“No matter how you spin it, there’s something seriously smelly about an industry that survives on kickbacks and commissions. Claiming you act for your client but getting paid by people who want you to flog products to that client, is the sort of behavior that is rightly seen as corrupt.” – Annette Sampson, Sydney Morning Herald, April 27th 2010.
With the recent Royal Commission into the Australian banks, this quote, almost a decade on, stands as true as ever.
Rosemary Rogers, the former chief of staff of NAB Chief Executive Officer, Andrew Thorburn, had $7.5m in assets frozen in a suspected multi-million-dollar fraud case.
How did it happen? A friendship between Ms Rogers and a senior member of an events company, The Human Group, issued inflated invoices to NAB (client) to receive enormous undisclosed commissions.
In approximately two years, Ms Rogers managed to accumulate a $7.5m fortune, including assets such as waterfront houses, boats, expensive cars and a signed $1m cheque.
There were further reports of Rogers using this money to take her family on extravagant holidays, accumulating costs of over $500,000 over the space of a few weeks.
The following is an article written almost 10 years ago by Francis Child, the Managing Director of The Association Specialists. It highlighted several issues present in the events industry and the need for clients to take preventative measures to protect themselves from malpractice.
‘Shortly after purchasing Conference Action in 2000, a supplier walked into my office with a cheque made out to the company for a significant sum of money. When I asked what it was for, he informed me it was the ‘commission’ due for the work he had done on behalf of my clients. I politely informed him I did not accept nor wished to accept such payments, as they clearly meant I had a conflict of interest between ensuring the best possible service for my clients and the provision of work to suppliers. In addition, it would not take a rocket scientist to be fairly certain that the only person paying for this ‘commission’ would be my clients through higher charges.’
– Francis Child, Managing Director
Sadly, this type of activity, whether packaged as commissions, rebates, mark-ups on invoices, or other forms of inducements negotiated with third party suppliers, is rife within the event management industry. As a result, you the client are being compromised in two ways.
Firstly, you may well be paying considerably more than the ‘fair’ market value through hidden costs for the services of a Professional Conference Organiser (PCO).
Secondly, you may well be working with a PCO who has an undeclared conflict of interest, which by its nature may compromise the potential success of your event.
Without clear and transparent fee structures, your event management fee may differ by upwards of 100% through hidden event management expenses. As a Duty of Care to your organisation, you need to identify these fees before you sign any contract. This will ensure neither your organisation, nor your event is compromised.
This problem has occurred more frequently since Event Management has become a comoditised product. The lack of barriers to enter the industry has squeezed profit margins for new industry players, forcing event managers to find alternative income streams from their clients; sometimes ethically, often not.
Customers are often fixated on the quoted upfront fees proposed by conference organisers as the guide to the worth of the tenderer, rather than focusing on the quality of the offering and entire cost of service.
Ultimately, you as the customer need to ask yourself:
“Is saving a few dollars worth compromising the integrity of my event?”
Jack Slater – The Association Specialists