SUNSET’S EVENTS : CONCERT CASH FILLED BACKPACKS : PARLIAMENTARY INQUIRY INTO EVENT FAILURE : AUDITED ACCOUNTS : CONFIDENTIAL REPORT INTO CONFLICTS OF INTEREST
A music industry insider has informed Fremantle Backchat that within Sunset’s Business structures it was normal practice to sell surplus tickets at entry gates for cash. Most entry tickets were sold online through booking agencies but it is estimated as many as 2000 tickets, normally available to events online, may have remained unsold. Depending on the event these were sold for cash at prices of “$120 to $150”.
As cash registers filled a Sunset director, James Legge, “would empty them, putting the money into a backpack. As the tills refilled he would return and empty them into the backpack again”.
Fremantle Backchat’s informant explained that, if there were people still waiting to gain entry when tickets were sold out, Sunset’s volunteer workers were instructed to recover ticket stubs from waste bins. The tickets were then recycled “restamped” and sold again. It was impossible to know exactly how many cash tickets were sold but “anything from 1000 to 2000” was estimated.
This indicates that within the directors’ matrix of companies there could have been cash sales of $120,000 to $300,000 at any particular event.
It is not illegal to sell goods and services for cash but it is unknown whether all of the cash collected at events went ‘through the books’ or was kept aside, possibly to avoid being used to pay creditors. Sunset has recently attempted to negotiate settlements with creditors.
Fremantle Backchat has been supplied with information which indicates the Sunset directors are secured creditors. This would mean that before other creditors are paid the directors have first call on funds.
PARLIAMENTARY INQUIRY INTO EVENTS FAILURE
In September 2011 a parliamentary inquiry was held into the dealings of One Movement Pty Ltd, Sunset Events and the three directors with Events Corp, part of Western Australian Tourism Commission. One movement had been sponsored by Events Corp for a series of three events which failed financially.
‘Sunset’ has become an umbrella term which covers a matrix of companies. Each company ran events controlled by the three directors, David Chitty, Andrew Chernov and James Legge, each registered with ASIC as individual one dollar companies.
In summary it was proposed by the three directors that One Movement Pty Ltd should host an event in Perth each year for three years. The event was managed by Sunset Events, in itself a partnership operated by the three directors.
The events were planned for 2009, 2010, 2011 and involved agreed sponsorship by Events Corp of nearly $3m. The event of 2009, the first in the planned series of three, did not meet expectations. Audited accounts of One Movement Pty Ltd showed sponsorship of $1,683,035 which included State Government sponsorship of $995,500.
Ticket sales were recorded in the company audit at $134,893 online and $23,023 in cash
AUDITED ACCOUNTS OF ONE MOVEMENT PTY LTD
The audited accounts of One Movement Pty Ltd, for an 18 month period ending on 31st December 2009, were submitted and reveal a net loss of $1,361,439.
Expenditure showed administration costs Of $202,667 and consultants’ fees of 364,083 were paid. It is not known who the administrators or consultants were but it may be reasonable to assume they may have been one or more of the three company directors. During the inquiry the directors claimed $400,000 was spent on due diligence at the event’s planning stage.
(A link to the audited accounts is shown at the end of this article)
It is reasonable to conclude that, in spite of $400,000 claimed to have been spent on due diligence, which presumably included calculations related to adverting and sales, the company did not follow its own research advice. Did they spend as little as possible to ensure the event’s attendance reached expectations?
A final report was made to Parliament in December 2011 (see link below). The report included many observations, among them:
“Total revenue was approximately $1.26m below that budgeted, with the largest variance being ticket sales which was $908k below that budgeted”.
The report continues “Total expenses were approximately $47,485 below that budgeted with the largest variance attributable to marketing expenses”.
The audited reported, under the heading “Emphasis of Matters Regarding Going Concern” said “One Movement Pty Ltd has a deficiency of Working capital and a deficiency of net assets of $1,361,588. The liabilities of the company include borrowings from Sunset Events which is related to equity. The owner directors have pledged their ongoing financial support for One Movement Pty Ltd”
The Parliamentary Report said “The Committee views the Auditor’s “Emphasis of Matter” as significant”. (see Note below)
The Committee cast doubt on the liquidity of One Movement Pty Ltd, spoke of the considerable financial distress shown in the financial statement and outlined the directors’ explanation of delays in paying creditors. The auditors said: “This situation indicates the existence of material uncertainly that may cast significant doubt on the companies ability to continue as a going concern and therefore the company may be unable to realise assets and discharge its liabilities in the normal course of business. The financial report does not fully disclose this fact.”
One Movement Pty Ltd ceased trading on September 5th 2011.
CONFIDENTIAL REPORT : CONFLICT OF INTEREST WITHIN EVENTS CORP
In a separate report into matters surrounding government sponsorship of events, questions were raised in relation to a manager within Events Corp resulting in the Report on Allegations of a Conflict of Interest Involving a Tourism WA Employee and the One Movement Music Festival.
The report is relevant as a number of Fremantle City Councillors have expressed a conflict of interest in relation to Sunset Events.
There were several conclusions in Commissioner Wauchope’s report to the acting CEO of Tourism WA.
The principal conclusion was:
“There was both an actual and perceived conflict of interest … This presented a situation which raised competing interests and a perception that there was the potential for the individual concerned and or Sunset Events to receive an unfair advantage”
(Fremantle Backchat has a copy of the confidential report).
THE PUBLIC HAS A RIGHT TO KNOW
A 21 year was lease awarded to Sunset by Fremantle Council Chamber in the face of considerable public opposition. It seems reasonable to ask Council’s Administration to reveal what due diligence was conducted into the Sunset matrix of companies in relation to the application for the lease at Unit 1 J Shed. Fremantle ratepayers are subsidising the lease.
Did Council Administration have knowledge of these Parliamentary Reports, transcripts, financial statements and reports related to conflicts of interest?
If they did how much information was relayed to councillors and/or were complete reports made available to them?
If these reports were relayed to councillors did evidence of systemic failures within Sunset Events and government departments influence councillors decisions?
NOTE : Emphasis of Matter paragraph (EMP) has been defined in International Standards on Auditing (ISAs) as follows:
A paragraph included in the auditor’s report that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor’s judgment, is of such importance that it is fundamental to users’ understanding of the financial statements.
One Movement Pty Ltd Audit:
Inquiry into WA Tourism Commission/One Movement: