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When the FBI raided the offices of a New Orleans film production company on June 1, publicly exposing a months-long investigation into the firm and the generous film incentives it received from the state under the direction of a former official, it threatened to seriously tarnish the reputation of one of Louisiana’s few economic development success stories—its rapidly growing motion picture industry.

But more than a month later, the federal probe doesn’t appear to be resonating with industry decision-makers on the West Coast. Nor is there any tangible evidence that the state has lost any business as a result of the probe—at least not yet.

State officials aren’t taking any chances, however. With an ever-growing list of states aggressively vying for a lucrative piece of the film industry pie, they’re proactively campaigning to get the message out that Louisiana still has one of the best film incentive programs in the country, despite the alleged missteps of a single player.

“The story hasn’t had the impact on the West Coast that we feared it would,” says Sherri McConnell, director of the state’s Office of Entertainment Industry Development. “But we’re certainly prepared and developing a plan with so that we can respond pre-emptively.”

That’s good news to local producers and industry investors, who were steeling themselves for the worst when word of the federal probe initially leaked out. The investigation centers on LIFT Productions, a New Orleans company that received generous tax credits under a former Department of Economic Development official, Mark Smith. Investigators are reportedly trying to determine whether Smith, who was the state’s top film recruiter until 2005, received kickbacks from LIFT in return for awarding to the company lucrative tax credits, a charge LIFT’s attorney has denied.

The credits were given under the state’s old law, which was tightened in 2005 to prevent against potential abuse. What’s more, since the allegations surfaced last month, the state has announced it will no longer award any tax credits to LIFT. Meanwhile, LIFT’s top official has taken a leave of absence.

Nevertheless, in scandal-ridden Louisiana, where a veteran congressman was recently indicted by a federal grand jury, a former governor sits in federal prison and a long list of former judges and insurance commissioners stand convicted of federal crimes, news of the film industry probe couldn’t do anything to help the state’s image.

“Louisiana finally gets something going to bring in new jobs that will help us grow and keep our best and brightest here, and we do something that we have a great deal of experience in: shooting ourselves in the foot,” laments Joe Traigle, whose Sterling Capital has bankrolled many productions shot in Louisiana.

But it turns out the industry hasn’t seen it that way. The national media never picked up the story. More significantly, the industry trade publications up until now have ignored it as well. The editor of P3/Production Update, a leading trade pub that last year ranked Louisiana as the best place in the United States to shoot movies, didn’t even know about the investigation until informed by a reporter. That magazine just compiled its 2007 list of top production destinations and, though it hasn’t been published yet, Louisiana again ranked high.

“I interviewed studio executives all over the country and all over the world,” says Sally Kemper, editor of the Los Angeles-based P3/Production Update, whose ranking will be out later this month. “These are big people in the industry, and not one of them mentioned this investigation. They all had very glowing things to say about Louisiana.”

State officials and local film offices concede they did initially receive a handful of “panic calls” from studios or producers who were worried. Arlena Acree, who directs the Shreveport Office of Film, Media and Entertainment, received two calls from worried vendors who have big projects planned for North Louisiana. She asked state officials to call the vendors on her behalf.

“They’ve asked me not to discuss it publicly,” Acree says of the vendors. “But after Sherri and I talked to them, they felt much better.”

Joe Traigle

McConnell says those two calls are the only ones that stand out in her mind, and she feels confident she and others in her office have gone a long way toward allaying fears that the entire industry is tainted by the scandal. A bigger worry, however, is whether other states are trying to use the federal probe against us. Since Louisiana initiated its film industry incentive program of tax credits in 2002, the competition has gotten a lot stiffer. Today, more than 20 states have similar programs, while another 15 offer at least some sort of tax credit to moviemakers. While Louisiana remains a leader, other states are gunning for it.

“Our biggest concern is the competition from other states that have started to use this against us,” McConnell says. “We’ve heard that some states have stuff on their Web site, and we’ve heard there are people out in other states visiting studios and trying to use this as a selling point against going to Louisiana.”

McConnell hasn’t seen any firsthand evidence of such. But Shreveport economic development-turned-film industry consultant David Dodd says he knows enough about the industry to be certain it’s going on.

“The Monday after that story broke, I can guarantee there were representatives from other states in the studios saying, ‘Well, it’s good old corrupt Louisiana,’” he says. “‘You need to come to a place where it’s not corrupt.’”

Which is why state officials are going on the offensive to allay any lingering fears. They’re planning a trip later this month to Hollywood to meet with studio executives and have been working the phones, contacting both producers that have come here in the past and those they hope to attract in the future. They’re also planning a public-relations campaign that will emerge over the next couple of months and will include a significant amount of advertising in trade publications.

“We’ve come up with a marketing and media strategy with regard to getting Louisiana’s message out,” McConnell says. “That the industry is bigger than just the one company and that we’ve grown to be an industry that can be self-sustaining and can move on.”

Mitch Landrieu

Lt. Gov. Mitch Landrieu is also jumping in on the effort, sounding the same message. As the self-proclaimed ambassador for the state, he’s been trying to get out in front on the issue. Says Landrieu: “We’ve been very aggressive about it.”

Another important element of the sales pitch is legislation passed in the recent session that clarifies the regulations governing that portion of the incentive program that grants tax credits on new infrastructure. The new legislation ensures that tax credits will only be granted after bricks and mortar are actually laid on studios and sound stages, closing loopholes that opened the program for potential abuse.

That has gone a long way toward addressing concerns among some in the industry. As long as the federal investigation doesn’t appear to be expanding beyond LIFT and Smith, state officials are cautiously optimistic they have dodged a bullet.

“I think we’ll get passed this, and we’re already well on the way,” McConnell says. “We’re still getting phone calls every day from folks who are interested in coming to Louisiana.”