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Jacobsen used box office funds to prop up Arena

Jacobsen used box office funds to prop up Arena
August 14, 2009

Investigative accountants have found that promoter Kevin Jacobsen's collapsed company, Arena Management, used money from advance ticket sales to help fund its day-to-day operations at the Sydney Entertainment Centre, according to a report in The Australian newspaper.

According to reporter Valerie Lawson, two reports by Sydney accountancy firm PPB show the amounts exceeded $400,000, while another firm of accountants found that Arena appeared to use $2 million worth of advance ticket sales funds and that "this money had been used elsewhere in Arena".

The authority sent PPB's reports to the Independent Commission Against Corruption in December. In May, the authority wrote to the Australian Securities and Investments Commission, telling the regulator of its concerns over Arena Management's finances, and including evidence that the company might be trading while technically insolvent.

ASIC replied that its "misconduct and breach reporting" team was reviewing the matter.

Arena Management went into receivership and external administration on 31st July. Debts are believed to exceed $8 million and possibly be as high as $12 million.

The Sydney Harbour Foreshore Authority terminated Arena Management's earlier this month. A spokeswoman for the authority said that by early August last year, Arena Management owed it more than $1.47m in unpaid rental, maintenance contributions, interest, parking space levy payments and unpaid legal fees. As part of the lease agreement, the authority had a $465,000 bank guarantee.

Under the terms of its lease, Arena was obliged to make regular payments into an ANZ Bank 'maintenance account'. An amount of close to $1 million in the account was clawed back by Arena's receiver last week, but the authority is taking legal action in the NSW Supreme Court to recover the money.

Another Arena creditor, Michael Coppel Presents, the promoter of American singer Pink, is owed about $900,000.

In April, accountants BDO Kendalls, acting for a potential bidder for the Arena lease, AEG Ogden, conducted a due diligence report on Arena Management, finding a shortfall in event funds of $2.1 million for the SEC by the end of February this year.

Arena Management has blamed its financial troubles on the high rent, $2.1 million a year, and the fact that it spent about $4 million on an upgrade to the venue.

Late last year, Arena asked the authority for new "commercial arrangements", and "as a precondition, it commissioned forensic accountants PPB to check Arena's financial position. This investigation was conducted with Arena's consent."

Last year, Arena began to negotiate the sale of its assets, including the Sydney Entertainment Centre lease that it had first won in a tender in 2003. The lease sale price was $4.5m with a further $1.2m to buy out minority shareholders, Michael Edgley and a trust controlled by Sydney businessman, Ted Harris.

A buyer would also have to take into account a deal done last year when Ticketmaster advanced Arena $4 million in exchange for exclusive ticketing rights for the Sydney Entertainment Centre until 2018. The advance was reduced by $1 for every ticket sold.

By February, the balance was still close to $3.9 million. PPB's reports stated that Arena had access to the $4 million advance payment and that "these funds have been consumed by trading losses".

Three companies were interested in buying the lease: Ticketmaster itself, AEG Ogden and the American company, Live Nation.

Ticketmaster was the first to withdraw, last March. The following month, Arena Management's Executive Chairman, Michael Jacobsen, resigned. AEG Ogden withdrew in July, followed by Live Nation.

The SHFA will administer the Sydney Entertainment Centre for six months and its 20 staff will be paid by Darling Harbour Convention and Exhibition Centre.





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