Film Subsidy Fraud

A big story has broke in Louisiana concerning film subsidy fraud:

Hoffman and Arata allegedly gained money after convincing authorities they were going to transform an old mansion at the edge of the French Quarter, which had fallen into a severe state of disrepair, into a film post-production facility. But now, prosecutors say the defendants filed a “materially false and misleading” film infrastructure tax credit application “when, in truth and in fact, the expenditures had not been made as claimed.”

There have been strong indications that other VFX companies are engaging in similar acts of subsidy fraud:

For example, I’ve had a number of professionals tell me that some companies will hire a worker as a BC resident but ask them to immediately move to India to work there instead. The idea here is the producer would be able to still claim a 60% rebate on their salary from the BC government but not really do any work in BC but India instead.

I’ve been in contact with multiple publications that would like to do an investigation and story on this issue if it is indeed true. We would like to reach out to anyone who has information about this to contact me: vfxsoldier at gmail dot com. Your identity will be protected and will not be revealed to anyone but the reporters involved.

Now let me make it clear that I am not falsely accusing any company of actually doing this but there have been enough people contacting me about this issue that I thought I’d reach out to readers about this.

Soldier On.

22 Responses to Film Subsidy Fraud

  1. Faking BC residency isn’t by any means easy so one the whole, I actually doubt it. They don’t take your word for it because you work in a BC studio, you need to prove residency with MSP (health insurance), rental agreement, BC ID, utility bills, tax returns, etc, etc.

  2. polyphemus says:

    I talked to a co-worker who turned down a gig at Prime Focus. The job was in Vancouver but the understanding was the position would require working in India and BC 50/50 roughly in the case of my friend. Depends on how they file it.

    As for faking residency, I’ve seen other studios in Canada run the production through a numbered company. Once you qualify for residency, they just file for the tax credits after you are done and try to retroactively apply the credit before you are a official resident. They got 1-2 years to do this after the production wraps. If the government does an Audit, its too late, the production is done and the numbered company is out of business. Not sure if they would go after the artist in this case.

    Seen that happen a few times in Ontario/Quebec, not sure if that is happening in BC but it wouldn’t surprise me.

    • Hollywood Reporter says:

      Production companies in Canada hire their own auditors to make sure their books will pass CRA audit. This happens immediately.

  3. Dave Rand says:

    VFX artists and professionals from New Breed studios are still waiting to get paid for work on the feature Horns. Owed aprox 450K they’ve entered the Les Normes (labor enforcement division of Quebec) spiral of hopelessness. Facing similar fates as did artists and pros from Meteor, Lumiere, Big Bang, DAMNFX, Redfx, and Fake Studio employees. Making Montreal the single most concentrated area of unpaid artists. Sad to see everyone turn a profit while the actually creators of the shot magic suffer repeatedly

    The shops either bankrupt and re open under new names or continue doing business with out fines or reprimand.

    Bouncing paychecks on artists has become the norm. It has happened repeatedly and to the same people.

    …..and it’s all subsidized…so where’s the money going?

    You’d think that there’d at least be a guarantee in place that the subsidized wages actually go to the artists…but there is not.

    Meanwhile the pictures all go on to make a healthy profit, many of them in the hundreds of millions

    There’s was a business plan in use in Montreal where the American Studio can sign over the subsidy to the VfX vendor and get the break up front. The shop would cash in later. Not sure if this is still in play.

    • Dave Rand says:

      Another common practice there is to take the contract with the Americans and borrow against it at the bank..who knows what happens to the cash after that….sure is not ending up with the artists and support staff.

    • hector says:

      Modusfx seems to join the team lately…

    • vfxmafia says:

      Dave,

      Montreal is really shady in the film world. My buddy is a DP and shoots regularly their and tells me stores about the camera rental houses….and grip equipment…etc…is all owned by this one family…….said it was mafia-esque their….

  4. Vfxjustice says:

    I’ve asked some former employees at a company called world wide fx in Louisiana what it’s like working there, especially in regards to the tax credit system. World wide fx has it’s headquarters in Sofia Bulgaria, but also has a satellite office in Shreveport, LA. The company had a reputation for taking in tax credits for many of its projects, then shipping work overseas. On one particular project which was filmed in Louisiana, the vfx work came into the Shreveport office after receiving tax credit from the state. However, shortly after work began on the project, all the work was simply sent to the Bulgaria office where the labor is cheaper, and the Shreveport employees were laid off with only a 2 day notice. Some only got a 5 hour notice that they were being terminated. My understanding of the tax credit system is that it’s supposed to be creating jobs for the people in that area, and not just shipping those jobs overseas so that the film executives can pocket all that tax credit money. A few days after all the employees were laid off, word got around to the film commissioner of Shreveport and all the employees were mysteriously brought back with no explanation, only to be all laid off again a few weeks later. After talking with those artists, it was clear that the company has a reputation for laying people off with little to no notice at all. A few people were hired, made the drive all the way there, and on their first day everyone in the company was laid off for an undetermined amount of time, only told that they “might be able to come back in a few weeks”. In addition to the low wages, the facility was described as a bare minimum structure with no windows, pitch black inside. The company did not install an elevator required by the building regulations because they were able to claim that ” construction was still ongoing” though it remained in that state for years and it still has not been installed.

