Michigan offers cautionary tale, with workers left unpaid

Chris Winters thought he’d landed a sweet gig when he went to work last November for a startup visual effects and production company in Michigan, Maxsar Digital Studios.

He’d grown up in the Wolverine State, and the new job was close to his parents’ home. “I was excited about it,” he says. “It seemed too good to be true — and it was too good to be true.”

In less than a year, Winters and at least a half-dozen other artists were chasing a producer for $50,000 in unpaid wages, while Maxsar Digital was forced to close. Production incentive programs can lure legitimate productions and bring a lot of money into the state. But they can also attracts bottom-feeders who can tap into the state’s allotted funds. The Maxsar tale occurred at the same time that a shift in state government meant a sudden lack of support for the program, followed by a crash in the filming industry in the state.

The Michigan experience stands as a cautionary tale for anyone involved in incentives. States need to be aware that not every film company will be able to deliver on all its expectations. And film companies, their employees and local businesses need to be aware that politics is a volatile area, and a shift in administrations can mean a drastic shift for everyone involved.

Winters, along with as many as 15 other freelance vfx artists, went to work for Maxsar Digital on a sci-fier called “Scar 23,” produced by Philippe Martinez, who was CEO of Maxsar, though Maxsar wasn’t the production company on the pic. The new Maxsar artists didn’t know Martinez, but they soon learned that the French-born exec had served jail time in France after investors complained to authorities about his former company, Ulysse, which had been forced into receivership in Los Angeles.

Martinez’s business dealings in 2006-2007 with helmer Amy Heckerling and filmmaker David Ayer on separate projects left both complaining publicly that Martinez was trying to renegotiate terms of already-completed deals or deliver less support for their films than he’d promised.

After winning rights to Ayer’s “Harsh Times” with a $4 million bid, Martinez later asked him to slash the price by $1 million. In a 2008 Entertainment Weekly interview, Heckerling alleged that Martinez botched deals for “I Could Never Be Your Woman” by signing away DVD rights, killing its chances for theatrical release and relegating it to the straight-to-DVD bin.

At first, production seemed to be going as planned on “Scar 23,” and one supervisor told the team that Maxsar planned to ramp up its slate with more films each year for the next several years. But by early 2011, the company began to fall behind in paying many of its freelance artists.

When the artists began asking what was happening, says Winters, “we were told a lot of things. They kept saying that they were going to find more investors and that we would get our money, so when they asked me to keep working even though I wasn’t being paid, I did it.”

They were also told that Maxsar could be affected because newly elected Gov. Rick Snyder, a Republican, said shortly after taking office he believed the film incentives program in Michigan needed to be changed or abolished. Maxsar general counsel Franklin Walker (who is among those still owed money by the company) says “I told (the vfx artists) we would pay them, but that we were having problems because of investors being scared off by the governor’s statements about the incentives program.”

The Michigan Film Office, however, says that since “Scar 23″ had been approved for the incentives program in 2010, it would be grandfathered in, regardless of what the new governor or state legislature did in 2011.

Potential investors were brought into the Maxsar facility to view vfx work on “Scar 23,” according to editor Nick Hoban, a former Maxsar staffer who was paid in full for his work there. Hoban believes the failure to attract more investment wasn’t just a matter of worries about the incentive program.

“They were constantly rewriting the script for ‘Scar 23′ and asking the vfx artists for ideas about how to fix the problems in the script,” Hoban says. “It was not a good story, so I don’t think the incentives would have made a difference either way.”

But since Snyder began moving to eliminate the Michigan film credit and replace it with a grant program capped at $25 million, the entire film industry there has cratered.

“I was working on ‘Avengers’ earlier this year, and the minute the governor started talking about changing the incentives program, they pulled out of Michigan and went to Cleveland,” says David Rumble, a Michigan-based location manager. “So I’ve spent the last seven months in Ohio along with a lot of other Michigan crew people who had to follow the work.”

Rumble thinks Michigan’s film business collapsed as soon as Snyder began his anti-incentives statements. With fierce competition from neighboring states like Ohio, it was all too easy for producers to find financially greener pastures nearby. Michigan also recently lost “Iron Man 3″ to a more attractive incentives program in North Carolina.

“It’s the big productions that fill up hotels, restaurants and hire a lot of local crew and then pay them union day rates,” says Rumble. “Little films will always cut corners and try to pay you less.”

The Michigan Film Office admits there’s less film production this year than in 2010, but emphasizes it is still able to approve incentives for 21 projects.

Of the lost “Iron Man 3″ deal, the film office says, “We put a competitive offer on the table to Marvel and Disney, and they, like every project, had to make a business decision.”

