N.O. businessman charged with defrauding film tax-credit program

A New Orleans attorney and businessman who is married to one of Mayor Mitch Landrieu’s deputy mayors was charged Thursday with conspiracy and wire fraud for allegedly ripping off a program designed to entice film and television production to the state through lucrative tax credits.

According to the six-count federal indictment unsealed Friday, Michael Arata and Peter Hoffman bought a decrepit mansion at 807 Esplanade Ave. and said they planned to transform it into a post-production facility, making it eligible for tax credits.

Arata is the husband of Emily Sneed Arata, a longtime Landrieu aide and current deputy mayor of external affairs. She is not accused of any crimes.

A City Hall spokesman declined to comment on the indictment because of its filing in federal court and “ongoing investigations.”

Attempts to contact Michael Arata on Friday evening were unsuccessful.

“We are surprised and disappointed that Michael has been included in this indictment,” his attorney, Billy Gibbens, said in a prepared statement. “Michael Arata has done nothing wrong, and we will respond in court at the appropriate time.”

Gibbens declined to comment further.

The Louisiana Motion Picture Incentive Act, which has helped to make the state the No. 3 site in the country for movie filming, has been dogged by controversy.

Critics have said the subsidy program is both overly generous and poorly overseen. In 2007, its former commissioner, Mark Smith, pleaded guilty to accepting bribes from Malcolm Petal, a leading producer, in exchange for tax credits. Petal was sentenced to five years in prison, while Smith was sentenced to two years.

Under the program, companies that make films in the state are eligible to receive tax credits that are calculated as a percentage of the company’s qualified expenditures. Among those expenditures are infrastructure, such as the purchase and construction of facilities directly related to film and TV production.

Michael Arata and Hoffman submitted false documents about expenditures to receive more than $1 million in tax credits, according to the indictment.

In order to qualify for the tax credits, each expense had to be verified by an independent certified public accountant.

According to the indictment, Hoffman, the CEO of California-based Seven Arts Entertainment — which in 2011 noted the New Orleans investigation in an SEC quarterly report — and Arata submitted a report in February 2009 claiming they had made expenditures on the Esplanade Avenue mansion in the course of its renovation.

A $13 million renovation of the three-story Whann-Bohn House — completed in 1859 and reconfigured in recent years to include screening rooms, a sound-recording stage and enough space to house film crews of varying sizes — was supposed to have been completed by September 2012, Susan Hoffman, Peter Hoffman’s wife, told The Times-Picayune at the time.

However, the work they claimed had been completed for tax-credit purposes had not actually been done at the 10,617-square-foot mansion, according to the indictment. Arata and Hoffman are accused of creating “false and misleading” accounting books and other records that were submitted to auditors.

On June 19, 2009, the state issued about $1.1 million in tax credits for the property. At that point, according to the indictment, Arata bought the credits through his company, LEAP Film Funds, and sold them to local businesses and individuals for profit.

The credits typically have fetched about 80 cents on the dollar.

Jan Moller, director of the liberal Louisiana Budget Project, which monitors state spending, said a program like the Motion Picture Incentive Act, with an annual budget of more than $200 million and light oversight, is ripe for corruption.

“It’s a cash cow, and this program has been growing every year while other programs have been getting cut,” Moller said. “It’s a large amount of money with light regulation. It becomes a tempting target for anyone who wants to make a quick buck.”

Arata and Hoffman face a maximum prison term of 20 years each, as well as a fine of up to $250,000 for each of the half-dozen counts.