Questions mount around Las Cruces film set purchase

In 2018, at the urging of state Sen. Jeff Steinborn, D-Las Cruces, city leaders agreed to pay $20,000 for sets from a cancelled television series.

“Graves,” featuring Nick Nolte as a former U.S. president, appeared on the Epix cable and satellite television network for two seasons from 2016 to 2017. It was produced in Rio Rancho.

The sets included partial facsimiles of the Oval Office and the Lincoln Bedroom, the fuselage of a passenger jet, a replica missile warhead and a jail cell.

Production company Lionsgate Television and show producer Bill Hill donated some of the set pieces directly to Film Las Cruces, while others became city property licensed for the non-profit’s use.

The price was negotiated by Hill and Steinborn, who also serves as board president of Film Las Cruces, the non-profit organization serving as the city’s liaison to the film industry.

The set pieces were rare and of professional quality, Steinborn told the city council, and would be an asset for a burgeoning Las Cruces film industry. He said the prospect of bringing the set pieces to Las Cruces had already attracted the attention of the New Mexico Film Office’s location manager.

“They do get calls every year for these types of sets,” Steinborn told the council. “There may not be anyone right now, but we believe at some point in time that call’s going to come.”

At the Feb. 26 work session, Steinborn told the council the transaction had to be completed quickly.

“We did our due diligence even vetting the opportunity,” Steinborn said in an interview, “and we had to move incredibly fast because they were getting rid of all these sets.”

He presented emails dating from Feb. 2 in which economic development staff notified the city purchasing manager of their intent to purchase the sets, requesting information on how to complete the transaction.

“We did our due diligence even vetting the opportunity and we had to move incredibly fast because they were getting rid of all these sets.”

In a Sun-News report last summer on marketing Las Cruces as a location for large-budget movie production, Film Las Cruces head Jon Foley said part of his organization’s job is educating municipal governments and local vendors on meeting the needs of an industry that spends lavishly yet makes decisions quickly.

“They tend to be very rushed, very ‘now,'” Foley said at the time. “The needs are immediate.”

In this case, approval and payment were needed quickly because Lionsgate was clearing the Rio Rancho studio where the show had been produced.

The sets were presented to councillors not as works of art, but as production assets for commercial films and for training students at New Mexico State University’s Creative Media Institute and the school of Creative Media Technology at Doña Ana Community College.

In the same session, councillors discussed a potential city film incentive program to bring film productions and related economic activity to Las Cruces.

The council took no formal vote at the work session but agreed the purchase price of $20,000 fell within then-City Manager Stuart Ed’s discretionary authority, and would not require a council resolution.

Seeing the purchase get a public go-ahead, Steinborn thanked the council profusely.

That was Monday and the sets were in the studio that Friday, March 2. A Sun-News photographer captured photos of the plane and other set pieces being moved into the studio that day.

Steinborn told the Sun-News, “We did not move that plane until the city paid for it,” and provided emails dated from Feb. 2, 2018, indicating economic development staff intended to make the purchase and sought advice from the purchasing department on the correct way to proceed.

However, no check was cut until March 29, and both he and Foley said the sets were moved 240 miles from Rio Rancho to the Film Las Cruces studio, located in an old Coca-Cola bottling plant south of town, over a period of three weeks, which Steinborn described as “one of the most harrowing stories.”

The New Mexico film technicians’ union, IATSE Local 480, donated the rental of a stake bed truck, Foley said. He and other volunteers from Las Cruces made “11 or 12” round trips, with Foley making nine of those trips himself.

He said he made that trip as often as twice a day.

After the final load, Foley said the truck broke down, convalescing at the Las Cruces studio for two weeks before it was repaired and driven home to Albuquerque.

On March 9, 2018 — a week after the Sun-News reported on the arrival of the plane to the studio — Film Las Cruces held a ribbon-cutting at its new studio.

The set pieces on display caught the attention of city staff attending the event, because a purchasing order and payment had not yet been approved.

Based on the evidence that the “the items were already received and accepted well in advance of a (purchasing order) being issued for this purchase, or City Council granting budget approval,” it was reported as a possible procurement violation.

The $20,000 invoice from Graves Productions was dated Feb. 13 — two weeks before Steinborn spoke to the council — for items described as the airplane set and “other previously received & inventoried film sets.”

Confusion about when the merchandise was added to city inventory and moved complicated the city’s review over whether the transaction was completed properly.

In a May 16, 2018 memo, city financial services director Rosie Duran described the purchase as a “processed procurement violation,” saying the Feb. 13 invoice had been paid on a requisition later converted to a purchase order on March 29, 2018.

A property agreement between the city and Film Las Cruces licensing the city-owned sets and props to the non-profit describes the set pieces as “solely for production-related purposes . related to local film endeavours.”

During the review, Ed argued in internal emails that the film sets were “capital purchases” that would “ultimately end up as functional assets of the Sound Stage once it is constructed.”

Six months later, a newly created procurement review committee would conclude its investigation with a brief memo dated Aug. 27, 2018 stating “the items in question are considered art objects,” and therefore exempt from the city’s home rule procurement code.

