Studio head paid $450k to settle failed investment

NEW ORLEANS — A film studio executive who never repaid $1.9 million he took from New Orleans Saints players and others paid $452,000 to settle a dispute over another failed investment, court records show.

Wayne Read, chief executive of Louisiana Film Studios LLC, paid Dr. Spiro Gerolimatos on Jan. 21 — nearly three weeks after he raised $1.9 million for a Louisiana movie tax credit deal. Gerolimatos, a radiologist, won a summary judgment in Illinois state court over a $400,000 loan he made to Read for Mardi Gras Studios, which was to be built in New Orleans.

The judgment was made in May 2008 against Read because he never responded to the lawsuit. He also paid $52,000 in court fees and interest, documents show.

Jimmy Castex, an attorney representing two of the people who paid Read for tax credits, said lawyers in the case had confirmed all $1.9 million raised for the purchases was delivered to Read by Jan. 2.

Louisiana Film Studios is the target of an involuntary bankruptcy suit filed in New Orleans by several investors, including Saints linebacker Scott Shanle, former Saints punter Mitch Berger and long snapper Kevin Houser, now with the Seattle Seahawks, who thought they were buying the tax credits.

Saints Coach Sean Payton, quarterback Drew Brees and former star Archie Manning also were also among 27 people who bought the credits that promised about $1.33 for each dollar invested.

Sherri McConnell, director of the Office of Entertainment Industry Development, said the studio never applied for the credits, which are designed to boost the Louisiana film industry.

On Tuesday, lawyers for the claimants in the bankruptcy case asked a judge to appoint an overseer for the studio’s finances until the dispute is settled. U.S. Bankruptcy Judge Elizabeth Magner set a hearing for Friday.

A message seeking comment was left Wednesday with Read’s spokesman, Allan Katz. No one answered the phone at Louisiana Film Studios’ office in suburban New Orleans. As of Wednesday, the studio had not filed an answer to the involuntary bankruptcy petition.

Read has said he intends to repay the tax credit money after finding other investors or buying credits from a broker. He said he was hit by unexpected startup costs and lower-than-expected revenue and did not apply for the tax credits because of confusion about what expenses could be claimed.

Castex said the FBI had contacted parties in the case. The FBI and the U.S. attorney’s office have refused to confirm or deny an investigation. No criminal charges have been filed.

In Gerolimatos’ lawsuit, the doctor said he agreed in September 2007 to loan $400,000 to Armada Studios, described as a company obtaining land in New Orleans for Mardi Gras Studios. Gerolimatos was to receive $40,000 in interest, plus the original principal amount, within three months of closing the purchase on the land, the suit said.

The closing never took place.

According to records of the Louisiana economic development department, Read applied for tax credits for Mardi Gras Studios on Dec. 1, 2007. They were never issued because the project never went forward. The application envisioned an $81 million studio built from the ground up. Those documents also listed Armada Studios as another name for the project.

Gerolimatos’ suit, filed in March 2008, said that Read failed to put the money in an escrow account as agreed and never gave Gerolimatos the account number or account name. Read told Gerolimatos several times that he would travel to New Orleans and have the money wired to him — and then said he was going to pay Gerolimatos “by receiving money from other investors,” the suit said.

In the involuntary bankruptcy petition, Shanle, Berger and Houser are seeking return of $468,750 paid to Read. Houser, who said he told some of his Saints teammates about the tax credit opportunity, has said he doesn’t believe it had anything to do with his recent release from the team.

Also in the suit is a construction company half-owned by Houser’s wife, claiming the studio owes it $681,418 for work done on a renovated grocery warehouse that Louisiana Film Studios leases. Two other tax credit buyers made claims totaling $134,000.