The recent announcement that the United States Internal Revenue Service has placed a $18.3 million dollar tax lien on Manny Pacquiao for allegedly unpaid taxes from 2006 through 2010, may have come as a surprise to the average fight fan who watched the rising star take America by storm, impressing us with mega fights and huge endorsement deals during that time frame.
In the Philippines, Manny faces allegations by BIR that he owes his country 2.2 billion pesos ($50 million) in back taxes.
In defense of Pacquiao, Promoter Bob Arum announced last month;
“For each of Manny?s fights that occurred in the United States, including those in 2008 and 2009, Top Rank withheld 30 percent of Manny’s purses and paid those monies directly to the Internal Revenue Service via electronic funds transfer,? Arum said. ?Top Rank has deposit confirmations for each payment. Top Rank has done the same for all U.S. endorsements it has facilitated on Manny’s behalf. Top Rank submitted copies of the EFT deposit acknowledgments to the Bureau of Internal Revenue as proof of payment. The BIR received the documents but directed Manny to obtain ?certified? documents directly from the IRS itself.?
Contrary to that statement the IRS alleges that Pacquiao owes $2,862,437.11 for 2008 and $8,022,915.87 for 2009.
Pacquiao?s career appears to be littered with financial problems dating back to his emergence in America with former promoter Murad Muhammad and M&M Sports.
In April of 2005 Pacquiao filed suit in United States District Court for the Southern District of New York alleging, among other things, that the defendants corrupted Mr. Pacquiao’s business managers by transferring more than 30% of Mr. Pacquiao’s purses to a shell limited liability company controlled by the business managers on the fiction that Mr. Pacquiao’s United States taxes would be paid out of those monies. In fact, unbeknownst to Mr. Pacquiao, the tax monies were never paid, leaving Mr. Pacquiao with a massive bill for back taxes, penalties and interest.
As alleged in the complaint, the Internal Revenue Code required M&M Sports to withhold Mr. Pacquiao’s tax monies, and the defendants diverted these funds in violation of the law. The complaint alleges that this illicit arrangement between M&M Sports, Mr. Muhammad and the business managers resulted in the business managers agreeing to purses for Mr. Pacquiao that were significantly below market.
With the advent of the IRS Tax lien could we now see another suit filed against Top Rank and Bob Arum?
In 2011 much of Manny Pacquiao?s financial difficulties came to the forefront with the much published war between VisionQwest attempting to assist Pacquiao in clearing up the exact tax issues that resulted in the IRS Lien.
VisionQwest?s Michael Lodge desired to go into the Nevada State Athletic Commission and receive contract information that dated all the way to Pacquiao?s 2005 contracts. To say that he meet with resistance from Top Rank may be an understatement. Lodge issued this statement in 2011!
?We started compiling records and building files for Manny and MP. We were able to get the audits under control and to stop the seizure and levies taking place before we took over. However, to be able to completely do our job, we needed for Manny?s boxing promoter, Top Rank, Inc. to provide a lot of documents that where in their possession. From the beginning of the review and examination in late 2010 of Top Rank Bout income statements, Top Rank, Inc. and its majority owner Bob Arum provided us with minor documentation, then in 2011 became very hard to work with and would not respond to requests for documentation and answers to questions. From the documents that where furnished, VQ and its staff where able to decipher various accounting issues and we were very concerned that there were considerable un-answered questions regarding the recording of revenue (through a verification processes with outside companies) and their expenses. We were also able to identify ridiculous amounts of money being paid to Michael Koncz and the fact that Michael Koncz not only worked for Manny and MP but Top Rank, Inc. as well.?
In August of 2011 VisionQwest President and CEO Lodge informed this writer by email
?We are unhappy with the way things were done through these negotiations. We reached out to Top Rank several times and received no response. We are not dropping Mr. Pacquiao as our client. However we are reviewing all appropriate legal options to protect Mr. Pacquiao as we continue our examination of contracts and financial records that Top Rank has produced. We will continue to work for Mr. Pacquiao diligently and in the highest professional manner.?
We asked VisionQwest directly on August 20th of 2011 if Bob Arum himself was causing the alleged interference in getting required documents to assist Pacquiao with clearing up his tax issues, to which Lodge responded
?I will not comment on who is causing the interference. However, we will deal with it through the proper venue and directly with our client. It is important that all parties understand the importance of resolving inference issues and how it affects our clients business concerns. Interference is not a professional business practice for any company or persons to adopt. It only shows that there are agendas that are not healthy for our client. It will be resolved quickly and professionally.?
Prophetically it appears that Lodge was accurate in his statements and the chance for Pacquiao to avert his new financial issue passed with the firing of VisionQwest.
VisionQwest reportedly advanced Pacquiao monies as well as worked unpaid for a period of time. They filed suit in 2011 to recoup such monies in the tune of $649,016.95 under the allegations of Breach of Contract.
The response from Koncz when the suit was filed;
?We will vigorously defend these false allegations contained in the lawsuit, and we have also instructed our attorneys to research counter-claims,? stated Koncz. ?Because VisionQwest has breached a number of confidentiality laws contained within their own contract and made a number of slanderous statements against Manny Pacquiao and myself alleging that I?m misappropriating money and stealing money, which is totally bulls**t.?
Confidential sources provided information that the IRS had some questions regarding certain records provided by Top Rank in the Pacquiao documentation regarding checks written to and documentation from a company A.D.K Corporation.
In a Boxingscene.com article from 2009 Juanito Rubillar-Michael Koncz Saga Continues , A.D.K Corporation is reported as being associated with Michael Koncz.
A.D.K Corporation is an entity suspended from doing business in 2005 by the California Secretary of State and headed by a Michael Koncz.
Michael Koncz told Rappler.com that the $18 million being sought by the IRS is for the deductions disallowed by the tax agency.
The fact that shortly after VisionQwest began the documentation process of Pacquiao?s expenses and receipts for several years, they suddenly faced firing does not bode well for Pacquiao?s future chances in prevailing over either country?s Tax institutions.
In a recent statement to Fighthype.com, VisionQwest laid the blame directly at the feet of Michael Koncz and his record keeping skills.
?However, Michael Koncz was not able to provide documentation to back up the numbers?
Was Koncz?s poor record keeping skills part and parcel of the disallowance by the IRS?
Records and receipts are the only way to win this battle and according to VisionQwest, those records were incomplete or failed to be provided to Lodge?s company it appears
Now confronted with a two continent tax battle, Pacquiao faces a left right combination that may derail a career of wondrous earnings. Hopefully in the future Pacquiao will not be seen greeting guests at a Macao casino ala Joe Louis, as the cast of characters that surround him fade into the shadows.
