Tax Credits Gone Wild!

Kudos to the Times-Picayune for pulling back the curtain (be sure to read the comments) more on the Mark Smith scandal, showing how film tax credits were abused to include 3 of New Orleans’ most popular music events: Jazz Fest, Voodoo Music Experience and Essence. It was revealed that more than $10 million in tax credits are due to be paid to behind-the-scenes entities, notably through lawyer Will French whose connections to Smith, LIFT and the whole credit system run deeper than anyone else in the state. Commercial interests took advantage of this (obvious-to-anyone-with-morals) fraudulent twist in the application of the credits. But it was Smith’s penchant for padding that allowed the credits to be based on the entire budget of the events rather than the actual cost of filming. Thus the dollars are beyond any amounts ever thrown at in-state music events.

Again, not only Mark Smith, but former Louisiana Economic Development secretaries Don Hutchinson and Mike Olivier contributed to this huge stretch in logic and reasoning in signing off on what to most people are outrageous claims. In fact, what this represents is the biggest expenditure for music in the history of Louisiana. The state could’ve released more than 1000 CDs by Louisiana artists for less money, not that the CD market is so hot right now. No doubt there are festival organizers around the state fuming, and rightly so, about how New Orleans seems to get too much. Too bad Hutchinson and Olivier (and Ernest Collins and a few others) aren’t joining Smith at this month’s sentencing.

This scam would not have happened under Ellis Marsalis’ watch. When we ran the Louisiana Music Commission, we couldn’t spend more than $1000 without Chairman Marsalis’ oversight. Maybe that’s another reason why they got rid of us. Not that Mark Smith ever dealt with us truthfully or would’ve included us in this kind of decision-making. He couldn’t afford the scrutiny of anyone with common sense. And had Bernie Cyrus been hired as the Entertainment Cluster Developer back when the state first established the position, these scandals with film and music would not have happened.

This situation gets to the root of how large-scale tax credit systems are manipulated by those “in the know” about government programs. Like the GO Zone credits (a story you can expect to be equally tawdry since these disaster-inspired credits are funding stadium suites in Alabama and myriad projects that fail to address true rebuilding needs), the abuse of the film tax credits goes beyond the mechanics of movie production and deep into the intense world of film (and apparently event) financing. As of now, Mark Smith is a lynch pin but hardly the only perpetrator of fraud. Surely others will soon be doing the perp walk on the evening news. We can only hope.

Unless the FBI or Louisiana Attorney General decides to probe whether fraud took place regarding the music festivals, bending these state regulations apparently has no punitive consequences. And obviously, this isn’t the only state rule so poorly written and implemented. So don’t expect to see the State of Louisiana police its own and exact any punitive measures.

All we can ask is that law enforcement dig deeper into this situation. And hope that the new Jindal administration will do better.

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