'Book Him!': Michigan Film Subsidy Scandal Leads to More Charges

A scandal first exposed by the Mackinac Center last June has led to a second set of felony fraud charges filed by the state Attorney General, according to The Grand Rapids Press. The charges stem from an alleged conspiracy to obtain a state subsidy worth as much as $10 million through "false documentation" purporting to show a property transfer that constituted the basis for the subsidy claim. The transfer never actually occurred, however.

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The Mackinac Center began investigating shortly after then-Gov. Jennifer Granholm trumpeted a state subsidy for a "Hangar42" studio project in her 2010 State of the State address. The Center discovered that the property had been listed for less than $10 million just days before being "sold" for an estimated $40 million. The sudden price hike is important because the size of any potential tax credit depended on the amount of this purported "investment."

For months last spring, the Mackinac Center tried in vain to get someone in state government to explain the sudden jump in price. Such secrecy was characteristic of the previous administration's aggressively less transparent management of the Michigan Economic Development Corp. and Michigan Film Office, especially following an embarrassing scandal involving a subsidy offered to a paroled felon for a phantom company. The Center's response to the wall of government secrecy was to go public with its unanswered questions.

Our action triggered a superb series of investigative reports by Chris Knape at The Grand Rapids Press. Among other items uncovered by Knape’s diligent digging was a YouTube posting of a speech by a paid political appointee in the office of then-state Rep. Robert Dean in which the staffer bragged about making millions off the state in a film studio deal.

It was already known that Dean had intervened with the Michigan Film Office on behalf of the Hangar42 subsidy-seekers, and in August he lost the primary election for a senate bid, blaming the defeat on the negative Hangar42 publicity. Perhaps coincidentally, a short time later Michigan Film Office Director Janet Lockwood retired after offering to take full responsibility for the fiasco.

Now the two principles in the alleged scam each face two counts of felony fraud and could serve time in prison.

The Michigan film incentive program is the latest in a long line of failed state "economic development" programs going back to 1947 and involving every governor since then. The programs have failed to create net new jobs because they merely shift resources unfairly from many entrepreneurs and families to a lucky few.