Allen Klein

From Wikipedia:

Allen Klein (December 18, 1931 – July 4, 2009) was an American businessman, music publisher, writers’ representative and record label executive. He was known for his tough persona and aggressive negotiation tactics, many of which affected industry standards for compensating recording artists. He founded ABKCO Music & Records Incorporated. Klein increased profits for his musician clients, who previously had been receiving less lucrative record company contracts. He first scored monetary and contractual gains for Buddy Knox and Jimmy Bowen, one-hit rockabillies of the late 1950s, then parlayed his early successes into a position managing Sam Cooke, and eventually managed the Beatles and the Rolling Stones simultaneously, along with many other artists, becoming one of the most powerful individuals in the music industry during his era.

Rather than offering financial advice and maximizing his clients’ income, as a business manager normally would, Klein set up what he called “buy/sell agreements” where a company that Klein owned became an intermediary between his client and the record label, owning the rights to the music, manufacturing the records, selling them to the record label, and paying royalties and cash advances to the client. Although Klein greatly increased his clients’ incomes, he also enriched himself, sometimes without his clients’ knowledge. (The Rolling Stones’ $1.25 million advance from the Decca Records label in 1965, for example, was deposited into a company that Klein had established, and the fine print of the contract did not require Klein to release it for 20 years.) Klein’s involvement with both the Beatles and Rolling Stones would lead to years of litigation and, specifically for the Rolling Stones, accusations from the group that Klein had withheld royalty payments, stolen the publishing rights to their songs, and neglected to pay their taxes for five years; this last had necessitated their French “exile” in 1971.

After years of pursuit by the IRS, Klein was convicted of a misdemeanor charge of making a false statement on his 1972 tax return, for which he spent two months of 1980 in jail. […]

Sam Cooke

In 1963, Klein began a business partnership with Jocko Henderson, an urbane black disc jockey who had daily radio shows in both Philadelphia and New York. Henderson hosted lavish, profitable live rhythm and blues shows at the Apollo Theater in Harlem, and formed a partnership with Klein to begin doing the same in Philadelphia. As Henderson’s partner, Klein was introduced to Sam Cooke, a preeminent talent who was equally adept at writing, producing, and performing his numerous hit records. Cooke had scored four top ten hits between 1957 and 1963, including his number one hit, “You Send Me,” among 33 records in the top 100 in that period. Although Cooke was clearly making his label, RCA Records, a great deal of money, label executives nonetheless repeatedly refused to honor his many requests for a review of his accounts. Klein forced the reluctant label to open its books for a thorough audit. Shortly afterward, RCA agreed to re-negotiate Cooke’s contract.

Klein secured for his client a genuinely groundbreaking deal. Cooke created a holding company, Tracey Ltd., which was named after Cooke’s middle daughter. Klein, Cooke’s manager, sneakily changed paperwork and listed himself as owner instead (and Sam Cooke as his employee). Sam Cooke trusted him to protect him against crooked music executives but Klein used that trust to his advantage.

Tracey would manufacture Cooke’s recordings and give exclusive rights to RCA to sell them for 30 years, after which the rights would revert to Tracey. Cooke would receive a cash advance of $100,000 per year for three years, followed by $75,000 for each of two option years. Instead of being paid the first $100,000 in cash, Cooke was paid in Tracey preferred stock, which would be taxed only when he sold it. While the deal benefited Cooke, it also greatly benefited Klein, who ended up owning the rights to all of Cooke’s recordings made since the contract re-negotiation when Cooke was killed in 1964 and his widow sold Cooke’s remaining rights to Klein.

Klein’s successful negotiations on behalf of Cooke brought him new clients, including Bobby Vinton and the Dave Clark Five. As with Cooke, Klein arranged for his clients to be paid over a period of time to reduce their tax liability. This also benefited Klein, who took advantage of the earning potential of money over time to “make money from the money.”

According to the 2019 documentary Lady You Shot Me: The Life and Death of Sam Cooke, Klein was a predator in his relationship with the singer. As of 2019, Cooke’s family received no royalties or benefits from his music. All royalties and publishing profits go to the Klein’s corporation. The documentary also proposed that Klein was behind the death of Cooke and had him murdered in order to become the sole beneficiary of Sam Cooke’s music.[citation needed]

Mickie Most and the British Invasion

In 1964 Klein became the American business manager of Mickie Most, a former singer who was the savvy producer of hits for the Animals and for Herman’s Hermits. Klein extended to Most a million-dollar promise, adding that if he failed to deliver in only one month, Most owed him nothing. Klein did deliver, through strategic re-negotiations of existing contracts and new producing opportunities for RCA, including offers for Most to produce for both Sam Cooke and Elvis Presley. Though the latter two prospects did not materialize, Most was suddenly one of the most talked-about and financially gratified figures in the English recording industry, and Klein was a step closer to eventual agreements with both the Beatles and the Rolling Stones.

