Director Daniel Adams Sentenced to Prison for Tax Credit Fraud (Exclusive)

Daniel Adams, the director of "The Golden Boys," was sentenced Thursday for inflating expenses on his application for Massachusetts film tax credits

BOSTON — Three weeks after he pleaded guilty to inflating expenses on his application for Massachusetts film tax credits, director Daniel Adams was sentenced to up to three years in state prison.

A superior court judge ordered Adams on Thursday to pay nearly $4.4 million in restitution and serve 10 years on probation when he completes his prison term.

Adams, 51, defrauded the state of $4.7 million by submitting falsified budgets, bank account and investment documents and contracts for enlarged actor salaries while filming 2008’s “The Golden Boys” and 2009’s “The Lightkeeper” near his home on Cape Cod, according to court documents.

“I am deeply sorry and want to apologize to the Commonwealth of Massachusetts, the court, and the Department of Revenue,” Adams said at the sentencing.

He was then led away in handcuffs.

Suffolk Superior Court Judge Carol Ball released Adams on $10,000 cash bail so he could organize his affairs with his wife and 10-year-old daughter, who attends school near the family’s Los Angeles home in Bel-Air, his lawyer James Greenberg said.

“He was accepting responsibility before he was even charged,” Greenberg told TheWrap. “He was submitting inflated costs to get a larger tax credit, and he admitted that.

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He said Adams, who has no previous criminal record, received a just sentence but the amount of restitution, which was denied a hearing by the judge, was unfair.

Adams is the first person to be charged with conning the state out of money through its 25 percent tax credit program, which was enacted in 2006. The credits can be a lucrative source of income for filmmakers, who can sell them to companies.

According to a spokesman for the Massachusetts Attorney General Martha Coakley, Adams sold his credits to Wal-Mart and Bank of America.

Though similar cases of fraud in Nebraska and Iowa emboldened critics of state tax credit programs for filmmakers, Lisa Strout, who heads the Massachusetts Film Office, said such instances are unusual.

“I have never heard any other issue [like this],” Strout told TheWrap. “That’s what makes me mad. The industry is very respectful about learning this stuff — they call a million times about this thing to make sure they get it right.”

The case stems from 2007, when he shot “The Golden Boys,” also known as “Chatham,” near his West Barnstable home on Massachusetts’ southeast coast.

When he finished the film, which starred Rip Torn and David Carradine, Adams submitted his documented expenses to an independent accountant and wrongly reported eligible costs to the Department of Revenue of more than $6.7 million, according to a statement from Attorney General Martha Coakley.

“This resulted in a tax credit payment of more than $1.6 million,” the statement said. “Investigation revealed that multiple reported costs were fictitious or inflated, and that eligible costs to produce the film were in fact only $2.3 million.”

Two years later, when he organized a new production company to create “The Lightkeepers,” starring Richard Dreyfuss, Adams became bolder.

After a review from an independent accountant, he again over-reported his eligible costs to the state government, this time for more than $17 million. He was awarded more than $4.2 million in tax credits.

But this time, investigators from the Department of Revenue spotted suspicious tax returns and began probing other documents Adams submitted with his application.

“Numerous items listed as expenditures were fictitious or inflated,” Coakley said in a statement.

Among these, investigators found that Adams reported that he paid Dreyfuss, the lead actor, $2.5 million, when he was actually paid about $400,000. Adams received more than $3.6 million in overpaid tax credits.

Greenberg said, though his client pleaded guilty, the Bay State should use their own accountants to verify the expenses rather than requiring filmmakers to receive independent audits.

“Flying on the honesty of people in any business doesn’t work,” he told TheWrap. “Business is fraught with dishonesty and greed, and I don’t think they had any checks and balances.”

He said Adams plans continue making movies when he completes his sentence. The director is up for parole in two years.