The former heads of an Iowa tourism board are set to plead guilty to defrauding lenders who backed a money-losing 2018 concert festival featuring acts such as Maroon 5 and Kelly Clarkson.
Federal prosecutors say Aaron McCreight, 46, and Doug Hargrave, 54, inflated advance ticket sales for the three-day Newbo Evolve festival in Cedar Rapids in August 2018 when they approached Bankers Trust for additional money to keep the event afloat.
In all, the concert lost $2.3 million and cost $3.8 million to stage, officials said at the time.
Earlier this week, McCreight, who had been president and chief executive of Go Cedar Rapids, and Hargrave, who was its finance director, were charged with bank fraud. Both men have filed notice that they intend to plead guilty at their arraignments later this month, according to court filings.
Messages left with attorneys for McCreight and Hargrave weren’t immediately returned. A spokeswoman for Bankers Trust declined to comment.
South By Southwest, Iowa-style
Officials initially billed the Newbo Evolve music and events festival as something akin to South by Southwest, the hugely successful events festival in Austin, Texas, complete with lectures, pop-up shops and cocktail parties interspersed with concerts.
When Go Cedar Rapids initially approached Bankers Trust for financing, it projected that it would make a profit on sales of 11,000 tickets to both the Maroon 5 and Kelly Clarkson concerts, plus 4,000 three-day passes that cost $375 each, prosecutors said.
In December 2017, the bank lent the festival organizers $1.5 million, according to court papers.
By June 2018, however, fewer than half the projected tickets had been sold and organizers were projecting a $1.1 million loss and faced the possibility of having to cancel as they were now unable to pay Clarkson or buy alcohol to be sold at the event, prosecutors said.
McCreight and Hargrave then returned to Bankers Trust to ask for additional money, but presented the bank and the board of Go Cedar Rapids with overstated ticket sales that painted a rosier picture of the financial health of the event.
The bank was led to believe that 9,000 tickets had been sold for the Maroon 5 concert and 6,000 for Kelly Clarkson’s performance, when fewer than 6,000 had been sold for Maroon 5 and just 2,000 had been sold for Clarkson, according to court filings. McCreight and Hargrave also told the bank that the event was slated to draw $250,000 more in sponsorship revenue than had actually been sold, prosecutors said.
Based on this information, Bankers Trust agreed to lend the event another $700,000, bringing the total debt to $2.2 million. Due to the losses the concert incurred, organizers were unable to pay back virtually any of the money, prosecutors said.
The concerts ultimately occurred without a hitch, although organizers were forced to hand out thousands of free tickets so the musicians wouldn’t have to perform to half-empty crowds.
Messages left with representatives for Maroon 5 and Clarkson weren’t immediately returned.
Source: This post first appeared on http://marketwatch.com/