Bob Mackin
The New Orleans company behind the bankrupt Pemberton Music Festival claims that local investors ignored its last-minute plan to keep the 2017 event alive.
That, according to Huka Entertainment’s June 23 response to the scathing trustee’s report tabled at the June 6 creditors meeting.
The 16-page response, via Jonathan Williams of Owen Bird, was quietly posted on trustee Ernst and Young’s website. It shifts the allegations of gross mismanagement back at local investors Amanda Girling and Jim Dales. The July 13-16 festival was cancelled May 18, leaving more than $13 million in unsecured creditors, mostly ticketholders. The creditors meeting heard the festival lost almost $50 million between 2014 and 2016 after initial projections of modest profits.
Huka’s written response said the concert promoter took “extraordinary and successful steps, up to the last moment, to obviate the need for bankrtuptcy” by securing a letter of intent from an unnamed high net worth individual willing to help the 2017 festival to proceed. Huka also said it proposed to move the festival to reduce costs. The alternative location was also not mentioned in the report.
“These two developments appear to have been entirely ignored by the Canadian investors,” Huka said in its response.
Festival site owner/investor Girling, investor Dales and Huka rep Stephane Lescure voted for the bankruptcy on May 16. Huka claims Lescure voted as an individual, contrary to Huka’s “stated complete opposition to bankruptcy, if it meant failing to honour fan or artist commitments.”
The festival’s holding company reported $6.6 million in assets, including $2.9 million cash. At the June 6 meeting, Girling’s company Janspec and Dales’s 1644609 Alberta Ltd. withdrew their $3.7 million in secured creditor claims.
The Huka response claimed that Girling and Dales were operational partners from day one, who were well-informed and given complete access to financial files. “Moreover, the Canadian investors always did their own ‘due diligence’ and then repeatedly invested funds, after weighing the risks and benefits, and this was always based on full disclosure and explicit reporting by Huka, H1 and third-party accounting.”
Huka said it never accessed any funds that it was not entitled or authorized to take, nor did it receive USD$3.45 million in producer fees.
“In fact, Huka worked for months at a time without pay, in an effort to make the events viable. By way of contrast the Canadian Investors did redirect funds intended for other purposes, including taxes owing, and instead used those funds to pay themselves and a select group of vendors.”
Huka said it only received payment for its services in order to pay the wages of two dozen full-time employees who worked year-round to produce the festival. Girling and Dales received rent revenue for the land and other fees, plus benefits in the form of tax credits “of considerable value.”
11th hour cancellation threat “false innuendo”
Huka rejected the allegation that it threatened to cancel the 2016 festival on the eve of its kickoff after demanding $3.6 million to cover cost overruns.
“This is false innuendo, arising mainly from omissions,” said the response.
A meeting did occur and additional funds were needed, but Huka said the local investors were aware of that “for a long time prior to the date here. “
“At no point after guests had arrived at the festival was cancellation ever discussed.”
Huka called the allegation that it drew monthly producer fees after the 2016 money-losing festival “completely untrue and outrageous” and demanded it be withdrawn and publicly corrected. Huka alleged that Girling’s company, Janspec, used $233,933.90 of festival funds to pay Janspec and another Girling company, Sunstone.
“This was despite explicit reporting from Huka that funds were very limited, such that the venture could be in jeopardy.”
Huka claimed it repeatedly warned the Canadian investors that they were wasting time that should have been spent preparing for the 2017 festival. “This situation was growing more dire with each passing day. This approach by the Canadian investors was a constant theme underlying the complete history of PMF, and interfered with Huka performing its duties.”
Girling and Dales, Huka said, “continued to retard the process by repeatedly diverting attention to tangential matters that only interfered with moving forward, rather than focussing on producing PMF 17 in a timely manner. Many of these steps that delayed the process were taken without Huka’s knowledge, and contrary to Huka’s repeated pleas to move forward.”
The offer they made to take Huka out of the festival was not fair market or good faith, Huka countered: the company claimed they offered $0 for Huka’s interest in H1, “a company into which Huka infused assets that continue to be worth millions of dollars.”
Huka founder A.J. Niland and CEO Evan Harrison did not respond to theBreaker for comment. Likewise, Girling and Dales have refused comment. By email, Janspec vice-president Nyal Wilcox said “The original trustee report was based on facts, excerpts from emails and actual events. We have no comment on Huka’s version of the story.”
theBreaker revealed at the end of May that a Horseshoe Bay businessman, Joseph Spears, is leading a group aiming to salvage the festival this summer in Pemberton or at another venue. Spears told theBreaker on July 5 that he is “working out the details.”
