A superseding federal indictment handed up Thursday adds 16 counts and a third defendant to an alleged New Orleans-based scheme to rip off a popular state tax-credit program aimed at wooing film and television production to the state.
Along with expanding allegations against New Orleans lawyer and businessman Michael Arata, who is married to one of Mayor Mitch Landrieu’s deputy mayors, and his business partner Peter Hoffman, the indictment now names Hoffman’s wife, film producer Susan Hoffman, as a defendant in the alleged conspiracy.
The trio were partners in several business ventures when they bought an old mansion at 807 Esplanade Ave. in Faubourg Marigny, proposing to renovate it for a post-production facility.
A $13 million upgrade of the three-story Whann-Bohn House — originally completed in 1859 — was supposed to have been done by September 2012, Susan Hoffman told The Times-Picayune at the time. But according to the indictment, the work the three defendants claimed had been completed at the 10,617-square-foot mansion for tax-credit purposes was not actually done.
The three are accused of cooking accounting books and submitting other misleading or falsified records to auditors.
The 22-count indictment realleges a wide-ranging conspiracy that now includes 33 “overt acts” — up from 15 in the original, six-count indictment handed up in February against Arata and Peter Hoffman, the CEO of California-based Seven Arts Entertainment.
Most of those acts relate to emails from 2008 to 2010 that contain misleading financial and accounting documents, the indictment alleges. The original indictment stopped in 2009, the year the state issued $1.1 million in tax credits to the Esplanade Avenue project.
Another application to the state for the “film infrastructure tax credits” was submitted in 2010 along with invoices and affidavits. No tax credits were issued to the partnership from that application, the indictment states.
Arata, through a company called LEAP Film Fund II, bought the credits from the partnership at a discounted price, then sold them locally for a profit, the indictment alleges.
The new indictment adds 11 counts of wire fraud, a count of mail fraud and four counts of false statements. Arata is the lone defendant named in the allegations of false statements. The indictment claims Arata lied to an FBI agent in a Jan. 27 interview when he said:
That he had ended his partnership with Peter Hoffman in July 2009.
That he wasn’t aware that $350,000 in legal fees had been submitted to the state for tax credits.
That film equipment had been “acquired” for the mansion when in fact it had not.
That he thought he had fully disclosed construction and equipment expenses, when he knew “he had purposely concealed the circular transactions from the auditors.”
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.
“Michael Arata has done nothing wrong, has consistently told the truth and will respond to the government’s allegations in court,” defense attorney Billy Gibbens said in a statement.
The indictment describes Susan Hoffman as “a California film producer who relocated to the New Orleans area. Susan Hoffman and Peter Hoffman were married but had been legally separated since approximately 1998.”
Among the companies Susan Hoffman owned and operated were Leeway Properties, New Moon Pictures and Seven Arts Pictures Louisiana.
In order to qualify for the tax credits, each expense had to be verified by an independent certified public accountant.
The case marks the latest example of alleged abuse of the Louisiana Motion Picture Incentive Act, which has helped to make the state the No. 3 site in the country for movie production.
Critics have said the subsidy program is both overly generous and poorly run. 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.
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