Sec. 24-4 of the code includes “art objects or artifacts or for their creation” on a list of authorized exemptions to the code. Since works of art are not subject to council approval or the requirements of the procurement code, with one sentence the committee ended a review that had unfolded over five months.

On May 7, 2018, the city council unanimously voted to ratify Ed’s purchase of the film sets.

The resolution also settled an accounting problem by authorizing the city to draw from the city’s Hold Harmless Gross Receipts Tax fund.

Initially, the city economic development department had sought to draw the money from the city’s capital improvement funds account, which included $3 million of the “hold harmless” dollars intended for building construction or improvements, and were told this required city council approval.

The problem that remained, according to Duran’s May 14 memo, was that documentation of what assets were purchased and when they were received was not complete. What seemed clear is that the goods were moved before approvals and payment were made.

“The violation that I believe would still apply is receipt of the goods before a requisition or PO were approved as the invoice is dated 2/13/18 and states specifically that they were previously received and inventoried,” Duran wrote.

Ed responded via email that evening that “the invoice is not accurate,” and said the economic development department, headed at that time by Philip San Filippo, told him the sets were inventoried on Feb. 20 in Las Cruces, and on Feb. 22 and 23 in Albuquerque.

His email does not account for the fact that, as Foley and Steinborn both told the Sun-News, the sets were transferred in up to 12 deliveries over a period of three weeks.

Ed acknowledged “the private arrangement to have the sets transported and stored here in Las Cruces was done before the sets were owned by the City,” but also noted that the cost had been borne by the production company, the property was not delivered to city property and that it was Film Las Cruces, not the city, that bore any risk.

Foley said the sets “have been utilized by students quite often,” for college technical courses as well as a weekly training program for local film technicians.

While the plane and some other set pieces “haven’t had much commercial use, if any,” Foley described the fuselage in particular as “the most incredible training tool we have at Film Las Cruces studios.”

“It’s really helped students get out of the mindset of shooting in reality, and creating the reality that they’re shooting in,” he said, noting that it provided students with experience simulating reality using set and studio effects.

After being described in public meetings and internal documents as assets for film production and local economic development, the sets were defined as objects of art for the first time in the memo ending the internal review.

The procurement review committee, consisting of city attorney Jennifer Vega Brown, assistant city managers Bill Studer and David Dollahon, and human resources director Andrew Moquin (who left his position in 2019), was created on June 11, 2018. The committee reviews potential procurement violations and makes recommendations to the city manager.

The film sets were not included among the procurement deficiencies identified in the city’s external audit for that fiscal year.

The Sun-News asked city elected officials and senior staff whether they considered the sets objects of art. City councillors who responded generally referred the question to Studer or Vega Brown. Councilor Yvonne Flores responded with a simple, “No comment.”

Studer did not respond to a query from the Sun-News for this story.

Vega Brown responded: “The film set issue was resolved well over a year ago and it was reviewed in last year’s audit. The City’s external audit did not report it as a finding. The purchase of the film set was discussed amongst the city council in an open meeting and the city received direction to move forward with the purchase. The city’s appointed procurement committee reviewed the procurement code and reviewed the council meeting and did not find a violation of the procurement code.”

Asked fora legal opinion as to whether the merchandise could legally be defined as art, she wrote: “I appreciate your request for a legal opinion; however, I am only able to provide legal opinion to my client.”

In an email, Mayor Ken Miyagishima wrote, “I don’t necessarily think it’s a ‘work of art,’ but a possible movie set at an extremely low price!”

Through the lens of the film industry, however, Foley said there was a plausible case for describing the sets as works of art.

“I would absolutely say that film sets are art,” Foley said at the Film Las Cruces office. “That is somebody’s creativity coming to life that is not necessarily meant to be real. We don’t have a prison at Film Las Cruces Studios — we have a prison set that was conceptualized by an artist and built by artists . I think there is a very good argument saying that it is art.”

The procurement review committee was created in June of 2018 in response to findings on the city’s external audit for that fiscal year.

While the purchase of the “Graves” film sets was not flagged by auditors, several instances were found in which the city missed violations of procurement code. The auditors noted that the city “self-identified” several of them.

The new committee was tasked with reviewing potential procurement violations and making recommendations to the city manager. The policy also instituted mandatory procurement training sessions for approximately 300 employees, according to the city’s response to the audit.

The city also said it had, in January of 2018, changed its organizational structure so the internal auditor reported to the legal department instead of the city manager’s office.

Violations of procurement rules were among the complaints raised in a whistleblower complaint last year that prompted Miyagishima to authorize an independent investigation. The final report found no wrongdoing by city officials but included some criticisms of Ed’s management style.

Ed served as city manager from November of 2016 until his abrupt resignation in April.

Debra Smith, the former purchasing manager, was placed on administrative leave last December and terminated in January. In a pending lawsuit against the city, Smith alleges she was fired in retaliation for opposing procurement violations, including the film set purchase on a list of examples.

San Filippo, the city’s former economic development director, was fired by the city in August amid an investigation into financial transactions involving his department, the Las Cruces Country Music Festival and Visit Las Cruces, the city’s convention and visitors’ bureau.

Algernon D’Ammassa, The Associated Press

by Canadian Press

Questions mount around Las Cruces film set purchase

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