[A brief note: this week is going to be the final week of the All Expo, All of the Time theme that's taken over Shanghai Scrap. We have non-Expo posts planned for next week, and we're going to like doing them. But, for this week at least, a few loose ends to tie up before moving back into prior and new beats. Of course, Expo won't be leaving our thoughts entirely - we have some items that we'd still like to explore over there - but I think a solid month of exclusive Expo blogging is quite enough. Anyway, back to the Expo blogging.]
Loose end #1. Potential conflicts of interest at the USA pavilion, and a response from the pavilion’s president. [fair warning: this is going to get long and technical; for US pavilion wonks, only.]
In early May I obtained a budget for the US pavilion contained in a document request from the Internal Revenue Service. It’s an interesting document, available here. I won’t bother going into an analysis of it for the purposes of this post, but it’s no understatement to say that several items in the budget – especially the $23 million budgeted for the three short films in the pavilion – raised eyebrows across the Expo community. It also raised an important question: how did the US pavilion manage to spend $23 million on films, $61 million on the pavilion as a whole, and still manage to end up with a pavilion that – across the board – has been subjected to scathing reviews (see here, here, and here for examples from the mainstream press).
Well, one obvious explanation would be that somebody associated with the US pavilion had or has a financial or business relationship with BRC Imagination Arts, the contractor on the films and pavilion program, and that person would benefit in some way from the excessive payments to BRC. And, from the beginning of the tortured, murky process that resulted in the derided USA pavilion, considerable suspicion has been focused on Nick Winslow, the president of the non-profit organization, Shanghai Expo 2010, Inc., that designed, built, and manages the US pavilion. Why the suspicion? A couple of weeks ago I was reading through IRS filings related to the US pavilion when I came across a Winslow resume dating to mid-2009 suggesting that he did, indeed, have a business and financial relationship with BRC Imagination Arts. I blogged on the subject, here. The relevant passages from the resume can be found below, underlined in red (click to enlarge).
Now, the resume suggests that Winslow was – as of June 2009 – an adviser and owner’s representative to BRC Imagination, and – if that’s the case – it would place the US pavilion’s tax-deductible 501c3 status at risk (officers with 501c3 organizations are prohibited from having financial or business interests with organization contractors). So, before publishing the resume and my concerns, I contacted Winslow, the US Consulate, the spokesman for the US pavilion, and the CEO of BRC Imagination Arts for comment on whether the document was accurate, and the precise nature of Winslow’s relationship to BRC. I received no response and so, after five days of waiting, I posted. But, to be honest, the matter continued to trouble me. And so, after several more days of silence, I reached out once again, via another channel, to the pavilion.
Now let me back up for a moment. Ever since Jose Villarreal was appointed to be Commissioner General to the US pavilion, the organization has – progressively – become more and more transparent. There are still some rather significant secrets associated with it – for example: who at the State Department selected Shanghai Expo 2010, Inc to design, build, and manage the structure? – but Villarreal has made a good effort to lift the curtain and answer questions – especially many of my questions – about the pavilion and its managing organization. So, roughly ten days after posting the Winslow resume, I received a Winslow statement that attempted to answer my questions. Unfortunately, it raised more questions than it answered and so I felt obligated to follow-up. About a week later, I received answers to those follow-ups. In the interest of fairness, I’m going to post Winslow’s statement and answers in full.
But first, a quick note (and a few notes along the way). Even a quick scan of Winslow’s answers reveals that they are very precise, very legal. This is interesting on a number of counts. First, I twice interviewed Winslow in 2009, and he is – on the phone, at least – quite freewheeling and informal, willing to say just about anything (this is an impression that others have shared with me, as well). That personality is missing from the answers that he provided to me – especially the follow-ups. Did Winslow enlist legal counsel to help him answer my queries? I asked, but did not receive an answer on this point. As a writer, however, the conclusion seems inescapable. Which leads to the question: what would motivate somebody to enlist a lawyer for help answering questions posed by a blog? The only answer that I can reach is this one: somebody has reason to be concerned about the legal consequences of his/her answers and associated actions. Does Winslow have reason to worry? Well, I’m not a lawyer, but it’s certainly the case that one complaint has been filed with the IRS in regard to his relationship with the USA pavilion, and I’m aware of a second currently in preparation. Whether or not those complaints are investigated is something that isn’t public.
Much of this is speculation, of course, and I’m not sure that it’s worth taking it much further than I have. At this point, I think much of this could be settled by a proper and fair accounting of precisely how the US pavilion was awarded to Winslow, who, precisely awarded it and why, how and why so much money was spent on the pavilion, and how could so much money produce such a poor result? Many of these questions could be answered by the IRS; others will need to be answered by the State Department and/or Villarreal in his final report on the pavilion, due after the end of the Expo.
In any case, without further ado, Winslow’s explanation of his resume, and his answers to my follow-up questions. For context, once again, below, the passage in question (click to enlarge).
And now, Winslow’s written statement (with a few interjections and comments from me):
“This will clear up any confusion about the appropriate separation of business between me (Nick Winslow), Shanghai 2010 USA Pavilion (the 501c3) and BRC Imagination Arts.
• I am not now, nor have I ever been, BRC’s “owner’s representative” for any project anywhere at any time. My old resume correctly lists BRC among my “clients” served between 2000 and the present but I have never been a BRC owner’s representative or agent, nor have I ever received or been promised a commission or finder’s fee or anything like that, verbally or in writing, from BRC. There is a typo (a missing comma) in my old resume, which could allow this relationship to be misread.”
[ed. note: what follows is Winslow's answer to a later follow up question regarding the nature of the missing comma, and its placement.]
Q. Where is the typo that Winslow references? Where, precisely, would the comma go? I don’t understand how a comma would change the resume. Perhaps he could provide a re-write of the section in question?
A. The missing comma after BRC Imagination Arts would cause the phrase that follows to be a collection of various attributes applicable to various clients previously named, rather than all specifically to any one. In any case, the facts do not support the accusation; Nick Winslow has never been an agent or representative of BRC Imagination Arts. Furthermore, there is no hint of deception here; the typo did not cover anything up.
[ed note: Two things. First, Winslow changes his story. And second, he doesn't answer the question. This is a description of what Winslow DIDN'T do for BRC. So far, no description of what Winslow actually DID for BRC. I did ask a follow-up on this point, and received an answer, which I'll post further down. But first, the remainder of Winslow's statement.]
“• There are very few of us in this business, so just about everyone on the numbers side (i.e. me) has worked with just about everyone on the creative side. For example, I have worked at different times with both BRC and Barry Howard.
[ed. note. Barry Howard was part of BH&L, the last of the bidders in the formal State Department Request for Proposal on the pavilion that concluded unsuccessfully in 2008.]
• Since BRC started work for Shanghai 2010 USA Pavilion and since the formation of the 501c3 (Shanghai 2010 USA Pavilion) no business relationship or payments of any kind have taken place between me and BRC (including all entities owned or controlled by BRC and Bob Rogers) other than as provided by the contract between BRC and the 501c3 for the USA Pavilion.
To remove any further doubt, here are the key dates regarding BRC’s involvement:
On 3/28/08 BRC made the final payment to me ($600) for consulting on a theme park for Dubai. With this payment, this and all other business relationships between me and BRC were paid up and concluded. After this date no other business relationships between BRC and me have existed other than the contract between BRC and the 501c3 (Shanghai 2010 USA Pavilion).
[ed. note. Again, this is a first answer. It doesn't provide any insight into what, precisely, was the relationship. Presumably, this was an expense reimbursement, rather than a consulting fee.]
o After this date BRC and I each worked independently for the same client (The National Health Museum) but our contracts with this client were separate and independent, and we had no business relationship between us. This work was substantially concluded in 2006 with some minor follow through as late as early 2009. But as I said, there was no business relationship between me and BRC on this project.”
[ed. note. This is an incredibly damaging admission. As noted in this blog post, and its supporting documents, Winslow represented to the State Department that he could deliver a $13 million in-kind contribution from the National Health Museum for the US pavilion. According to this bullet point, the National Health Museum was a Winslow client at the time that he promised this. In other words - he was using the US pavilion as a means of advancing his personal professional interests. BRC isn't the only possible, potential conflict involved here. Shameful. Winslow continues ...]
“o The formation of the 501c3 took place on April 2, 2008. Initially this entity had no cash.
o BRC began work for me on the USA Pavilion in April of 2008, at BRC’s own risk, on a voluntary basis without a contract and with no guarantee of payment.
o BRC and Shanghai 2010 USA Pavilion signed their first agreement regarding this project on May 2, 2008. This agreement covered only the Vision Phase (the beginnings of concept development).
• It was not until over a year later, on July 29, 2009 (just 9 months and a couple of days before the opening of expo) that BRC signed the production phase agreement which authorized creation and production of the BRC deliverables that entertain people in the pavilion today.
• For what it’s worth, BRC was the creative consultant retained by Doug West, producer of the USA Pavilion at the Aichi expo in 2005, in Doug’s abandoned effort to secure the USA Pavilion for Shanghai, prior to Barry Howard. BRC worked directly for Doug, who withdrew because he did not believe Shanghai was feasible. I was not involved in Doug’s effort in any way and, in fact, didn’t know BRC had worked on Doug’s phase of the project until I discussed it with BRC in 2008.”
[ed. note. So that's that - Winslow's statement. Next, his - or his counsel's - answers to my followups.]
Q. In light of Winslow’s acknowledgment that there’s an error in the resume, and the fact that a complaint has been filed with the IRS partly based upon that error – will Winslow file a corrected resume with the IRS? If so, when? Can I see it?
A. Winslow will follow any/all obligations to and/or directions from the IRS with respect to any and all document requests.
[ed. note. This answer is incomplete based upon the first answer that Winslow gave me, ie, he left out a comma in his resume. But if you accept the answer given in the lawyerly second response - the resume is accurate - it makes sense. Clearly, though, Winslow and his advisers are in no hurry to file corrections with the IRS.]
Q. Given that agreements were reached with BRC BEFORE the 501c3 was formed, I am somewhat dubious of the claim that BRC started work SINCE THE FORMATION of the c3. Would be good to see the contract(s). Can I?
This is not correct on several counts.
o No agreements were reached before the 501(c)(3) was formed. The 501(c)(3) was formed 4/2/08. The first agreements between the 501(c)(3) and BRC were reached on 5/2/08.
[ed. note. The question is not what agreements were reached, but rather what was communicated verbally or in email. What promises or intended promises were made? Surely, negotiations and verbal agreements took place before the formation of the 501c3.]
o No work began until after the formation of the 501(c)(3). [ed note: BRC and Winslow would have you believe that BRC didn't begin work until the formal documents were signed, that there were no emails or discussions prior to those dates] ] The first work took place April 10 and 11, which was after the formation of the 501(c))(3) but before the signing of the agreement. This initial work was limited and speculative. Speculative work is not at all unusual in this industry – in fact it is a normal part of the sales process to have an exploratory meeting or do some light creative brainstorming on spec, with no signed contract. (Barry Howard/BH&L Group did the same.) In this case BRC attended a meeting April 10 and 11 with a client (Winslow) who said they had no cash, made no guarantee that BRC would be paid and signed no agreement. On those dates Winslow was also not sure he had a project. The March 17 announcement by the State Department that an LOI had been signed was not given to Winslow by the State Department until 4/17/08. The first agreement between BRC and the 501(c)(3) was signed 5/2/08 and the first check was given to BRC that day.
[ed. note. What's troubling about these passages is that they strongly suggest that Winslow chose BRC without subjecting it to any kind of comparable cost analysis. That is to say - the US pavilion's film program wasn't open to competition; Winslow chose and that was that. Why would he do this? Well, clearly, his past relationship with BRC could be one possible reason. He knew them; they knew him; let's do business. That's open to question. Is it reckless and counter to good governance - especially good governance of non-profits dependent upon tax-deductible contributions. Put differently - had someone other than Winslow been in charge of selecting a production company, it's almost certainly the case that the process would have moved forward differently. Winslow's eagerness to do business with BRC, and the apparent lack of a competitive bid, puts his credibility - and BRC's - at serious risk.]
o In any case, all of the above activities came after the close out of all other business between Winslow and BRC.
[ed note. What was the nature of this other business? It sounds far more extensive than what was implied in Winslow's original statement indicating a final close-out payment of $600. This is precisely the sort of information in which the IRS will take a serious interest.]
Q. What, precisely, was Winslow’s relationship with BRC? As a ‘consultant’ – as opposed to an owner’s rep or advisor? Is there a difference? If so, what is it? Aside from receiving payment for $600 for work on a theme park in Dubai, Winslow offers no insight into what he DID do. All he describes is what he DIDN’T do.
A. A consultant performs specific work, either by the hour or for a lump sum, usually in service of a specific project. As an example of consulting work, a consultant might write a report analyzing the economic feasibility for a proposed project or look over a draft staffing/operational plan and advise ways of improving it. Prior to (but never after) the formation of the 501(c)(3) Winslow performed these kinds of specific consulting services for BRC.
o An Owner’s Rep is like an agent, responsible for obtaining work, and is sometimes paid based on their success at getting work for their client. Nick Winslow has never been an agent or representative of BRC Imagination Arts. Winslow has never been promised, nor has he ever received, payment of any kind from BRC based on Winslow seeking or obtaining work for BRC.
[ed. note. This is hardly a complete description of Winslow's past relationship with Winslow, and the lack of specificity is troubling. What we don't know: how many other deals they've worked on, any shared ownership or projects, value that's exchanged hands and the duration of the relationship. The lack of such specific information suggests that something must be missing. Others might be able to compel that information; this blogger can't.]
5. Winslow writes: “BRC began work for me on the USA Pavilion in April of 2008, at BRC’s own risk, on a voluntary basis without a contract and with no guarantee of payment. ” But there must’ve been some agreement, no? Verbal?
o No, there was hope but no agreement. This was all speculative for both BRC and the 501(c)(3). [ed note. Difficult to believe that there wasn't a basic verbal agreement on the parameters of an eventual collaboration.]
o This is not unusual in this or other fields. BRC performed a very small amount of creative work at its own risk. The 501(c)(3) said that they did not have the cash to pay BRC, nor did they sign any contract. There was a high probability that nothing would come to BRC or the 501(c)(3) in exchange for this work.
o Prior to the March 17 announcement by the State Department that an LOI had been signed, the 501(c)(3) (like BRC) was not sure it had a project. Even after the 4/17 LOI announcement, the 501(c)(3) was not guaranteed a project, as the overwhelming majority of the money was yet to be raised. (See related answer above.)
o Barry Howard’s team faced exactly the same speculative situation with their work. Like BH&L Group, BRC hoped that the free ideas would win approval and that a contract would follow. But at the time the initial work was performed (April 2008) there were no guarantees to anyone.
o This is normal in our business.
o In any case, all of the above named BRC activities came after the close out of all other business between Winslow and BRC. [ed. note. This phrase "all other business" repeats throughout the responses. Just how large and widespread was/is the Winslow-BRC relationship?]
o The vast majority of BRC’s work was not confirmed until over a year later when the Production Agreement was signed on July 24, 2009, only 9 months and a couple days before the opening of expo.
[ed. note. THIS IS THE VERY DAY THAT THE USA PAVILION RECEIVED A LETTER CONFIRMING ITS TAX EXEMPT STATUS. Interesting coincidence, yes?]
6. I think much could be illuminated by providing a look at the books. Is that yet possible?
• Deloitte is the accounting and tax services provider for the 501(c)(3) and has participated in the preparation of the company’s budgets and financial statements. The Board of Directors of the 501(c)(3) has reviewed and approved all budgets and financial statements of the company. The company will file tax returns at the appropriate times and provide an audited set of financial statements. Audits will be conducted by a major US accounting firm. Six of the seven members of the 501(c)(3) board are outside directors.
[ed. note. I think a 'no' would've sufficed. Transparency in regard to the accounting would help even more.]
Well. This stands as one of the lengthiest Shanghai Scrap posts, ever. If you made it to the end, congratulations – you are a true US pavilion wonk. I’m going to open up comments with the hope that they’ll be substantive and intelligent. And fair warning: comments from State Department IP addresses will be outed immediately unless they are accompanied by a real, verifiable name and email address.