“There are good people in this business and there are scum. And when there’s a lot of money involved, there are bound to be suits. Lawsuits are tools of the trade and you use the tools you have to survive…” –Allen Klein, in the Playboy Interview, November, 1971
Allen Klein and ABKCo. Industries, Inc., have been accused in a New York Magazine article of skimming some $1.14 from out of each Bangla Desh album. Klein has filed a $150 million suit against the magazine and Peter McCabe, writer of the article (entitled “Some Sour Notes from the Bangladesh Concert,” in the February 28th issue of the weekly magazine). Knowledgeable industry observers, however, knowing a court case would force full disclosure of all financial details of the Bangla Desh album negotiations, doubt the suit will ever reach the court.
McCabe, a free lance writer (formerly a reporter with Rolling Stone), analyzing figures and statements from Capitol Records and the Allen Klein office, drew the conclusion: “By the simple arithmetic that anyone familiar with the record business can command, a breakdown of the proceeds leaves approximately $1.14 per album unaccounted for. That’s not just a buck and change, not when multiplied by a possible three million.”
Klein, in the suit filed February 28th in State Supreme Court, asked for damages from the publication of “false and defamatory matter” concerning ABKCo. Damages were also claimed “due to the fact that the publication of the article has seriously impaired sales of The Concert for Bangla Desh album,” and a third claim cites “damages for injury to ABKCo’s credit and reputation.”
In the article, Klein is pictured as “brisk and businesslike” by McCabe, who has been researching Apple for almost a year for a book on the business aspects of the break-up of the Beatles. McCabe connects business to the Bangla Desh benefit concert of last August: “There is no reason to think Allen Klein cares less about the plight of Bangla Desh’s wretched refugees than any other mortal, but there is considerable reason to think that for Klein the concert … was also an occasion for business as usual.”
After a quick rundown on the complex negotiations for distribution of the album, a phone research job on marketing and publishing costs that “leaves at least $1.14 unexplained” in his mind, McCabe continues his portrait of Klein. The head of ABKCo and manager of John, George, and Ringo “sees himself as something of a Robin Hood,” McCabe writes. “He is a non-smoking, non-drinking scrapper with a penchant for bluff and exaggeration, and, as he has publicly admitted, a capacity for lies.”
McCabe was referring to the Playboy Interview Klein gave to staff writer Craig Vetter last fall, which included this exchange:
Would you do literally anything to accomplish what you felt you had to for a client?
Klein: Yeah, I think so.
Would you lie?
Klein: Oh, sure.
Would you steal?
* * *
In mid-January, after the inordinately delayed album was finally released, with retailers and distributors screaming over the near-impossible profit restrictions dictated by Klein (representing Apple), Klein was sitting in his New York office, talking to a reporter from the New York Times. “I had a special client,” he said quietly. “Ten million starving children.”
In the matter of the New York Magazine article, Klein is going all out. In fact, he has thrown himself into the middle of a lawsuit circus and sets of album cost figures that have, unfortunately for him, only added to the confusion.
McCabe began hearing the sour notes after learning of the basic contract agreement for the disbursement of funds from the $10 wholesale price: $5 to US Committee for UNICEF and $2.73 for Capitol (for pressing and production costs, including 25 cents per album to Columbia, which is distributing tapes in the US and Canada).
That leaves a $2.27 balance paid to ABKCo, and McCabe hinted that the record industry, in general, was “wondering.” “Only a part of this money can be accounted for,” he wrote. “The American Federation of Musicians’ standard cut is 1.05 percent, but this would only total 13 cents. Reliable record industry sources estimate that the box for the album, together with the booklet that goes with it, would cost, at most, 50 cents. There is, of course, the question of ‘mechanical’ royalties, the two cent fee per song, per album sold, which is paid to the publisher of the song and is usually split 50-50 between composer and publisher. But even on an album such as The Concert for Bangla Desh, which has 19 tracks, some of which are more than five minutes long and therefore receive more than two cents, the maximum amount payable in mechanicals would be about 50 cents. This leaves at least $1.14 unexplained…
“It was Klein who said that ‘all monies accrued, including interest, will be turned over to the charity.’ But thus far, Allen Klein has been unavailable for comment about what is happening to all the Bangla Desh album proceeds. As John Lennon once said, ‘When Allen doesn’t want to talk, he just doesn’t answer his phone.'”
Klein first demanded a printed retraction. Denied, he called a press conference in his plushly-carpeted Broadway office February 29th to announce his suit against New York Magazine and to explain where all the money went. And last week, he placed double-spread ads in all the trade publications (costing an average $1500 a page). Now, however, he is refusing to answer questions directly, having them screened through his publicity agents, Solters and Sabinson, Inc., instead. And so far, questions have received at best haughty, brusque replies. And there are many questions.
At the press conference, Klein gave pretty much the same breakdown of costs as he would in the ads. Without showing any visible documentation, he told the reporters of a 73.1 cent cost on the album box and 64-page color booklet (based on 1.25 million units) and a publishing-royalty payment of 70.5 cents per album, both figures considerably higher than McCabe’s estimates. The AFM was getting 16.5 cents, he said, “inventory” accounted for 65.2 cents, “returns” were nine cents an album (on sales of 600,000), “manufacturing, art work, studio time, and freighting” were 20.3 cents, and “other manufacturing costs” amounted to 20.3 cents. And, on a 600,000 sales basis, there was a “cost of concert” of $1,025 per unit. So, Klein concluded, Apple was actually losing money to the sour tune of $329,000 if the album sold a million, and $18,000 if sales reached six million.
In the hastily-assembled trade ads, Klein shows his losses decreasing with increasing sales. But he has reduced the amortized “cost of concert” to a still mammoth $201,000, and returns have been lumped in with art work (which Camouflage Productions, which did the photos and designing, said cost less than $5000 in total expenses), recording studio time, freighting, “and other overhead costs” in a new, sliding figure ranging from 69.9 cents to 52.3 cents. Another difference is “inventory at hand,” figured to slide from 65.2 cents on 600,000 units, down to 11 cents for three million sold.
Questions center around “inventory at hand,” which no record company executive contacted by this publication could explain (“It’s tough to figure out what it means,” said Stan Cornyn, a vice president at Warners, after studying the Apple ad). “Returns” also needs explaining, since Capitol had been charged with the manufacture and distribution of the records and had, in fact, declared a stringent returns policy for stores (ten percent, compared to the usual 100 percent) because of the deal forced onto Capitol by Klein. Box/book costs are arguable (major printers and art directors reached by Rolling Stone gave educated estimates ranging from $250,000 to $750,000 for the package Klein claims cost more than $900,000).
But Klein’s figures not only slide; they seem to change, disappear or reappear at will. In the lawsuit brief (as published in Variety), there is no mention of “inventory,” but the concert costs go back up to $1.02, amortized, meaning a total cost of more than $600,000 for the use of Madison Square Garden for two shows, artists’ expenses, crews, and Klein knows what else. In news stories at the time of the benefit it was reported that ABKCo, as producers of the concerts, had spent $50,000. Also before the New York Magazine article, Klein’s L.A. press agent had provided a breakdown of album costs, with the box and book then at 75 cents and a balance of $1.52 per album for returns and two general categories, “obsolescence” and “etc.” At that point, the total was $10 clean. No loss mentioned.
Aside from the question of the so-called missing $1.14, the New York Magazine article recounted a rumor that “Klein was using the Bangladesh album as a wedge to drive home other deals with Capitol.” McCabe continued:
“The company’s marketing vice president, Brown Meggs, was reluctant to answer directly when asked for confirmation of this, but he did say that ‘there were a lot of other negotiations pending between Capitol and Mr. Klein, and Mr. Klein hadn’t failed to mention these during his talks about the Bangla Desh album.'”
Since the article appeared, Meggs has clammed up. “I really cannot comment on the damned thing,” he said, “since the matter’s in litigation. I’ve been told by my own people here.” But one of “his own people” said Capitol was not directly involved in the Klein lawsuit and was in no danger by talking. Another of “his own people”–President Bhaskar Menon, who directly negotiated with Klein–was willing to talk. Asked about Meggs’ response to the “wedge” rumor, Menon said, simply, “I cannot recognize that that was the case. If so, I was not aware of it.”
Still, such matters as individual Beatles product, and whether various records fall into the Capitol-Apple contract or the older EMI/Capitol-Beatles contract (which is much less lucrative for Apple and Klein) remain in dispute. Thus, the delay of recent Lennon-Ono releases such as the Attica single and the Fill-more East live/jam album, which Capitol considers to be Beatle product while Apple insists that, with Yoko’s participation, the album is “non — Beatle” and therefore an Apple, not Capitol, record.
Klein replied to the question of his using Bangla Desh to win his way on other deals with a flat “no,” through his publicity agent. As for questions on his cost breakdowns and the terms involved, he responded: “If you’re doing an article about the record business, you ought to know what the words mean.”
“Everybody at Apple is upset,” said ABKCo’s Los Angeles publicist, Sharon Lawrence. “It’s almost 95 percent untrue. Klein says he’s willing to take the rap, but the story says…it appears to say that the people around him are crooked, or that he’s led them astray.
He said George and Bob are very upset about the article.
“No one at Apple is making a profit,” she said. “In fact, they stand to lose money.”
(Meanwhile, the trades are still reporting Klein’s announcement of ABKCo’s intentions to buy Apple. Klein made the disclosure at the Annual Meeting of Stockholders here on February 15th. Lennon and Starr, it was reported, will make an offer to Paul McCartney for his 25 percent of Apple Corps Ltd. and the entire 100 percent could then be up for negotiations.)
The New York Magazine article, Sharon Lawrence continued, “came as a surprise. Klein only knew a week before about some kind of an article. Someone at Apple heard about it by chance, off the street.” In the suit brief, it is noted: “At the time of publication, defendant could have ascertained that the matter complained of was untrue.”
McCabe says he tried to talk to Klein in early February (“After the story was submitted,” Miss Lawrence added later). “I told them I was doing an article on the Bangla Desh situation for a major magazine. I spoke to his secretary and told her I had some questions…about the distribution of proceeds, about why Harrison called Capitol to apologize [Harrison, on the Dick Cavett show on ABC, blamed Bhaskar Menon for the four-month delay on the album’s release], and on what happened to the $1.14 per album I considered unaccounted for. She told me the questions were ‘rude,’ but she said she’d give him the list and he’d call back. And I didn’t hear another word.”
Klein’s secretary, questioned, refused to comment, referring all questions to the publicity firm.
(And while Klein was quick to call a press conference to announce the lawsuit, he had an ABKCo attorney, Alan Kahn, dispatch the following warning to this publication:
(“We are advised that you are about to publish an article embodying information contained in [the New York] article…
(“This is to inform you that the information contained in that article is inaccurate, incorrect and misleading.
(“Accordingly, demand is hereby made that you cease and desist from publishing such an article.
(“If you persist in publishing such information, we will be required to commence all necessary legal proceedings to protect our rights.”)
New York Magazine, McCabe said, is standing behind the article and is offering him the services of their lawyer. The magazine will publish a letter from Capitol’s marketing vice president, Brown Meggs, who wasn’t at the Bangla Desh album negotiations, but spoke at length to McCabe.