THE CULTURAL FILM FOUNDATION AND THE MEDIA AGENCY WILL BE AUDITED FOR MISAPPROPRIATION OF PUBLIC FUNDS
Foundations are part of the cultural film promotion ecosystem, but they have currently corrupted their social purpose by engaging in fraud against public funds and influence peddling, which demands the immediate termination of their participation in the system of state benefits. Due to these facts, controls and audits will be established to evaluate the destination of those funds, preventing their diversion, triangulation, or misappropriation.
THIS DECEPTIVE SCHEME IS UNDER JUDICIAL REVIEW.
PARTIES INVOLVED IN THE ARRANGEMENT: MEDIA AGENCY – FOUNDATIONS
DETAILS OF THE DECEPTIVE MECHANISM
DECEPTIVE MECHANISM “THE FOUNDATIONS”:
The project is managed by a Media Agency, which acquires the rights to a book, selects the director and the actors. All other resources such as sets and cameras are obtained free of charge through the Foundation.
The State does not usually provide direct cash, but rather tax credits (tax rebates) ranging from 20% to 30% of the expenditure.
THE SCHEME:
- A TOTAL BUDGET OF $15 MILLION IS PRESENTED FOR THE FILM “FRAUD.”
- IN THE EXPENSE BREAKDOWN, THE HIGHEST VALUE IS CGI AT $8 MILLION, ARTIFICIALLY INFLATED.
THERE ARE ALSO OTHER COSTS:
- STUDIO OVERHEAD (STRUCTURAL COST): They charge themselves an additional 15% for “using their own offices.”
- FINANCING INTEREST: The Agency pretends it took out a loan for the $15 million and charges itself 10% interest.
- DISTRIBUTION FEE: Even though they distribute the film themselves, they deduct 30% from every dollar earned.
If the State provides a 30% rebate, the Agency receives $4.5 million in cash or credits. Since the CGI actually cost much less (or was produced by a shell company owned by the Agency itself), the $4.5 million returned by the State becomes pure profit for the Agency before the film is even released. The Agency then makes the money disappear by transferring it to another account.
START OF FILMING
- All resources used—travel, lodging, cameras, sets—are provided free of charge by the Foundation. However, the Agency creates false invoices through its own companies.
- It generates fake daily rental invoices for equipment, locations, vehicles, supplier payments, etc.
- OVERBILLING OF LOCAL SERVICES: They hire a local company (which may also belong to them) for services such as security or catering.
- TRANSFER PRICING: They inflate the value of import/export of equipment (cameras, vehicles) to justify “customs and logistics expenses” that absorb the remaining funds.
WITH THESE FALSE INVOICES, THEY CAN CLAIM THEY SPENT MORE THAN $4.5 MILLION ON EDITING THE FILM, WHEN IN REALITY THE MONEY WAS TRANSFERRED TO ANOTHER ACCOUNT.
INITIAL STEP: INVOICE VALIDATION
- PRODUCTION: Expense in a Public Isolated Geographic Area: $1 million. Receives $300,000 from the State. This amount is low because everything is registered through customs, and they cannot falsify it.
- THEY CHOOSE REMOTE LOCATIONS to retain money from negotiations with local companies. The use of extreme locations is a recurring pattern. By taking filming to precarious and remote environments, standard studio safety protocols are eliminated. THE OBJECTIVE is to avoid audits during filming. Remember that the nude scene must be filmed to validate the $8 million CGI invoice. Here, the actress is forced into physical contact and nudity scenes to make the documentation credible.
- THE ACTRESS CANNOT OWN THE CGI: Because the invoice is in the Agency’s name, she does not receive any of that money despite appearing on screen. The actress only serves to justify the scheme. Actress: $0.
- THE OBJECTIVE: To prevent the actress from becoming aware, allowing the scheme to be repeated against the State.
- WHY AN ACTRESS: An actress is used because nudity or such scenes justify high CGI costs. The State believes the cost is $8 million.
ACTORS’ SALARIES:
The Agency reports $5 million for three actors to obtain $1.5 million from the State. Each actor receives $500,000. However, from this salary the following are deducted:
AGENCY COMMISSION (-10%)
MANAGER COMMISSION (-10%)
LEGAL FEES (-5%)
TAXES (APPROX. -40%)
APPROXIMATE NET EARNINGS: $175,000 PER ACTOR
- RISKS: The Agency may force the actress to hire services from “sister companies” or affiliates (marketing, legal advisory, accounting) owned by the same Agency. In this way, they prevent her from having available cash. Without liquidity, the actress becomes dependent on the Agency.
- IMAGE RETENTION: Due to limited financial growth, she remains indebted to the Agency and chooses to work again to recover money she never actually lost.
THE FILM IN THEATERS
FILM REVENUE EXAMPLE: $30,000,000
TOTAL REVENUE: 12M + 8M + 10M = $30,000,000
AGENCY EARNINGS: 6M + 800K + 10M = $16,800,000
EXPLANATION:
- From the $12 million box office, the Agency keeps 50% ($6 million), while the other 50% goes to the exhibitor (theaters).
- From international sales, the Agency takes a 10% commission ($800,000).
- From streaming licenses, the Agency retains 100% ($10 million).
TOTAL: $16,800,000
PREVIOUSLY OBTAINED: $4,500,000
GRAND TOTAL: $21,300,000 IN AGENCY PROFITS
REMEMBER: The $4.5 million was already transferred to another account.
HERE, A NEW TRANSFER OF $16.8 MILLION IS MADE TO ANOTHER ACCOUNT, RESULTING IN ZERO PROFITS ON THE BOOKS.
HOW IS THE TRANSFER DONE?
A company is created in a tax haven, supposedly owning the CGI technology or distribution rights.
TRANSFERS TO “CLEAN” THE PRODUCTION ACCOUNT:
Payment for “Technical Services”: The $8 million for CGI is transferred to a company such as “EDFFX Global Solutions” (owned by the same Agency).
ROYALTIES AND LICENSES: The Agency charges a “brand usage fee” for using its own name and transfers funds under “franchise fees.”
REIMBURSEMENT OF INFLATED EXPENSES: Money is transferred to friendly advertising agencies, which return 80% under the table or through fictitious services.
ONCE ALL PROFITS ARE TRANSFERRED, THEY CLAIM THE MONEY WAS LOST DURING PRODUCTION.
They present management expense invoices during audits.
JUSTIFICATION OF MANAGEMENT COSTS (PROFIT ABSORPTION):
Digital Post-Production Services (CGI): $8,000,000
Justification: External billing for visual effects processing, cloud rendering, and advanced color correction.
Marketing and Release Strategy (In-house): $2,400,000
Justification: Agency fees for campaign design, social media advertising, and press management.
Distribution and Digital Copy Costs (DCP): $3,400,000
Justification: Delivery of digital keys to theaters, server maintenance for streaming, and subtitle/dubbing encoding.
Administrative Fees and Legal Costs: $4,200,000
Justification: International contracts, intellectual property protection, liability insurance, and “representation expenses.”
Logistics and Promotion Tours (Press Tour): $3,800,000
Justification: Travel expenses, luxury hotels for executives, and premiere events.
TOTAL FALSIFIED EXPENSES: $21,800,000
TOTAL PROFITS: $21,300,000
21,300,000 – 21,800,000 = $ - 500,000
THE AGENCY CLAIMS IN AUDIT: A LOSS OF $ -500,000 FROM PRODUCING THE FILM.
The film shows a loss in the audited books, while in reality the money was transferred elsewhere.
THE GOAL IS NOT FOR THE FILM TO SUCCEED. THE OBJECTIVE IS TO PROFIT .THIS IS NOT ABOUT CINEMA. THIS IS ABOUT EMBEZZLEMENT OF PUBLIC FUNDS, DOCUMENT FORGERY, AND FRAUD. THE UNDERSTANDING AND SEVERITY OF THESE EVENTS REQUIRE SWIFT FEDERAL INTERVENTION.
THIS NEW LEGISLATIVE MODEL IS CURRENTLY UNDER REVIEW
This proposed legislation establishes a federal framework to regulate the use of public funds and tax incentives in the audiovisual industry, focusing exclusively on financial integrity, transparency, and worker protection, without interfering with creative or artistic content.
1. PURPOSE OF THE LAW
The law aims to:
Ensure transparency in the use of public funding in film and audiovisual productions
Prevent misuse, fraud, or diversion of tax incentives
Strengthen labor protections for artists and technical workers
Establish technical auditing systems based on objective data
Preserve full neutrality regarding artistic expression and content
The law explicitly does NOT regulate storytelling, narrative, or artistic decisions.
2. FINANCIAL TRANSPARENCY AND TRACEABILITY
All productions receiving public funds must ensure:
Full traceability of financial flows
Clear identification of fund origin and final beneficiaries
Separation between public funds and private capital
Prevention of hidden transfers or financial structuring designed to obscure spending
The goal is to guarantee that public money is used only for its intended production purposes.
3. TAX INCENTIVES AND PUBLIC FUND USE
The law regulates:
Film tax credits and government subsidies
Conditions for eligibility and continued access to incentives
Audit requirements for declared production expenses
Restrictions on misuse of public incentives across multiple projects
Any improper use can lead to loss of eligibility or recovery of funds through legal procedures.
4. TECHNICAL AUDIT SYSTEM (CGI / VFX VERIFICATION)
A technical auditing framework is introduced to verify production claims, especially in digital effects (CGI/VFX).
It relies on objective indicators such as:
Rendering logs and system data
Energy consumption records
Computational processing time
Production pipeline metrics
Independent technical expert evaluations
Importantly:
Artistic or narrative quality is never evaluated
Only measurable technical production data is considered
5. ECONOMIC COERCION AND LABOR PROTECTION
The law introduces protections for audiovisual workers by defining verifiable economic coercion, including:
Contractual pressure limiting real consent
Lack of reasonable alternative employment
Imbalanced “take-it-or-leave-it” contracts
Absence of documented independent consent
It ensures that:
Consent must be free, informed, and documented
No artist can be forced into non-essential personal conditions
Vulnerable workers are protected from financial dependency pressure
6. ARTIST SAFETY AND INTIMACY PROTECTION
Productions receiving public funds must implement:
Intimacy coordination protocols
Documented consent for sensitive scenes
Psychological support when required
Protection against coercion or retaliation
These measures are designed to protect dignity and workplace safety in film production environments.
