Georgia Attorney General Closes Probe of ‘Sully’ Tax Credits

Click here to read the full article.

The Georgia attorney general’s office has closed a criminal investigation into Warner Bros.’ use of tax credits on the Clint Eastwood film “Sully,” after state revenue agents declined to pursue the case.

The state prosecutor’s office opened a criminal probe two years ago, after a whistleblower alleged that the production had claimed more than $600,000 worth of expenses that were actually incurred in California. Georgia offers a 30% credit on film and TV production costs incurred in the state.

More from Variety

• Box Office: Why 'Hustlers' Soared While 'The Goldfinch' Flopped

• James Gunn Confirms Full Cast for 'The Suicide Squad'

• Bruce Springsteen Documentary 'Western Stars' Set for Early Opening

The attorney general’s office referred the case to the state Department of Revenue, which is responsible for looking into tax fraud. According to a Warner Bros. spokesperson, the department’s investigators never contacted the studio. The whistleblower, who asked to remain anonymous, also told Variety that the department never followed up on the complaint.

Katie Byrd, the attorney general’s spokeswoman, said the Department of Revenue never reported back to prosecutors on the case. As a result, the office closed its investigation earlier this month.

“Our office opened a criminal case after receiving a complaint in May of 2017 alleging possible fraudulent tax credits being provided to the producers of the movie, ‘Sully,'” Byrd said in a statement. “In July of 2017, our office referred the case to the Georgia Department of Revenue for investigation. We did not receive evidence, a report, or information that a crime occurred from the DOR. Accordingly, our office closed this case.”

“Sully” recounted the story of U.S. Airways Flight 1549, the 2009 flight that was forced to land on the Hudson River after a bird strike. The film, starring Tom Hanks and Aaron Eckhart, was shot in New York, California and Georgia in 2015, and released in 2016.

The production did not win the California tax credit lottery, which prompted much of the shooting to move to Georgia. However, the scenes involving the water rescue on the Hudson were filmed in a large tank at the Universal lot.

According to documents obtained by Variety and witness interviews, the production bought two decommissioned A320 planes for use in California. A production accountant wrote an email that discussed billing one of the planes “through GA airplane broker,” and specified that the broker “must have GA brick and mortar office with at least one employee.” Georgia’s film credit regulations mandate that in order to claim an expense from a local vendor, the vendor must have an office in Georgia with at least one employee.

The production obtained an invoice from a Georgia broker in the amount of $642,207. The broker told Variety that he was paid $1,500 to draft the invoice, but that he never saw the parts or bought or sold anything.

The production even shipped a small piece of airplane fuselage to a lot in Atlanta, ostensibly to use as a “cover set” in case of inclement weather. The piece was never used and was later sold for scrap. The fuselage piece appeared on the invoice at a cost of $350,000 — matching the cost of one of the decommissioned planes used in California. The other expenses on the invoice matched expenses that were also incurred in California.

Two sources told Variety that producer Tim Moore insisted that expensive parts be billed through Georgia, where they would effectively cost 30% less.

When Variety first asked Warner Bros. about the case in 2018, the studio denied wrongdoing.

“We carefully followed the rules and regulations as set forth by the state of Georgia,” a studio spokesperson said at the time. “After production, we submitted our qualifying expenditures, and they were fully audited and approved without question by the Georgia Department of Revenue.”

At the time, the Department of Revenue declined to comment on the case, citing an ongoing investigation. Reached last week, department spokesperson William Gaston referred questions to the attorney general’s office.

Josh Waites is the director of the department’s Office of Special Investigations. He did not respond to a list of questions about his agency’s handling of the case.

The agency has a budget of $6.8 million, and employs 27 sworn officers. They office investigates shady tax preparers and car dealers who commit odometer fraud. The agency has never brought charges against anyone for cheating on the state’s film tax credit.

Deborah Wallace, the state’s inspector general, told Variety that her office has never received a complaint about film tax credit fraud.

The tax credit has transformed the Atlanta region into a major production hub, and enjoys broad political support. It is more generous than many other programs, covering both above-the-line and below-the-line costs. Unlike other states, Georgia does not set a limit on the amount of film credits issued each year. In recent years, the state has awarded $800 million annually in film tax credits, roughly double the amount granted in New York or California.

Sign up for Variety’s Newsletter. For the latest news, follow us on Facebook, Twitter, and Instagram.