By LEE ROOD
Des Moines Register & Tribune
October 9, 2009

Six of the 15 production companies that received tax credits for filmmaking in Iowa did not carry Workers' Compensation insurance in the state, The Des Moines Register has learned.

Iowa law requires that most employers provide Workers' Compensation benefits to eligible employees in the event they are injured on the job. Failing to carry the insurance exposes taxpayers and hospitals to expenses stemming from uncovered injuries and is considered a crime, said Christopher Godfrey, Iowa's Workers' Compensation commissioner.

"This highlights that there's a very uneven playing field out there when it comes to companies willfully violating the law to compete," Godfrey said.

He said his agency was unaware that the film companies were not carrying insurance for their workers, and that he intended to notify them this week that they needed to carry it. Those who do not respond within 30 days may be referred on to the attorney general's office.

The companies' failure to obtain the required insurance also raises questions about how some workers hired in Iowa's filmmaking industry were being classified - as independent contractors or employees - by companies that qualified for the credits. The answers would determine whether taxes and Social Security were properly withheld, and whether some workers would be eligible for unemployment insurance.

Two of the biggest beneficiaries of Iowa's stalled tax-credit program - Iowa Film Production Services and Changing Horses Productions - are among those that show no record of having Workers' Compensation insurance, according to Iowa Workforce Development records.

Iowa Film Production Services, based in Iowa City, received $6.42 million in tax credits for two projects. Changing Horses, run by horse trainer Dennis Brouse, was awarded $9.27 million in tax credits for five projects, according to information from the Iowa Department of Economic Development.

Changing Horses had been filming the national PBS series "Saddle Up With Dennis Brouse" and related educational materials, and had credits pending for a documentary about the history of the horse when Gov. Chet Culver froze Iowa's tax credit program.

Neither Brouse nor Bruce Heppner-Elgin, the owner of Iowa Film Production Services, returned phone calls Thursday.

Heppner-Elgin said last month that his company had hired more native Iowa workers than any other filmmaker involved in the fledgling industry. The company, also called Storybench, employed about 100 people for the movie "Splatter." The company received $4.83 million in credits for that movie filmed in Washington and Burlington, which means the film should have spent about $9.7 million in Iowa.

When asked last week, Heppner-Elgin would not discuss details of his film budgets. "I'm not at liberty to discuss our budget," he said. "But we didn't slide anything through. If we were going to sneeze on set, we sent an e-mail to the film office."

In a previous interview with the Register, Brouse said he had about 20 people who worked regularly on his productions - 10 on his show, four crews on the documentary - as well as about 50 others who have worked infrequently. They all, he said, were considered freelancers.

Culver froze the tax credit program after economic development officials discovered what he called mismanagement and abuse. On Monday, the attorney general's office announced a criminal investigation was under way.

The other companies that appeared not to be paying Workers' Compensation insurance for their Iowa workers are: Single A Films, Cornfield Productions, Ticket Out Productions and Mississippi Films, according to Iowa Workforce Development.

Kerry Koonce, a spokeswoman for the agency, and other state officials said they could not disclose whether all the filmmakers were paying unemployment insurance or whether taxes were being withheld in workers' paychecks.

That information is confidential under federal law. Unemployment insurance information "only becomes public if a worker appeals a denial for benefits," Koonce said.

Godfrey said it was possible some of the companies could have Workers' Compensation insurance in other states. However, "looking at this list, they all should have been carrying the insurance" for those who worked on sets in Iowa, he said. If workers on those sets were injured, employees could sue for a range of damages.

Failing to carry the insurance is also serious misdemeanor, Godfrey said.

He said the practice undercuts competitors who pay the insurance and classify workers correctly.

Some who worked on other films said Thursday the filmmakers they worked with did pay unemployment and Workers' Compensation, withheld taxes and paid into Social Security.

"That was withheld, no problem," said John Busbee, who worked on five films.

Jon Hazell, an Iowa filmmaker who has yet to receive any tax credits, said the costs of unemployment and Workers' Compensation are built into the budget of every big project he had planned.

He said he uses a bonded line producer responsible for bringing a film in on budget who insists that the required insurance be built into expenses.

Hazell said he wishes the state would act more quickly to deal with the bad news coming out of the film program. He had 12 projects in the works that he said were worth $100 million to Iowa's economy.

If state leaders suspend the program for a year - as was suggested this week - filmmakers wouldn't be active again until the spring or summer of 2011, he said.

"It kills me, quite honestly," he said. "I mean, I can still film my Civil War documentary, which was the first. ... but I would get it done in a much more rudimentary way."