Seven Arts Founder Peter Hoffman Gets Probation & Fine For Louisiana Film Tax Fraud Scheme – Update

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2nd UPDATE, 9:10 AM: Peter Hoffman issued a statement the day after his sentencing on tax credit fraud conviction in Louisiana. Still maintaining his innocence, the Seven Arts Entertainment founder said his prosecution was a “practice guide to every governmental misuse and abuse of these controversial ‘fraud’ statutes and represents the very worst in prosecutorial vindictiveness and lack of candor.”

UPDATED with sentencing details and quotes:  A federal judge in New Orleans today sentenced Peter Hoffman, Hollywood’s once-highflying guru of exotic tax breaks, to five years’ probation for defrauding the state of Louisiana out of $1.13 million in film tax credits. The founder of the now-defunct Seven Arts Entertainment also was given a $40,000 fine and 300 hours of community service.

U.S. District Judge Martin Feldman also sentenced Hoffman’s ex-wife, producer Susan Hoffman, to three years’ probation a $10,000 fine and 150 hours of community service for her role in the scam.

The Hoffmans were convicted in April 2015 of conspiring to commit mail and wire fraud in connection with a scheme to mislead Louisiana officials about how many film tax credits he was entitled to for turning a dilapidated old French Quarter mansion into state-of-the-art postproduction facility. Prosecutors said he “conducted circuitous bank transfers to create the appearance of payments” for construction work that was never done and for film equipment that was never purchased.

Evidence presented at trial showed that more than $13 million in purported expenditures were submitted to the state for tax credits even though the house at the center of the project was only valued at roughly $5 million after its renovation. “In addition to repeated misrepresentations regarding construction expenditures throughout the scheme,” the U.S. Attorney’s office said in a statement, “the fraudulent expenditures claimed included $1,834,292 in non-existent film equipment, $962,856 in bogus interest payments on a non-existent $10 million loan, $150,000 in fake rent costs, and over $1.5 million in various fraudulent fees.

The Hoffmans’ partner, actor and film producer Michael Arata, received four years’ probation and was fined $15,000 for his role in the scam when he was sentenced on January 27. Since then, the Department of Justice filed a notice of appeal of the sentence. Two weeks before Arata was sentenced, his wife, Emily Sneed Arata – who was not involved in the conspiracy – stepped down as the deputy mayor of New Orleans.

“I thank the Assistant U.S. Attorneys and agents for their diligent, thorough and ethical work in investigating and prosecuting this case,” stated U.S. Attorney Kenneth Polite. “As a result of their collective efforts, a jury convicted Peter Hoffman, Susan Hoffman, and Michael Arata of fraud and conspiracy for their roles in a scheme that utilized bogus invoices, fake expenditures, and varied misrepresentations to defraud the State of Louisiana and its citizens out of millions of dollars. This criminality was compounded by the fact that, as the Court found during sentencing, Peter Hoffman and Michael Arata used sophisticated means and abused positions of trust in committing these felonies, and Hoffman committed perjury during the trial. We will review this matter and consider seeking appeal of the sentences of all three defendants.”

Polite also praised the work of the FBI and the Louisiana Office of the Inspector General in investigating the case.

“At a time when Louisiana’s state budget is bleeding and many critical government services are endangered, the fraud committed in this case is especially outrageous,” said Louisiana State Inspector General Stephen Street. “Those who are brazen enough to defraud these tax credit programs should know that we will continue to come after them with every resource at our disposal and do everything in our power to make them suffer the consequences.”

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