Michigan’s incentive program has a dim future at best. As of now, SB 569 — the legislation that would introduce a cap of $25 million and spell out how that money would be awarded — sits in committee in the state legislature. Since it hasn’t moved, the Michigan Film Office decided on Sept. 30 that it will no longer take incentive applications for fiscal year 2012.

Maxsar workers were made well aware that incentives played a part in the company’s financial crisis. Moreover, even as the studio was falling weeks behind paying its freelancers in early 2011, management started to tell the vfx artists that they needed to complete certain parts of the vfx for “Scar 23″ quickly. According to several artists interviewed for this story, supervisors said they needed the shots for an audit by the Michigan Film Office. The audit, they said, would show that Maxsar was doing the work that would qualify them for 2010 incentives funds.

However, Michigan’s film office says it doesn’t examine the vfx on a project during any kind of audit. The Film Office and the Dept. of Treasury only perform an audit in order to determine the actual amount spent in the state during a production, since that number is used to calculate the size of the incentive check a production will receive.

Maxsar shuttered in April, leaving “Scar 23″ unfinished and some of its freelancers, including at least six digital artists, unpaid for as much as three weeks’ work. Some tried to contact Walker or Martinez to find out if there were any plans to pay them. Some artists managed to get through and were promised they would get their money. Others found themselves dialing disconnected phone numbers.

Vfx artist Adam Skutt says he was told by Martinez in July that the producer was about to cut a deal for a different project, and that if the deal went through, some of the funds would be used to pay him the more than $4,000 he was owed. After that phone call, he never heard from the producer again, and Martinez has since stopped taking his calls, he says. Skutt never received his payment.

Still others were told that once “Scar 23″ passed through its incentive audit, Martinez would settle all debts for Maxsar. Walker, who confirms that the artists’ claims are legitimate, says there are records of all Maxsar’s outstanding debts, including contact information for all creditors, including the artists. None of the vfx artists interviewed for this story
say they had heard from Maxsar or had been asked for their current contact information.

“If anything, it seems like they’ve been avoiding us, because a phone number for Franklin (Walker) was changed and then I couldn’t get in contact with him,” says Winters, who has been working with an attorney to try to get the $9,000 still due him.

The incentive check for “Scar 23″ could go a long way toward settling those debts. Though the Michigan Film Office can’t comment on specific aspects of the audit for the project, they confirmed “Scar 23″ was approved for the incentives program and that their audit is in progress. The office also stated that if the film qualifies for the entire amount specified in its original paperwork, an incentive check for $4.28 million could be issued, although neither Maxsar nor Martinez would be the recipient. Instead, payment would be made to a company called Teddy 23, registered in Michigan with Luc Campeau listed as “resident agent.”

While it may seem strange, it is possible to receive an incentive check on a project that has not been completed. For this to happen, though, the producer must demonstrate through an audit that the money for the project has been spent in Michigan. Also, projects must be pre-approved for the incentives program, and before they begin work, they must usually show a concrete plan for completion and distribution. However, any wages paid out to those who are still owed money will not be eligible for the incentive program since those wages will have been paid after the final incentive paperwork has been filed.

Having helped complete Maxsar’s “audit” footage at a breakneck pace, Joan DiSalvo, a vfx producer who is owed more than $5,000 by Maxsar, says, “In the end, I couldn’t get any answers about payment, so now I’m pursuing options through the (Michigan) Dept. of Labor.” Hiring an attorney would eat up too much of what DiSalvo is owed, she says, and a small-claims court victory would mean little, since Maxsar is no longer in business.

Adds Winters: “These amounts, $3,000 or $5,000, might sound small, but when you’re freelance, it’s a lot of money. People forget we still have to buy health insurance on our own, which costs a huge amount when you don’t buy it as part of a company, and you also have to save for the times when you’re out of work.”

Variety reached Martinez by phone via his office at Bauer Martinez Studios in Florida. When asked about the money he still owed the “Scar 23,” crew, he became upset.

“I spent a lot of money in Michigan, and I don’t want to talk about it anymore,” Martinez said in late August. “We’re going to pay them in September, I think. I’m tired, and if you want to write a story about $50,000, then go ahead.”

Then he hung up. Walker followed up about 30 minutes later to answer questions on his client’s behalf, contributing much of the information for this story. In their last conversations with Variety, both Martinez and Walker confirmed that money was still owed to people who had worked on “Scar 23.”

In the meantime, Winters and the others can only wait and hope for payment.

“I’d like to think it will happen,” says Winters. “But we’ve been told so many things at so many different points that I’m not sure what to believe anymore.”

As of Oct. 6, Adam Skutt, Chris Winters and Joan DiSalvo had not been paid.

Filed Under:

Follow @Variety on Twitter for breaking news, reviews and more