225BatonRouge.com

Editor’s note: On Aug. 17, after 225’s press deadline, federal prosecutors charged Mark Smith with bribery and conspiracy for accepting $50,000 from LIFT CEO Malcolm Petal. Sources say Smith has agreed to plead guilty and cooperate with the investigation.

In February, Sherri McConnell was named entertainment industry development director at Louisiana Economic Development, a post that administers state offices for the development of film and television, music and digital interactive media projects, each with its own complex tax credit program. Less than two months later the FBI and IRS were investigating not only the largest player in the state film industry—that being New Orleans-based LIFT—but also McConnell’s predecessor, Mark Smith.

McConnell sat down with 225 after the close of the legislative session and opened up about those ongoing investigations and how her office is doing everything it can to move on.

225: Since the session just ended, let’s talk about the new legislation.

It’s been galvanizing, really.

That must be a big change, ‘galvanizing.’

I slept like a baby all weekend [after the session ended], which was the first time since I’ve had this job, quite frankly. It had to be clear to everybody what the rules are, so that was a big hurdle. We didn’t change the production investor credit side, except for tightening up some of the language to clarify. On the infrastructure side we put into law what we do in practice. We capped the program at $25 million per project. So a $62 million project would still get the 40% tax credit. Projects can be bigger, but they can’t get more than $25 million.

How was a $25 million cap chosen?

Bill Black (of Division of Administration) and I and (LED Secretary) Mike Olivier sort of backed into that number.

You thought that was a very attractive tax credit that also protected the state?

No question. It was a good middle ground. It also makes developers focus on real infrastructure as opposed to these Taj Mahal-type projects. Plus you now have to spend 25% of your budget before you get your first tax credit, so we’re ensured infrastructure is actually getting built. The other thing is with these multi-use projects, you’ve got to build the studio first, then we’ll talk about the ancillary things like lodging.

What can we expect to see upcoming from your office?

Well, Lafilm.org is pretty cool, but we have technical problems with it. If we can have a portal that comes into Louisiana Entertainment and breaks off into digital, music, film, live performance and have everything right there—

That’s what everyone talks about. Young people and industry people want more connectivity and access to these things through a central Web site.

Yeah, in fact, I’d like to have the application process detailed online where producers and developers can watch their applications go through the system.

More visibility—

Just the communication we’ve opened up since I’ve been here has created such a difference. That’s a continuing effort that I really welcome. I don’t want government to get so insulated. Just remind me, Jeff, in a few months if I’ve become a bureaucrat, OK?

I’ll be the first. Let’s talk about the LIFT situation because that has to have an effect on your office. People are now looking at the FBI investigation and saying things like, ‘As goes LIFT, so goes the state film industry.’ And yet looking at LIFT’s numbers, if the worst-case scenario happens and LIFT is out of operation, that’s only the equivalent of the state losing one major studio picture per year. And it seems that’s a gap that could be filled. Is that how you see it?

The industry quickly moved on because Louisiana has grown an industry bigger than LIFT, which is what we wanted to do. There’s no question the industry is self-sustaining if LIFT goes under. I hope it doesn’t. I hope the allegations are untrue. But you know what, if they broke the law, they need to be punished. Will it impact the state’s appeal? I can’t say that it won’t. But Hollywood was more concerned about us overreacting and shutting the program down than we were about their reaction. We had to put out those fires immediately.

If it negatively affects the industry, it will be short-term, and it will make us stronger. If we can learn from this, and make sure we have those checks and balances in there, then we can make this lemonade.

There was a meeting with LIFT CEO Malcolm Petal back in April where he basically demanded his tax credits immediately, and threatened to take LIFT out of state if he didn’t get them. So what was that like?

Did that send up a red flag as far as LIFT goes? No. Did I like their tactics? No. But I didn’t necessarily blame them at that point. We certainly felt we were being rushed to do something. However, they had been waiting a while, and I was very sensitive to that. Our government moves so slowly. Absolutely they pressured us to do that at that time. But this wasn’t the first time they had asked us to follow up on their tax credits. I believe I made the best decision for the industry at the time. I made Malcolm sign a personal guarantee right then and there. This was infrastructure we were talking about, so I knew they would come back to us many times after this as they built this thing. So I had some sense of comfort that we could revisit this. Understand, LIFT was real. They were making movies. These weren’t people saying, ‘If we build a studio, they will come.’

No, they were more like, ‘If you don’t give us our credits now, we will go.’

They said they had prepared a press conference to suggest that.

So you believed him?

No question, as did everybody else. He pulled out all the stops. Did I like it? No. But we all recognized at that point LIFT’s financing was moving forward. Their bond attorney does business with the state on a regular basis, so we have ongoing dialogue with him, and you make a judgment call. If they had called a press conference that day and got on the steps of the State Capitol and said, ‘We are not going to be able to finish this project because state government won’t give us tax credits,’ it would have been devastating. I advised Mike Olivier and I asked Division to sign those tax credits, no question about it. I did make what I thought was the best decision at the time. And that’s not to say we still won’t be able to recoup those credits.

Were those your toughest few days on the job?

It was tough because nobody was here. Locations Expo was going on in L.A., and the staff was out there. Richard House, our attorney, wasn’t in. And the application was on his desk for review, so it was difficult because I didn’t have the people around me to help me make that decision. It wasn’t pleasant.

How is [former executive director of the Office of Film & Television] Alex Schott doing in digital interactive?

Alex is no longer with the state. He got offered a communications job with Entergy. He never got started in the digital interactive office, though that was the plan from before I got there. The thing is, he didn’t want to leave New Orleans, and we really needed someone in the film office working it from Baton Rouge.

Which is now Chris Stelly. Your position with LED is one the department had operated without for a while. When were you first approached about it?

I was representing industry groups to the department, and Fran Gladden [of LED] and I used to work together at the Capitol. It was during the special session in December last year.

Having been at that contentious Commerce Committee meeting in December, you knew there was controversy there.

Yeah, but I didn’t apply for the job. Mike Olivier was having lunch with Fran and me, and he asked informally how to handle what was going on at the Capitol, and I told him my ideas. He said, ‘Well, you just need to take the job.’ I thought he was kidding at first.

Did you or Olivier know at the time you took the job that LIFT might be under investigation?

There were rumors out there, but you chalk that up to jealousy because they were the biggest player in the field. Certainly, I don’t believe Mike had any idea that was about to happen. He would have told me.

Would you have taken the job if you did know?

People ask me that, and I say, ‘Well, I’d have to think about it.’ I don’t know that I would have, but I should have. So maybe it’s a good thing that I didn’t know.

That’s a very honest answer.

Well, I can’t be anything but. Knowing that was about to happen would’ve been a scary thing.

Have you spoken to Mark Smith since Bernie Cyrus’ whistleblower lawsuit claimed Smith took bribes from LIFT?

Not at all. We haven’t talked to anybody. I had hoped to meet with Mark prior to all this coming down to talk about the job, and we weren’t able to connect on even that. It was a tough blow. For a lot of people in our office it was heartbreaking to think that Mark would do that. It’s just inconceivable. And I’m not there yet. That’s a hard one for me to see. How can I be that wrong about somebody? It’s inconceivable.

You seem to have a good perspective on it though.

I get more positive every day about our office rising above this and moving on. Our new slogan is: ‘We grow creative,’ and we do.