Pacquiao Watch: Manny’s millions and unpaid taxesBy Edwin Espejo Dec 29, 2013 5:33PM UTC
Friends outside his political circle blame his lack of education.
Those in his many inner circles said he is simply too trusting to see what was happening around him. Others say his tolerant attitude and kindheartedness got the better of him.
Even worse, some say he is too gullible.
Whatever it was or they were, even Manny Pacquiao himself has now realized he is in trouble – deep financial trouble.
He is facing huge tax problems both in the Philippines and the US, if the Bureau of Internal Revenue (BIR) and the Internal Revenue Service are to be believed.
And the amount owed is not just peanuts. They can mean Pacquiao will be boxing his way out of his misery without receiving a single penny over the next two years or over his next four fights granting that he continues to earn US$20 million tops per fight.
It would be a harsh future for him, Pacquiao knows, if he cannot overcome his tax woes.
It did not come as a surprise that he reportedly went to see BIR Commissioner Kim Henares and hold a 15-minute closed door meeting with the country’s top tax woman on Friday, December13, followed by a meeting with no less than President Benigno Aquino III on Wednesday, December 18.
For Pacquiao, the choice is a no choice.
Pacquiao’s tax woes began to unravel when the BIR slapped him with a P143 million tax case sometime in March 2012. Then Revenue 12 District Officer Rozil Lozares claimed Pacquiao repeatedly ignored summons to present documents to his income from fight purses, commercial endorsements and other sources of income.
Pacquiao immediately called the BIR move harassment claiming he did not receive the Letter of Authority and Subpoena Duces Tecum.
Nevertheless his lawyers went to see Lozares.They brought scanned copies of the documents the BIR was seeking from the Filipino boxing idol turned congressman.The BIR however rejected them and demanded the original taxpayer’s duplicates or certified true copies.
Lawyer Francisco ‘Bong’ Gacal said the BIR could have just given the 8-division Filipino champion “a simple accommodation.”
“This (was) not undue favor because the Philippine government knows how strict the US is in collecting taxes especially tax at source,” Gacal explained.
That, he added, would have relieved Pacquiao from the tax suits.
Gacal, who was requested by Pacquiao to assist the lawyers from Manila, nevertheless advised that certified true copies be immediately furnished to the BIR. The younger Gacal said after accompanying Pacquiao’s lawyers, he was no longer updated what happened next and only learned that a lawyer from Tupi, South Cotabato, Atty. Nonoy Rojas, was already handling Pacquiao’s tax cases with BIR 12. (Bong Gacal is a lawyer-CPA and is the younger brother of Pacquiao lawyer Franklin Gacal Jr).
But that 2012 episode was just part of the bigger picture of what happened to Pacquiao’s money along the way to stardom and how one person become a powerful ‘comptroller’ for his finances.
If documents obtained by AsianCorresppondent are to be believed, in all the years Manny has been fighting in the US until 2010, he never had his finances straightened out which resulted into the IRS imposing a US$18.3M lien on his property and income in the US for the period covering 2005 to 2009.
The documents, prepared by VisionQwest, a US accounting firm with whom Pacquiao had brief but tumultuous relations, revealed in detail how, where and why Pacquiao’s finances went into shambles.
A US-based informant privy to the documents confirmed their veracity.These explosive revelations are apparently making rounds among reporters in the Philippines.
In it, all fingers for the blame seem to point to Michael Koncz, described as Pacquiao’s financial advisor, or how the Canadian national may have keep him in the dark. But the explosive documents also suggest that Koncz and Pacquiao’s promoter Top Rank were less candid about his real income.
Koncz has been called many names. Among them the not flattering ‘Black Pope’, a derisive reference to a powerful figure behind the Vatican throne – somebody behind the conspiracy. British journalist Andrew Marshall called him über-gofer.
Koncz served as bridge between Arum and Pacquiao who successfully broke away with Murad and ended up with former manager Shelly Finkel. He kept himself very close to Pacquiao and was even reported to have slept on the floor at the foot of Pacquiao’s bed when the latter’s managerial contract with Finkel expired in 2006.
He was seen serving beer to guest and friends of Pacquiao during the latter’s birthday that year. Having endeared himself to Pacquiao, Koncz dipped his hands into managing boxers and arranging fight matchups for them.Among them is Bobby Pacquiao, younger brother of Manny.
Around this time, Joe Ramos, a trusted aide in Los Angeles, reportedly squandered Pacquiao’s savings in the US.
Jeff de Guzman, a former member of Pacquiao’s circle called LA boys, said Pacquiao eventually forgave Joe Ramos to whom he entrusted his money in the US after the guy cried and begged for forgiveness.
Koncz then eventually ended up ‘managing’ Pacquiao’s accounts in the US by establishing a shell corporation that was supposedly tasked to handle the finances of the Filipino boxing champion. The Canadian used ADK, a shell corporation owned by him, to be the funnel of monies earned by Pacquiao in the US.
Pacquiao owes no back taxes
Koncz said Pacquiao did not owe the IRS back taxes. He said there have been a few mix ups and some of his expenses may be disallowed as deductions.
“This is now being handled by our lawyers in America. This is not something new that happened yesterday. We have been discussing this issue with the IRS during the last three years,” Koncz said
The Canadian was dispatched to the US before Christmas to confer with Pacquiao’s lawyers and accountants and straighten out the tax mess Pacquiao is now facing.
Pacquiao has fought mainly in the US since 2005 where he did 18 of his last 19 fights. His last fight, against Brandon Rios, was held in Macau.
Based on documents leaked to reporters in the Philippines by an informant privy to Pacquiao’s fight purses, HBO remitted to Top Rank US$144,242,258 representing the net PPV sales of Filipino boxing champion’s fights starting with the first Pacquiao-Morales in 2005 fight ending with his Joshua Clottey win in 2010, the period covered by the supposed audit of VisionQwest.
Accordingly, Pacquiao eventually only got 45 percent of his PPV share – net of taxes and other expenses – because 27.5 percent went to his promoter Top Rank and the other 27.5 percent to MP Promotions, a company owned by Pacquiao himself.
Taxes were reportedly withheld only on fight purses stipulated in the fight contracts, which are way below what Pacquiao earned after the PPV numbers are in. For his fourth fight with Juan Manuel Marquez in December 2012, for example, his fight purse a stipulated in the contract, was only US$6 million but Arum went to say his guaranteed purse was US$26 million. For the fight against Shane Mosley, the guaranteed minimum purse of Pacquiao was US$12 million although statements coming from Top Rank mentioned a guaranteed purse within the vicinity of US$20 million. But paying taxes on incomes – including upside on PPV buys – in the US other than the minimum guaranteed fight purse already rested on Pacquiao or the team that is supposed to take care of his finances.
A letter to Pacquiao and his lawyer Franklin Gacal Jr signed by VQ’s Michael Lodge however saw something his firm was very much in doubt of.
The numbers reportedly provided by Koncz but were not backed up by proper documents.
“We asked Mike Koncz for these receipts but he had none to give us to support his reports. We asked for him to give us all receipts he had in storage, he gave us four (4) boxes and there are still more receipts in the Philippines,” the letter further stated.
Worth mentioning also are the HBO remittances of the PPV shares of Pacquiao to Top Rank. Pacquiao’s supposed shares in the PPV buys were not paid directly to him. Instead, checks were issued to Top Rank.
These were also mostly paid in tranches. For the first Morales-Pacquiao fight, HBO made 23 payments to Top Rank totaling US$7,130,360.02 including advances and eventeen (17) checks for the Morales-Pacquiao two rematch for US$7,173,641.78. It was 21 checks for a total of US$7,727,100.53 for their third encounter. Pacquiao’s biggest PPV income was for the Oscar de la Hoya fight where Top Rank received US$31,970,925.35 in three installments, as per records provided in the leaked documents, representing Pacquiao’s share and advances. It was the first time Pacquiao breached the eight figure mark for a single fight. Since then, he has been earning no less than US$17 million per fight.
