Filmmakers, ex-Iowa official accused of mishandling tax incentives meant to lure moviemakers

Iowa AG files charges over film tax credits

DES MOINES, Iowa — Two filmmakers, their companies and the former manager of the Iowa Film Office were accused Monday of mishandling tax incentives designed to lure moviemakers to the state.

The Iowa attorney general’s office filed first-degree theft charges against Wendy Runge, of St. Louis Park, Minn., and Matthias Saunders, of Minneapolis. Former film office manager Thomas Wheeler, of Indianola, faces a misdemeanor misconduct charge.

Runge is part owner of Polynation Pictures LLC and Saunders owns Maximum Productions LLC. They are accused of unlawfully inflating values on applications for tax credits totaling more than $10,000. Runge and Saunders also created The Scientist LL as an Iowa company to make a film that would use Iowa film tax credits.

The three companies are charged individually with first-degree theft.

Gov. Chet Culver fired Wheeler last September. He’s accused of failing to verify eligibility of applicants for tax credits.

Wheeler’s attorney, Gordon Fischer, said the state didn’t have a valid case against Wheeler.

“The state has decided to pursue a novel theory of criminal liability, and it is our position their decision is a mistake, that is not supported by the facts or the law,” Fischer said in a statement to The Associated Press.

Bill Roach, a spokesman for the attorney general’s office, said that summons for Runge, Saunders and their companies were pending.

Saunders told the AP on Monday night that he wasn’t aware that charges had been filed against him.

An e-mail sent to Polynation Pictures and a telephone message left for a Wendy Runge in St. Louis Park were not immediately returned.

According to an affidavit filed by the attorney general’s office, Runge, Saunders and their companies were seeking tax credits for a science fiction film entitled “The Scientist.” The affidavit alleges that the actions of the filmmakers and Wheeler “more than doubled the cost of the program to Iowa taxpayers.”

First-degree theft carries a possible punishment of 10 years in prison. Nonfelonious misconduct is punishable by up to a year in jail.

According to an affidavit filed by the attorney general’s office, Runge, Saunders and their companies were seeking tax credits for a science fiction film entitled “The Scientist.”

The filmmakers were awarded more than $1.8 million in tax credits, or about half of the cost of producing the film, according to invoices.

Items included on the invoices that the attorney general’s office said were inflated well above market value were a push broom and hand broom for $225 each; six road cones for $1,350; a metal rake for $225; a pick ax for $225; six step ladders for $900 each; another step ladder for $1,125; an extension ladder for $1,350; a $225 sledgehammer; and two shovels for $450.

The affidavit also says duplicate items appearing on multiple invoices created double-billing.

Under the program, a moviemaker could receive a 25 percent credit on payments made to an Iowa individual or business for movie production costs. There was also a 25 percent credit for expenses incurred outside of Iowa, but that credit was determined after the amount spent in Iowa was subtracted from the total cost of the movie.

Documents indicate that Wheeler ignored limits on investment tax credits and told filmmakers that they could make their movies for half the price.

The document said Wheeler approved procedures that made the program vulnerable to fraud and allowed filmmakers to include payments to out-of-state vendors as qualifying Iowa expenditures if they were “passed through an Iowa legal entity.”

A statement by Culver’s office said the charges confirmed the governor took the appropriate actions last fall when he suspended the tax credit program, noting allegations of improper spending and sloppy bookkeeping by the film office.

At the same time, Mike Tramontina, director of the Iowa Department of Economic Development, and a deputy director resigned. The department oversees the film office.

Culver later lifted the suspension for projects previously submitted by moviemakers after a judge ordered the state to issue $6.5 million in tax credit certificates to a film company affected by the shutdown.