GRAND RAPIDS – The owner of a company that claimed to have purchased a film studio near Grand Rapids, applied for a 25 percent state tax credit under its film incentive program and had his project cited by Governor Jennifer Granholm was charged Monday by the Department of Attorney General with fraud.

Joseph Peters of Ada, owner of West Michigan Film, was charged with one felony count of attempted felony false pretenses of more than $20,000. The department said Peters had actually never purchased the former Lear building that he claimed he would convert into a studio called Hangar42.

Peters had claimed the purchase price was $40 million, about four times the list price of the property just months before the claimed purchase. That would have made Peters eligible to claim a $10 million tax credit from the state.

The Michigan Film Office ultimately denied the application although it never said why, citing state tax privacy laws. The statement from the department said the application was denied because Peters could never substantiate that the transaction took place.

“With Michigan taxpayers already dealing with one of the highest unemployment rates in the country, it is a kick in the gut when someone tries to defraud them,” Attorney General Mike Cox said in a statement.

The charges were filed in the 61st District Court in Kent County and carry a maximum penalty of up to five years in prison. The investigation remains ongoing.

The charge is an explosive development in the ongoing controversy surrounding the Hangar42 project. It’s also the second time this year that the state has been in the position of awarding an economic development incentive to someone with allegedly fraudulent motives. Earlier this year, the state was humiliated when it was discovered that it had awarded a multimillion tax break to a convicted con-man who had concocted a scheme to defraud the state through the use of a fake company.

Already the Hangar42 controversy claimed the job of Noah Seifullah, who was chief of staff to Rep. Robert Dean (D-Grand Rapids). Seifullah, who was reported to have business connections to the Hangar42 project, met with officials at the Michigan Film Office at Dean’s request to find out why the state had yet to approve the tax credit, and Dean participated in a meeting with then-Film Office Director Janet Lockwood and Peters to discuss the situation. Lockwood has since retired.

While the Hangar42 situation isn’t as jaw-dropping as what happened with the RASCO scandal where Richard Short shared the stage with Granholm, who unwittingly praised the work of his firm without knowing he was a con-man, it’s still a black eye for the administration. Short remains under investigation by the Michigan State Police.

In Granholm’s State of the State speech this year, she cited Hangar42 as she listed off a series of companies recruited to the state through incentive programs.

“And these are just some of the ones we’ve helped with the economic tools you have approved,” she said in the speech.

Granholm spokesperson Tiffany Brown said of the charge in a statement: “We haven’t seen the charges so can’t comment on the charges. The governor has zero tolerance for fraudulent activity.”

Peters told The Grand Rapids Press the first he knew of the charge was when he saw it on television. He could not be reached for comment.

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