Are Events a Magnet for Corruption?

William O’Toole’s exploration of corruption in the events industry began back in 2010 with the Commonwealth Games in New Delhi, which were marred by financial irregularities, substandard construction, and inflated contracts. The chair, Suresh Kalmadi, ended up in prison for 10 months.

O’Toole, an events industry author and educator based in Australia, decided to write a textbook, with the goal of helping to minimize the risk of corruption by drawing from the history of events. As he began his research and reached out to festival organizers for information, he got very few responses.

That’s when he knew he was on to something big.

“I asked many times and received very little. But I knew from working in the events sector in 11 countries, that corruption was a real, ever present, and ubiquitous issue.”

Why Events?

O’Toole’s book, The Dark Side of Events: Navigating Corruption and Risk Management, explores various types of corruption, from money laundering to bribery, across the spectrum of events, from festivals to exhibitions. The underlying premise is that events, by their nature, are high-risk, highly complex, and project-based, making them “a free for all,” as he describes it. 

First, there is no centralized administration, unlike organized sports. Event industry associations have limited power over enforcing a breach of their code of conduct, other than canceling the individual’s membership. Add to that the fact that millions of dollars can be made from even the smallest event, the income comes from many sources, and they are held all over the world, which makes them a target for money laundering. Minimal administration, rotating suppliers and staff, and deadline pressures open the door to things like bribery and fast-tracked decisions that don’t follow the rules.

Most instances of event corruption in the events industry only go public when they end up in court. “Near misses are rarely, if ever, recorded,” O’Toole said. “By its very nature, corruption is secret.”

Enter the Fyre Festival

The poster child for event corruption was the Fyre music festival debacle in 2017, which resulted in the founder, Billy McFarland, being caught scamming investors out of $26 million, facing a $100 million class action lawsuit, and ending up in jail.

But that’s just the tip of the iceberg, said O’Toole. Just this year, the Byron Bay Bluesfest Music Festival, which has been in business in Australia for 36 years and attracts an audience of 100,000, was abruptly cancelled, with reports that it owes $10 million to suppliers and ticket holders.

Just like Fyre, instead of communicating the truth to sponsors and attendees that their finances were not in the black, organizers kept moving forward with the event, hoping that ticket sales and sponsorship would cover the costs. “When did it become obvious that it would fail?” said O’Toole. “At what point do you stop the process and the promise? When does hope become fraud?”

Many times, event organizers don’t start out with the intention to defraud, he explained. The pattern follows a behavior in gambling known as “chasing.” 

“This is particularly common where the cost of the event is to be covered by sponsorship and ticket sales,” O’Toole said. “The money comes in over time and is uncertain. How many times have we heard that a last-minute sponsor saved an event?”

Everyday "Bribery"

An entirely different kind of questionable behavior happens regularly and in plain sight. In the pharmaceutical industry, a number of ongoing lawsuits involve practices at medical conferences, including one against Purdue Pharma (the manufacturer of OxyContin) and the Continuing Medical Education conferences, and another against Schering-Plough and the American College of Cardiology Conference.

Evidence of influence might be found from indicators like pharmacists questioning doctors prescribing patterns, O’Toole said, “but I doubt any doctor or pharmaceutical company will admit to this type of influence. These live in a grey zone, where smart targeted marketing may be interpreted very differently.”

Common practices in the greater meetings industry fall into the same grey area, including hotel points, gifting, and fam trips.

“It has gone from a highly personal industry where gift giving is about establishing and maintaining friendships, to a highly competitive industry driven by marketing and finance,” he said. “When these practices are exploited, it leads to distrust — and the cost of distrust is enormous.”