Who’s funding 7107 Int'l Music Festival?
Organizers deny links to alleged PDAF scam brains Janet Napoles, but the incomes of their declared businesses aren't enough to pay American rock band Red Hot Chili Peppers
MANILA, Philippines – It’s an event that’s too good to be true.
One of the world’s most popular bands, a world-class DJ, other stellar international and local acts all in one weekend right here in the Philippines – the 7107 International Music Festival (7107), by far, is arguably the country’s biggest music event.
Fans are beside themselves with excitement. But with only one major sponsor, and organizers insisting they are funding the festival with their own money, 7107 raises questions about who is financing the grand event that will be held at Clark Freeport on the weekend of February 22.
Because of the high cost of mounting the music festival and the business partnership between Gian "Jon" Herrera, one of the organizers, and James Napoles, son of alleged pork barrel scam mastermind Janet Lim Napoles, insiders in the events-organizing industry believe Napoles is behind the grand 7107 event.
Festival organizers have vehemently denied the rumors.
But contrary to their claims, financial documents filed with the Securities and Exchange Commission (SEC) show that they do not have the financial capability to mount an extravagant event worth hundreds of millions of pesos.
7107 is being co-produced and organized by Conchitina Herrera, her younger brother Jon Herrera, and Filipino-Canadian John Michael Pio Roda.
The cash assets of the organizers’ registered businesses, as reported in their most recent financial statements to the SEC, totaled only P18.95 million – far from the P253.4 million price tag which organizers estimated the festival would cost. Their assets are far from enough to pay their headliner, the Red Hot Chili Peppers (RHCP).
The American rock band, which sang at the Super Bowl halftime show and which is coming to Manila for the music fest, will be paid $2 million or about P86.2 million in exchange for a full set performance.
The contract, signed by Jon Herrera and Roda for Supreme Talent Management on Oct 30, 2013, also stipulates that the festival organizers must pay the band 50% upon signing; the balance, by Jan 20, 2014. Herrera and Roda are co-directors of Supreme Talent Management, a company based in Hong Kong.
RHCP’s hefty signing fee excludes taxes. Neither does it include other demands included in the contract: all visa and work permits of the band, transportation, a kitchen area for the band's chef, and 5-star hotel accommodations for 3 nights – with each of the 4 band principals demanding “equal-sized best available suites.”
Festival organizers are also expected to supply production logistics, such as lights, video screens, a lighting rig that fulfills the band's requirements, and even a production assistant.
Pressed to cough up cash to cover the 50% deposit (equivalent to about P43.1 million) that the band wanted within a week from signing of the contract, Herrera sent emails to possible investors. He told them he “needed to bridge capital.”
He also told the potential investors that he had secured P80 million from sponsors but that it would take a month to collect from them.
An industry insider, who has organized concerts with international artists in the country for over a decade, told Rappler that signing a contract without having cash on hand is unheard of. “Never. There’s always a buffer,” the veteran concert organizer said, on condition of anonymity.
Insufficient private funds
In a February 3 email to Rappler, Conchitina Herrera said, “We are financing this festival from our own private funds and through sponsors such as Smart Communications, Spinnr, and Global Gateway Logistics, among others.”
Assuming they were seeking financial support from their other businesses, funds still appeared to be inadequate.
Registered businesses under the Herreras showed they could not afford even 50% of RHCP’s talent fee. We found 29 businesses under Jon Herrera's name, a number of which he shares with Conchitina and his other siblings. Conchitina had 8 companies under her name.
Of the 29 Philippine-based businesses under Jon's name, 16 submitted financial statements between 2006 and 2012. The reported average earnings of the 16 companies over 2-3 years totaled P29.8 million, according to our computations. Of the 8 companies under Conchitina's name, only 5 submitted financial statements spanning the years 2007-2013. Based on these documents, her average reported annual income was P1.7 million.
Some of those companies, however, did not consistently submit financial statements every year as required by the SEC. The other 13 businesses of Jon, and the other 3 of Conchitina, were either non-operational or had never submitted financial statements.
But in 3 of the companies under Jon's name, and which boasted of average earnings amounting to P12.7 million, Jon is no longer part of the companies and was merely a minority shareholder. These companies are Prive Members Only Club Inc, Embassy XL Club & Cafe Inc, and Knightclub Inc.
Taken together, the estimated P17.1 million average cash assets of Jon’s companies and Conchitina's own earnings total an estimated P18.9 million. This amount is far from the P43 million they needed to pay as downpayment.
Their co-producer Roda also had two registered businesses under his name, according to the SEC, but none of them had financial statements on record. Roda, a co-incorporator of Jon Herrera in one of his two SEC-listed companies, is said to have 13 years of experience in the music and events field.
He is also a managing director at Canada-based Chronico Music Group Inc, a production house and booking agency. Rappler could not access the company’s financial records, but was able to check the annual return filed by Supreme Talent Management Inc, which signed the contract with RHCP.
According to a financial document filed in Hong Kong on Sept 24, 2013, Supreme Talent Management Inc – of which Jon Herrera and Roda are co-directors – has an authorized share capital of HK$10,000 or P57,471. The company, which signed the contract with RHCP, was incorporated only in 2012.
