- Associated Press - Saturday, July 16, 2011

IOWA CITY, IOWA (AP) - Iowa has paid London filmmakers $450,000 to cancel plans to shoot a movie there about a flesh-eating lake monster and other films that could have qualified for millions of dollars in tax credits, newly released public records show.

London-based Midsummer Films and its subsidiaries won approval in 2009 to shoot six films in Iowa with the help of the state’s aggressive tax incentives, which were advertised as “half-price filmmaking” and briefly made Iowa a top destination for producers.

But just one month after Midsummer’s films were approved, then-Gov. Chet Culver suspended the program amid mounting evidence that fraud and mismanagement were costing taxpayers millions of dollars. Several top state officials resigned and Culver fired Iowa Film Office Manager Tom Wheeler, who was later charged with fraud along with several film industry representatives.

Midsummer’s productions had been approved for tax credits of up to $25.6 million based on estimated budgets totaling more than $51 million, according to records obtained by The Associated Press. The company could have tried to follow through with its plans after the program was reinstated for existing applicants with tighter oversight, but lawyers representing the state encouraged it to abandon the projects in Iowa to avoid a huge liability for state taxpayers.

“It was a much better thing for the state for them to not make the movies and for us to pay this amount of money than for us to make the movies and issue $25 million in credits,” said Deputy Attorney General Jeffrey Thompson, who negotiated the deal for the state. “The reality is, the idea that having people make movies in Iowa under the tax credit program created any kind of real economic benefit was just not true.”

The $450,000 payment reimbursed Midsummer for “liabilities and expenses” it spent preparing for production, according to a settlement dated March 30 and released this month to the AP. Thompson said an audit by the state confirmed Midsummer spent “substantially more than that” on the projects before the program was suspended.

In exchange for the payment, the firm agreed not to make the movies in Iowa or sue the state for breach of contract. Midsummer had signed a contract with the state for one of its six approved films, a feature-length film titled “Legendary, The Shocate,” which was to be shot in Des Moines and at Lake Red Rock.

“Travis Preston is called to investigate if a legendary lake monster is behind the deaths at a remote construction site,” a synopsis of the film reads. “As the death toll rises, Preston discovers the beast is not only real but has a taste for human flesh.”

It is the second large legal settlement Iowa has approved in recent months related to the movie program, and others are expected to be finalized soon, Thompson said. In the other case, Iowa paid a $434,000 cash settlement to After Dark Films on top of $316,000 in tax credits after the company argued it received far fewer credits than was initially promised to make two horror movies in the state.

Midsummer executives Matthew Kuipers and Chris Milburn did not return e-mail messages seeking comment, and a phone number listed for the firm rang unanswered.

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