Top Rank however reportedly failed to provide VQ copies of the vouchers or checks that were issued to Pacquiao via Top Rank representing his income from the fights the Filipino champion did under the promotional outfit.
In June 2011, VQ wrote Pacquiao and his lawyer Jeng Gacal a letter, strongly suggesting that Koncz should be fired as advisor to the Filipino champion.
The letter said Koncz, in addition to his failure to properly document earnings and income of Pacquiao, appeared to have been taking payments from Top Rank for his services on top of being an employee and confidante of the congressman from Sarangani.
There was a time when Koncz briefly was relegated to the sidelines but after Pacquiao terminated the services of VQ, he was again back as trusted Manny’s advisor.
Now that the IRS is running after Pacquiao, how will he be able to pay the US$18.3 million, notwithstanding the P2.2 billion (US$50 million) the BIR said he owes the government? BIR Commissioner Kim Henares said when they garnished Pacquiao’s 22 bank accounts they only found P1.1 million in two banks. Is Pacquiao broke? Or was he smart enough to open accounts abroad, away from the preying eyes of the taxmen?
Life of extravagance
Or is his lavish and extravagant lifestyle finally catching up with him?
Over the years, Pacquiao invested heavily on acquiring real properties. He bought a mansion at Forbes Park, an enclave reserved for only the richest in the country and home to some foreign embassy offices. He has two big houses in General Santos he calls Mansion 1 and Mansion 2. A town house in Davao City and Laguna, beach resorts in Maasim and Kiamba in the home province of wife Jinkee. He also has a house in Los Angeles that is now up for sale. He built houses for his mother and father and generously supported his siblings. He put up commercial buildings and brought two prime lots right in the heart of the city – one reportedly for P70 million for a one-hectare property, the other significantly much higher for a two-hectare piece of land besides his RoadHaus Hotel in Barangay City Heights.He bought a helicopter and a yacht in addition to a fleet of luxury cars that includes his favorite armored black Hummer.Jinkee herself drives a two-door Mercedes Benz Kompresor to work as vice governor of Sarangani.
His kids are studying in an international school in Laguna.
Pacquiao is living in style and is undoubtedly a good provider for his family.
He gave away cars and cash during his birthdays.
He could sometimes be generous to a fault.
He can afford it.
But can he still afford it now?
A source said Pacquiao has always been living on cash advances. Every fight ever since he was under Top Rank, cash advances were provided him to cover personal expenses. But his cash advances may have dramatically risen when he joined politics.
In 2007, sources close to Pacquiao said he allegedly spent P140 million hard-earned personal savings on top of the P20 million reportedly given to him by Malacañang in a losing effort to dislodge then re-electionist Rep. Darlene Antonino-Custodio for the 1st congressional district of South Cotabato-General Santos City.
Pacquiao said he learned a bitter lesson.
In 2010, he took his lesson seriously and ran again. This time, for the lone congressional seat of Sargangani.
In his blog, Andrew Marshall said, Koncz reportedly told him Pacquiao’s campaign for the congressional office would cost them P300 million (US$6.8 million at today’s exchange rate). “Koncz tells me that the campaign will cost at least 300 million pesos. That’s about £4.4 million, a fortune in this provincial backwater. Later, when Koncz emerges from a backroom with a Pacquiao-brand shopping bag, I snatch a glimpse of its contents: half a dozen bricks of bank-fresh pesos,” Marshall wrote.
A version of the article appeared in the Time Magazine.
Apparently, the lesson learnt was to spend even more to win a seat in the House of Representative.
Then this year, a very close confidante said Pacquiao still spent about the same amount even though he ran unopposed as he bankrolled the candidacies of brother Rogelio and wife Jinkee.
“Dili lang kay nahurot-hurot. Hurot gyud (Not only almost broke.Really broke),” Salud was quoted in an interview that he eventually denied ever saying.
It would seem unbelievable that Pacquiao could lose so much money in such a short period.
No, he may not be broke or exactly bankrupt but there may be more truth to his liquidity problem – one that if he does not take care of seriously and immediately may one day haunt him.
One thing many of his friends and even observers are advising him – it’s time to look into his books and give himself some serious reality check.