His victories for Most won Klein access to several key English musicians. He eventually negotiated vastly improved deals for The Animals, Herman’s Hermits, the Kinks, Lulu, Donovan, and Pete Townshend of the Who. However, Klein’s help came at a price. To shelter his clients’ money from Britain’s high taxation rate on income earned abroad, Klein held the money for them at the Chemical Bank in New York City and paid it to them over periods of time of up to 20 years. Klein invested this money, which earned far more than Klein was obligated to pay to his clients, and he kept the difference in the accounts, thereby maintaining control over the money.

The Rolling Stones

In the spring of 1965 Andrew Loog Oldham, co-manager of the Rolling Stones, saw in Klein a terrific business adviser and ally, one who could help him win an incipient power struggle with Eric Easton, a music business veteran who was then the other half of the band’s management team. Barely 21, Oldham was profoundly important in the development of the Stones’ image, and in initiating the songwriting partnership of Keith Richards and Mick Jagger. After some management mishaps, blame for which fell at Easton’s feet, and Jagger’s ascension in the band’s hierarchy following “(I Can’t Get No) Satisfaction”, the Stones’ first number one record in America, Oldham sought and received Jagger’s blessing to bring Klein aboard for re-negotiation of the group’s contract with Decca Records. The label offered the band the opportunity to make $300,000 if their records continued to sell. Klein countered with, and quickly secured, an arrangement paying the Stones twice as much, in the form of an advance. He also forced London Records, Decca’s American subsidiary, to sign a separate contract. It too was for $600,000. By the time Klein subsequently re-negotiated the deal one year later, Easton having been removed as co-manager, the Stones were guaranteed $2.6 million—more than the Beatles were making.

When Klein examined the Stones’ management contract with Easton and Oldham he found that the latter were receiving a disproportionate share of the group’s income: not only did Easton and Oldham receive an 8 percent royalty on sales of the Stones’ singles—the Stones themselves received only 6 percent—but they also received a 25 percent commission on the Stones’ income. At Klein’s insistence, Oldham increased the Stones’ royalties to 7 percent and relinquished his commission. Klein offered the Stones a million-dollar minimum guarantee, paid over a 20-year period to reduce the Stones’ tax liability, to let him become their music publisher, based on his faith in the Jagger-Richards songwriting team. He also arranged for a level of tour support and publicity far above anything the band had ever previously experienced for the Stones’ 1965 American tour in support of the album December’s Children.

Jagger, who had studied at the London School of Economics, gradually became distrustful of Klein, particularly for the latter’s ability to insert himself as a profit participant in the group’s ever-growing financial affairs. For example, in 1968 Klein very profitably bought out Oldham’s share in the band for $750,000.
By 1968 the Stones were so concerned with how their finances were being handled by Klein that they hired a London law firm, Berger Oliver & Co, to look into their financial situation and Jagger hired the titled merchant banker Prince Rupert Loewenstein to be his personal financial adviser. Another possible factor in the Stones’ dissatisfaction with Klein was that when the latter began to manage the Beatles he focused more of his attention on that band’s affairs than on the concerns of the Stones. In 1970, on the occasion of needing to negotiate a new contract with Decca, Jagger announced that Klein would be replaced as manager by Loewenstein.

The split between Klein and the Stones led to years of litigation. In 1971 the Stones sued Klein over U.S. publishing rights. The suit was settled the following year, with the Stones receiving $1.2 million as a settlement of all American royalties earned up to that point (and was essentially the $1.25 million advance that Decca had paid the Stones in 1965 that Klein had been withholding since August 1965). However, the Stones were unable to break their contract with Klein, who held an additional $2 million of the Stones’ money to be paid over a 15-year period, ostensibly for tax purposes. Klein’s company, ABKCO, continued to control the rights to publish the Stones’ music and it was Klein who made a fortune off the band’s all-time best-selling album, Hot Rocks 1964–1971. In 1972 Klein alleged that some of the songs on their album Exile on Main Street had been composed while the Stones were still under contract with ABKCO. As a result, ABKCO acquired ownership of the disputed songs and was able to publish another Rolling Stones album, More Hot Rocks (Big Hits and Fazed Cookies). In 1974 negotiations over royalties led to a payment of $375,000 to the Stones and ABKCO’s release of an additional Rolling Stones album, Metamorphosis. In 1975 more lawsuits and negotiations resulted in a $1 million payment to the Stones for non-payment by Klein of songwriting royalties, and the release of four Rolling Stones albums including Rock and Roll Circus and Rolled Gold: The Very Best of the Rolling Stones. In 1984 Jagger and Richards sued to break their publishing agreement with ABKCO because of non-payment of royalties. The judge encouraged the two sides to reach a settlement.

