Zurik: Horizon’s millions in film credits draw Kennedy’s ire
NEW ORLEANS (WVUE) - The more we examine the expenses reported by Horizon Entertainment in its production of "The Sean Payton Show" and "Saintsational," the more questions we have. Now a top state official has his own questions about the case, and how the State Film Office handled it.
Offices in the FOX 8 building in New Orleans used to be the headquarters of Horizon Entertainment. Horizon rented 1,800 square feet of space. They used part of this space to produce "The Sean Payton Show" - 39 episodes over two years. Horizon told the state that production cost $5 million and received $1.5 million in state film tax credits.
Tucked in the records Horizon gave the state were rental costs for office space to produce the show. Horizon formed a shell company, TCPS Productions, to actually produce the Payton show. TCPS would rent cameras, personnel and office space from Horizon and receive tax credits for the money spent.
That's perfectly legal - as long as the expenses were legitimate.
"It's a mess," says CPA Patrick Lynch after reviewing those records.
For the second year of "The Sean Payton Show," that shell company claimed it paid Horizon $62,500 for office space. They broke it down to $10,000 in rent a month.
Real estate experts say that $10,000 a month rent translates into 6,000 square feet of office space. So, according to real estate experts, the shell company was paying to rent about 6,000 square feet of space to produce the Payton show.
But that appears to be impossible, since Horizon only operated out of 1,800 square feet of space in FOX 8's studios.
"I think the whole motive is to inflate the production expenses at the production company level," Lynch says. "They're getting 30-cents-on-the-dollar income credits. So the more you can inflate the expense, the greater the income tax credits."
Horizon also produced the reality TV show "Saintsational." The shell company rented office space for that show, too, also costing $10,000 a month.
But there's more. Louisiana Media Company, the owner of this TV station and building, says Horizon received their 1,800 square feet of office space for free. They paid nothing.
But they still received tax credits on the office space rental.
"I want to see somebody angry," says La. Treasurer John Kennedy, who blames the State Film Office for approving these projects. "If I were king for a day, somebody would be fired here."
Kennedy says he's frustrated by the reaction from the head of the film office, Chris Stelly. In our interview, we asked him about that $5 million production of "Saintsational" that never aired. When we questioned Stelly about Horizon's many questionable expenses, in many cases he simply repeated to us, "That's what was presented to us in the audit at the time."
Kennedy tells us, "The Louisiana Film Office and Mr. Stelly – who I don't know, it's not personal – but their attitude should have been, 'whoa! We will get on this. We're on this like a hobo on a ham sandwich.'"
It's important to note that, while Stelly pointed to the audit in our interview, the Department of Economic Development gave a more direct response last week:
"LED has no tolerance for abuse of any state incentive program. On several occasions since 2008, LED has referred to the Office of State Inspector General (IG) film tax credit matters where LED's staff has had suspicions of fraud, which could not be confirmed solely from the evidence available to LED, even after a review by a certified fraud examiner engaged by LED. In these instances, further investigation is required by a law enforcement agency that has the authority to subpoena records from third parties. LED also has worked cooperatively with the IG and FBI on some of these cases and others. Some of these cases have resulted in federal prosecutions and convictions while others remain in progress. In the case of Horizon Entertainment, which recently was the focus of an investigative TV report by FOX 8, LED referred its concerns about Horizon (including the Saintsational and Family Gras productions) to the IG in approximately late 2010. That initial referral was investigated by the IG but did not result in prosecution. With new information revealed by FOX 8, LED has asked the IG to revisit all Horizon Entertainment productions that received film production tax credits. As the investigation has been reopened, there will be no further comment from the Inspector General."
Kennedy says the bigger issue is the audits that lead to the tax credits. Right now, the auditors are hired by the production companies themselves, and submitted to the state for approval.
"This business of basically trusting people to pick their own auditor and then not asking questions and writing a check… you'd never see that in the real world," Kennedy insists.. "Only in government would you see that."
"I'm not surprised, I guess, that it's coming to light," says Brian Garton, who worked as an editor for Horizon. "I didn't know it was to this scale."
Garton worked for Horizon from September 2009 to early March 2010, the same time Horizon also produced much of "Saintsational."
"I was hired as a editor, originally said to be for the Saintsations show," he tells us. "During my time there, as far as I remember, there was no editing done."
But documentation from 2009 shows $85,250 was paid for editors and $225,000 for editing systems. Horizon received tax credits for having a total of six editors working on "Saintsational."
"As far as I know, there were never six editors in the building," Garton tells us. "I mean, at most, as a stretch, you could say there were three people editing. But the third person was splitting his duties with many different jobs."
For "Saintsational," Horizon received tax credits for five edit stations. Garton says there were only three and, during his time there, never used on "Saintsational."
"I had my edit bay," he recalls. "I don't remember the names of the rooms or anything. But I had my edit bay, there was another edit bay that was used. Again, these two rooms were the only ones that were going full time that I remember. They were pretty much full-time 'Sean Payton Show,' except for small projects that bounced in and out."
When we interviewed Garton by Skype, he mirrored the comments made by another Horizon employee, John Beyer. They worked for the production company during different time periods.
Garton says the working conditions at Horizon could be described as tight. He says they were always pinching pennies, always told money was tight - which he can't understand, after looking at the $4.5 million Horizon received from the state.
"We were always told that we had less money than we should normally have to do the job we were doing," Garton tells us. "I remember one time there was a dispute about CD's or DVD's in the office, that there was too many DVD's being used, that Jason Sciavicco was angry at the PA for using too many DVD's. I mean, that's pennies per DVD, you know, a dollar per DVD at most."
Horizon's owner, Jason Sciavicco, has declined to answer our questions about the expenses. Horizon attorney Walter Becker says nothing improper was done.
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