7. AUDIT AUTHORITIES AND ENFORCEMENT STRUCTURE
The system separates responsibilities into three levels:
Technical Body
Conducts audits and data analysis
Issues non-binding technical reports
Does not impose penalties
Administrative Authority
Reviews audit findings
Initiates formal procedures
Coordinates investigations
Judicial Authority
Only body authorized to impose penalties
Approves fund recovery or sanctions
Ensures due process and legal oversight
8. FRAUD PREVENTION AND ENFORCEMENT
If irregularities are detected, the framework allows:
Administrative investigations
Suspension or loss of tax incentives
Recovery of improperly used funds
Legal review before any enforcement action
No automatic penalties are permitted without due process.
9. SAFE HARBOR PROTECTIONS
Entities acting in good faith may be protected when they:
Maintain proper financial and technical records
Cooperate with audits
Do not show intentional misconduct
Minor or unintentional errors are prioritized for correction over punishment.
10. INDUSTRY STABILITY AND INVESTMENT PROTECTION
The law aims to maintain a stable audiovisual investment environment by:
Avoiding over-penalization of compliant productions
Protecting third parties acting in good faith
Ensuring predictable regulatory conditions
Preventing double penalties for the same violation
11. TRANSPARENCY FOR STUDIOS AND PLATFORMS
Large studios and platforms receiving public incentives must:
Disclose financial use of public funds
Report production spending categories
Identify beneficial ownership structures
Avoid double-counting of subsidized expenses
12. DIGITAL PRODUCTION AND INFRASTRUCTURE CONTROL
Productions using CGI/VFX incentives must maintain:
Hardware and system logs
Render and processing data
Equipment traceability
Technical usage verification
This ensures public funds match actual computational production activity.
13. INDIVIDUAL LIABILITY, LABOR PROTECTIONS, AND CONTROL OF CONDITIONALITY IN THE USE OF PUBLIC FUNDS
13.1 General principle of liability
Any natural or legal person participating in audiovisual productions receiving public funds or tax incentives shall be liable only to the extent that there is:
proven participation in the management, execution, or benefit of public resources, and/or
direct and voluntary involvement in practices that violate financing, labor, or contractual integrity regulations.
Liability must always be individualized, proven, and assessed in accordance with due process.
13.2 Conditions of integrity in the labor and contractual environment
Productions must ensure that all artistic and technical participation is carried out under conditions of free, informed, and documented consent.
The following shall be considered risk indicators subject to administrative audit:
absence of formalized or registrable contracts
clauses that unjustifiably restrict the ability to accept or refuse work
structural economic dependency without reasonable alternatives for negotiation
lack of consent protocols in situations involving heightened labor or artistic sensitivity
The existence of these indicators shall not in itself constitute a violation, but may trigger enhanced administrative review.
13.3 Protection of consent and prevention of coercion
The use of public funds shall be prohibited in productions where economic, contractual, or professional coercion over audiovisual workers is established.
Determination of such situations shall require:
documentary review of contracts and payments
interviews or testimony within administrative or judicial proceedings
assessment of objective labor negotiation conditions
Under no circumstances shall the absence of a specific document automatically imply the existence of coercion; it shall instead be considered one element within the broader audit process.
13.4 Liability for misuse of public incentives
Where misuse, diversion, or simulation of expenses related to public funds or tax benefits is established, the following measures may apply:
full or partial repayment of received funds
temporary suspension from access to future incentives
fixed-term disqualification in severe or repeated cases
legal action where applicable
All sanctions shall be determined by the competent judicial authority.
13.5 Knowing participation in fraud or coercion schemes
Aggravated liability may only be attributed to collaborators who, with verifiable knowledge and voluntary intent, participated in:
fraud schemes involving public funds
contractual or financial simulation
systemic coercive practices linked to the acquisition of incentives
In such cases, liability shall be proportional to the degree of participation and benefit obtained, without prejudice to individual sanctions determined by the judicial authority.
13.6 Prohibition of automatic or collective liability
Automatic or collective attribution of liability based solely on professional hierarchy is expressly prohibited.
No participant may be sanctioned solely for:
complying with professional instructions
performing an artistic or technical role within a production
signing contracts without evidence of awareness of irregularities
13.7 Due process and separation of functions
All determinations of liability must respect:
prior administrative investigation
technical evaluation where applicable
final decision exclusively by judicial authority
full right to defense and contradiction
FINAL IDEA OF THE LAW
In simple terms, this law creates a system where:
Public money in film production is fully traceable
Technical data is used to verify production claims
Workers are protected from coercive contract structures
Fraud is prevented through audits and legal oversight
Creative freedom remains completely untouched