    WWfx is own by millennium studios which is on the same property. One story we were told but couldn’t get any concrete names, was about a woman worked as an accountant and uncovered some of the tax credit money was being spent on personal things for the executives of the company. When she brought this to light, she was fired, and then attempted to sue millennium. Worst yet was the conditions for the employees in Bulgaria. We heard stories about the artists not being paid for so long that some were unable to afford bus fare to get to work, and were reprimanded for not showing up at work. These are just few of the stories.

    • jonavark says:

      I was called into a Millenium WWFX show a while back. It was in complete disarray. The Shreveport team was largely inept. The Bulgarians were the only people who could do the work and at that time.. this wasn’t their first show. I would have fired a good many of the Shreveport team as well. In the end it’s no different than any other VFX place.. when you don’t have money you don’t keep workers. I don’t see that being solved with any of the solutions being discussed.

  5. M Kurt says:

    I would say it is very difficult to fake BC residency because first off you would need to pay MSP and file tax returns so without those it is obviously a fraud and one the government would pick up on.

    secondly it is normally the Film Studio who files for the rebate and not the vfx studio.

    • Its not about faking BC residency. They already are established residents. The scam is collecting the BC incentive for wages paid to a worker on the job in India. No idea if the language in the incentive law would bar this….it could be technically legal.

  6. Idiot says:

    If they are being paid in Vancouver and paying bc taxes then there is no fraud . Being asked to take business trips to consult in any of your offices is perfectly legal and happens in most industries.

    • kyoseki says:

      Depends on how long the “business trip” is.

      A Canadian citizen could probably get away with it, but a foreign national claiming BC residency for tax purposes is going to find it difficult to maintain that residency if they’re spending more than half of the year outside the country.

      Remember that the immigration services track when foreign nationals enter and exit the country, of course, whether the feds let the provincial authorities know is another matter entirely.

  7. vfxmafia says:

    This question might be for Scott Squires…

    If VFX houses are faking residency but the subsidy money is going to the studio……why would a vfx company risk fraud ..?

    what would be their motivation? (unless VFX companies are making money off the subsidy?)

    • Joe VFX says:

      Isn’t it obvious? Because they got the work by promising a ridiculously low bid combined with a guaranteed subsidy amount. Then they scramble to meet what they promised.

      • hector says:

        amen!

      • vfxmafia says:

        Now wait a minute….Scott Squires was explaining subsidies….(please refer to other forum postings ) and he says that the VFX companies don’t make any money off of subsidies….it goes back to the film studio….

        So why would someone commit fraud on the VFX company side…..for a subsidy that the big six studios are getting on the film studio side…?

        Unless Scott is wrong and the VFX houses are making money on subsidies…?

        Im really confused now

  8. Hollywood Reporter says:

    Once again VFX Soldier will post hearsay and innuendo to smear feces over Vancouver, even when the story was about Louisiana, which is infamous for corruption like confiscating assets of people driving on the interstate across country. But there goes this blogging xenophobe again turning it back on BC.

    I hire BC Residents and the minute they go someone outside the Province we do not claim their salary for incentive earned outside the province. Never. None of the major studios or production companies will do this and take the risk. Yes, sleezeballs will be sleezeballs but this “I’ve heard from “professionals” about these nefarious BC companies scamming” reminds me of watching the Daily Show play back Fox News highlights on a topic. Soldier, you are becoming the Sarah Palin of your cause. I want to puke.

    • R Lake says:

      Its ok if Soldier ACTUALLY had hard evidence then he would be shoving it at the government and exposing it. Fact is he seems to be running dry on ideas so now is resorting to hearsay as people are starting to tire of his BS.

      Obviuosly he now cars CVD is not working as every major facility seems to be pumping more money and time into BC as they already know that CVD have failed .

      Why would Sony be pushing more crew up here if CVD’s we imminent ? Do I trust the big wig lawyers at companies like Sony, ILM and MPC or the word of a mid level VFX artists named Soldier.

    • Disgruntled says:

      You dont know what your talking about.
      I personally have a friend in this situation. But he doesnt speak up for the reason most people dont. Fear of losing job or getting black listed.

      This stuff isnt made up.

  9. […] would really be news is if someone was committing some sort of fraud as some readers have pointed out. The article above seems to have been based on this CBC interview with Tinderbox VFX owner Greg […]

  10. Pom Bermer says:

    What about Rainmaker farming out a majority of the animation work on their next CG features to China…..

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: