Not Easily Granted

A Louisiana Hearing Committee has recommended the reinstatement of an attorney convicted in a case involving film industry tax credits and disbarred in 2016.

The committee noted that reinstatement after conviction should not be “easily granted” but found that the criteria had been met.

NOLA.com reported on the criminal sentencing

His Fourth of July weekend working on a house in Pensacola figures to be the most relaxing in years for New Orleans attorney Michael Arata, with prison no longer on the horizon.

It’s been six years since Arata, Hollywood producer Peter Hoffman and his wife, Susan Hoffman, fell under a 25-count federal indictment that accused them of bilking a state tax credit program that subsidized film industry infrastructure to the tune of more than $1 million. It’s been three years since a federal jury convicted all three of them.

A federal appeals court had all but measured up Peter Hoffman and Arata for prison scrubs in 2018, when it threw out an unusual decision by U.S. District Judge Martin Feldman to hand each of them probation — despite sentencing guidelines that recommended years in prison for each of them. The court also restored numerous charges that Feldman had tossed, rejecting the jury’s verdicts on those counts.

Less than a week before Mardi Gras, Feldman took another swing at leveling a punishment that would pass muster. The second round wasn’t a lot stiffer than the first. He again gave Arata probation, though this time he said that the lawyer would have to serve an additional year of probation confined to his home. 

A month later, as New Orleans weathered the early throes of the coronavirus pandemic, prosecutors returned to court on March 19, this time to strike a deal with Arata that ended the case against him. The government agreed to Feldman’s probation term for Arata, in exchange for Arata accepting his conviction. 

Even that mild penalty came with some wiggle room, though. Last week, Arata sought and received permission from Feldman to travel to Pensacola during his home confinement through July 3, “and thereafter as necessary,” as long as Arata notifies probation officers.

Hoffman didn’t fare quite as well as Arata. But Feldman gave him a revised sentence of just 20 months in prison, which the producer is still fighting. 

Federal sentencing guidelines had called for Arata to serve between 9 and 11 years behind bars. His attorney, Billy Gibbens, declined to comment on the deal.

The leniency Feldman has shown Arata, who comes from a local family prominent in local politics and the law, has caused some buzz in New Orleans legal circles. Arata’s late father, Blake, managed Moon Landrieu’s winning 1970 mayoral campaign and then served as his city attorney. Arata’s wife, Emily, was for years a top aide to Lt. Gov. and then Mayor Mitch Landrieu.

A nominee of President Ronald Reagan, Feldman took a deeply jaundiced view of the government’s case throughout the prolonged prosecution. It showed both times he sentenced the two men, who along with Susan Hoffman had been accused of conspiring to steal more than $1 million in tax credits by inflating the costs for the conversion of a moribund Esplanade Avenue mansion into a post-production film studio.

In a 124-page denunciation of the government’s attack, Feldman described “unchecked prosecutorial zeal” and accused prosecutors of employing “mean-spirited hype” to convict them.

The rules surrounding the state’s film tax credit program were “at best gray” when the renovation began, he wrote, and the law spelling out the incentives was “implemented haphazardly and in a manner rife with disorder.

The decision of the United States Court of Appeals for the Fifth Circuit referred to in the NOLA article is linked here.

With its colorful history and rich cultural stew, Louisiana has long been a popular setting for works of fiction, including movies. In recent years the state has also tried to become a place where films are made. That effort enjoyed considerable success. The Curious Case of Benjamin Button, Django Unchained, Twelve Years a Slave, The Dallas Buyer’s Club, and Dawn of the Planet of the Apes are some recent films of note shot in New Orleans. Believe it or not, in one recent year (2013) Louisiana surpassed even California as the most popular locale for filming major-studio productions. Mike Scott, Louisiana Outpaces Los Angeles, New York, and All Others in 2013 Film Production, Study Shows, TIMES-PICAYUNE (Mar. 10, 2014). This development led some to call New Orleans “Hollywood South.” Id.

State tax credits for the film industry spurred much of this growth. Id. (“[M]ake no mistake: The state’s tax-credit program . . . is largely responsible for the surge in local productions.”). They also provided an incentive for fraud. A jury found that to be the case for Peter Hoffman, Michael Arata, and Susan Hoffman. It credited the government’s allegations that they submitted fraudulent claims for tax credits, mostly by (1) submitting false invoices for construction work and film equipment or (2) using “circular transactions” that made transfers of money between bank accounts look like expenditures related to movie production. Their principal challenge to those convictions is an argument that the tax credits are not property within the meaning of the mail and wire fraud statutes but are instead akin to the video poker licenses the Supreme Court rejected as a basis for federal prosecution in Cleveland v. United States, 531 U.S. 12 (2000). If we conclude that the credits are property subject to the federal fraud statutes, defendants also contend that the evidence was insufficient to convict because they made a good-faith effort to comply with a state program riddled with gray areas.

While the defendants seek to undo their convictions, the government is unhappy with the sentences of probation that all three received. So it too appeals, arguing that the substantial downward variances exceeded the district court’s discretion. The government also contends that the district court improperly vacated a number of the jury’s guilty verdicts.

(Mike Frisch)