Of the 29 businesses listed under Herrera's name, one company is the highest earner according to available financial statements: D Urban Retails Inc.
D Urban Retails Inc, a wholesale company, was incorporated by Jon Herrera with the children of alleged pork barrel scam mastermind Janet Lim Napoles – James Cristopher and his sister Jo Christine – in November 2011. Napoles faces a plunder complaint before the Ombudsman for allegedly pocketing millions of pesos in government money.
James is known to be a friend and former business partner of Herrera. Aside from D Urban Retails Inc, the two are also behind Socal Holdings Inc, a financial holdings company, which was incorporated in July 2013, the same month news of the pork barrel scam first broke.
Insiders in the events-organizing industry believe Napoles funded the grand 7107 event.
Festival organizers denied this. Conchitina Herrera told a press conference in January that the rumors are "very serious allegations." She also declared, “As much as people would want to assume that, it’s absolutely not true.”
Jon Herrera also said his businesses with Napoles never pushed through.
According to the SEC, however, Socal Holdings Inc is still an active registered business, while D Urban Retails Inc, although still registered as active, submitted an “affidavit of non-operation” in early 2012.
The SEC has no financial statements of Socal Holdings on record. Ironically, D Urban Retails Inc, despite the non-operation affidavit signed by James Napoles himself, still reported earnings of P15.3 million in 2012, up from its reported cash assets of P5 million the year before.
These amounts were not factored into the Herreras’ average income, since they had denied involvement with Napoles.
Rappler sent the organizers repeated interview requests starting on January 22 to clarify alleged ties with the Napoles children and funding of 7107, but was denied. Requests to meet with the Herreras were also refused. One interview with Roda set for January 28 was cancelled by him and never rescheduled. Except for Conchitina's one-line email reply on funding, emailed questions to Jon were also acknowledged received but were never answered.
Besides Jon Herrera and the Napoles siblings, the other co-incorporators of D Urban Retails Inc were Medardo Sanez, Wendell Cunanan, and Luis Ang Jr.
Ang Jr, a close friend of Herrera, was the former senior marketing manager of Smart’s Broadband Internet and Data Services. Smart and its online music portal Spinnr are the festival's only major sponsors.
Asked about Smart’s involvement, the company's public affairs head Ramon Isberto said in a statement: “We were presented this project and we agreed to sponsor it in good faith. When these reports came up, we asked the organizers and we were given assurances they were not true. At this point, we just hope people enjoy the show.”
7107 itself announced Smart's sponsorship only in January 2014, which means it could not have paid for the 50% deposit that RHCP required in late October or early November, when the contract was signed.
RHCP is only one of 12 international performers signed up by the organizers. Another 43 local artists are expected to perform.
In an internal document prepared by organizers and obtained by Rappler, the original estimated total expense of organizers was pegged at P253.4 million. This covered artists, festival grounds, stage and production, local team, manpower, security, board and lodging, vehicle rental, permits and licenses, advertising and promotions, printing costs, representations expenses, and miscellaneous expenses.
Global Gateway Logistics (GGLC), the festival's venue, is the other sponsor Conchitina Herrera mentioned. The same internal document dated October 2013, shows that GGLC will provide security personnel for the festival grounds and was charging P1 million for use of the venue in Clark.
While Smart is sponsoring the event, a ranking telecommunications official estimates the maximum sponsorship by Smart to be between P80 million to P100 million only. This is still far from the P253.4 million estimated expense of the festival.
The same internal document prepared by the organizers showed they originally expected Smart to give a cash sponsorship of P250 million, an amount industry insiders said was “impossible,” even for a telecommunications company.
With financial statements showing the registered businesses of organizers unable to afford the headliner alone, it remains unclear where the funds for the whole festival itself is coming from.
Questions about financial sources have not been the sole source of buzz about the festival. Blogs questioning the organizers’ practices have cropped up, with many asking if 7107 had pulled a “bait-and-switch” tactic to get concert goers to purchase tickets and tease fans about possible featured artists, only to deliver on a few.
Industry insiders also found it unusual that organizers opted not to use renowned ticketing companies TicketWorld or TicketNet for an event of this magnitude, and instead chose to put up 3 kiosks in Makati and Eastwood for ticket sales. They also used the less reputable ticket-selling platform Flavorus.com to sell tickets online.
Festival goers also did not get their tickets upon payment, which insiders found unusual. Buyers had to instead pick up the tickets on a later date or wait for them to be mailed to them about a week before the festival itself.
In addition, less than a month before the festival, the Department of Tourism (DOT) distanced itself from the event and said it would ask organizers to remove the DOT seal from its promotional materials to remove the impression there was an official partnership.
DOT clarified with Rappler, it has “no direct business dealing with them other than that we acknowledge 7107 to be a help to tourism.”
On its website, 7107 said its mission is “to promote the Philippines – the islands, its talent, its culture and its music throughout the world.”
It also said it has sold to fans “from United Kingdom, Germany, Norway, Spain, Qatar India, Pakistan, Indonesia, Singapore, Korea, China, Japan, Thailand, Taiwan, Hong Kong, Australia, New Zealand, Canada, and the United States of America.”
With the festival itself and its name strongly associated with the image of the Philippines, other events organizers are saying things had better be right.