The Iowa Attorney General has filed criminal charges against two filmmakers and the former head of the Iowa Film Office accusing them of mishandling over $1.85 million in tax credits for a movie production.

The two Minnesota-based filmmakers, Wendy Weiner Runge and Matthias Alexander Saunders, both face felony charges of first-degree theft in connection with their production of a movie called “The Scientist.” They were accused of inflating the amounts on their applications for tax credits. They could face up to 10 years in jail and a fine of $10,000 if convicted.

Tom Wheeler, who was ousted from his job as head of the state’s film agency, has been charged with nonfelonious misconduct in office for failing to verify the filmmakers’ eligibility for the tax credits in December 2008. He could face up to a year in prison and a fine of $1,875. Two other top officials in the Iowa Department of Economic Development also resigned in the wake of the scandal last year. Three companies associated with the production were also charged by Iowa Attorney General Tom Miller: Polynation Pictures, The Scientist LLC and Maximus Productions.

Iowa’s film tax credit program has been suspended in the wake of the scandal. The state created the tax credit program in 2007 to stimulate the local filmmaking industry and improve the state’s economy. Under the program, two types of film tax credits were available to filmmakers: Qualified Expenditure Tax Credits and Investment Tax Credits. The first type could be obtained by filmmakers for up to 25 percent of qualified production expenses paid to Iowans or Iowa-based companies. The film’s investors could also obtain a tax credit for up to 25 percent of the remaining portion of the filmmaker’s costs, even if those costs were incurred outside the state.

However, the total tax credits were supposed to be limited to a maximum of 25 percent of the total cost of a film project. According to the attorney general, Wheeler nevertheless marketed the program as “Half-Price Filmmaking in Iowa” and awarded film tax credits equal to 50 percent of the qualified expenditures.

In the case of the “Scientist” production, the attorney general noted that much of the production occurred in Nebraska, and the cast and crew consisted primarily of residents of Minnesota and Nebraska. The producers set up pass-through entities for the purpose of claiming the Iowa tax credits. However, some of the entities were listed as both investors and recipients of expenditures that existed on paper only. The film was originally budgeted for $767,250, of which $625,000 was to be spent in Iowa.

However, the budget later increased to over $1.7 million and ultimately over $3.7 million, every dollar of which was claimed as a qualified Iowa expenditure. The filmmakers also allegedly claimed equipment rental costs that were inflated far beyond fair market value, including $225 to rent a single push broom and $1,350 to rent a two-foot extension ladder for 45 days.

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