Starting in 1986, when the introduction of compact discs brought great profits to the music industry, relations began to improve between Klein and the Stones. In 2002 the Stones’ album Forty Licks and the Licks Tour, celebrating the band’s 40th anniversary, incorporated songs owned by ABKCO. The Stones agreed to a five-year payment plan suggested by Klein’s son, Jody. In 2003 Klein negotiated with Steve Jobs to make ABKCO’s Rolling Stones songs available on iTunes.

Cameo-Parkway and ABKCO

In February 1967, with an eye toward producing films and finding a way to invest his clients’ money, Klein attempted to acquire Metro-Goldwyn-Mayer. His hopes were blunted when Edgar Bronfman, Sr., heir to the Seagram fortune, instead took control of the firm. Klein then turned his attention to Cameo-Parkway Records, a Philadelphia-born, Los Angeles-based label which had enjoyed hits in the late 1950s and early 1960s, thanks to Chubby Checker, Bobby Rydell, Dee Dee Sharp and others, but which by 1967 was no longer prospering. It was one of the first publicly traded record companies, making it ideal for a financial maneuver Klein had in mind, known as a reverse acquisition. It was meant to take Allen Klein and Company public via its being acquired on paper by Cameo-Parkway. By July 1967, Klein and his associate Abbey Butler had acquired a controlling interest and filed to rename Cameo-Parkway as ABKCO, which is an acronym for “The Allen and Betty Klein Company.” Fueled by speculation, the stock price increased from $1.75 a share in July 1967 to a peak of 76⅜ in February 1968 before the SEC halted trading. The American Stock Exchange declined to reinstate the stock; instead, ABKCO continued to trade over the counter, and the stock price dropped to more realistic levels. In 1987, Klein made ABKCO a privately held company.

The Beatles

In 1964 Klein approached the Beatles’ manager, Brian Epstein, with an offer for the Beatles to sign with RCA for $2 million but Epstein wasn’t interested, saying that he was loyal to EMI. After Epstein died in August 1967, the group formed Apple Corps in January 1968. They hoped it would provide the means for correcting Epstein’s unfortunate business decisions, which had both limited their incomes and ensured high tax burdens. Although “Hey Jude“, the Beatles’ first Apple release, was an enormous success, the label itself was a financial mess, with little accountability for how money was being spent.

Klein contacted John Lennon after reading his press comment that the Beatles would be “broke in six months” if things continued as they were. On January 26, 1969, he met with Lennon, who retained Klein as his financial representative, and the next day met with the other Beatles. Paul McCartney preferred to be represented by Lee and John Eastman, the father and brother respectively of McCartney’s girlfriend Linda, whom he married on March 12. Given a choice between Klein and the Eastmans, George Harrison and Ringo Starr preferred Klein. Following rancorous London meetings with both Eastmans, in April, Klein was appointed as the Beatles’ manager on an interim basis, with the Eastmans being appointed as their attorneys. Continued conflict between Klein and the Eastmans made this arrangement unworkable. The Eastmans were dismissed as the Beatles’ attorneys, and on May 8 Klein was given a three-year contract as business manager of the Beatles. McCartney refused to sign the contract but was outvoted by the other Beatles.

Once in charge of Apple, Klein fired a large number of the organization’s employees, including Apple Records president Ron Kass, and replaced them with his own people. He closed Apple Electronics, which was headed by Alexis Mardas. Mardas resigned his directorship in May 1971. Klein’s attempt to fire Neil Aspinall, a longtime confidant of the Beatles, was immediately thwarted by the band.

Klein was hit with his first crisis in managing the Beatles when Clive Epstein, brother of Brian Epstein and chief heir to NEMS, the management company his brother had founded, sold NEMS to Triumph, a British investment group managed by Leonard Richenberg. NEMS held a 25% stake in the Beatles’ earnings, which Klein as well as the Beatles themselves desperately wanted to buy out. This led to tough negotiations with Triumph. Klein ultimately secured the Beatles’ rights in their previous work for just four annual payments amounting to 5% of their earnings. However, in the lead-up to those negotiations Richenberg commissioned a hostile investigative report on Klein, which The Sunday Times ran under the headline “The Toughest Wheeler-Dealer in the Pop Jungle”.

An even more important battle to secure the Beatles a financial situation commensurate with their worldwide popular acclaim was with Northern Songs Ltd., the publishing company. Northern Songs was managed by Dick James, whom Brian Epstein had rewarded with the Beatles’ publishing rights in return for his helping them get placed on a TV show, Thank Your Lucky Stars, early in their career. But James had constructed a contract that gave him an outsized share, and Epstein hadn’t understood its implications. James knew that Klein would soon eliminate his perks, so he quickly offered to sell Northern Songs to ATV, run by entertainment mogul Lew Grade, rather than allow Lennon and McCartney an opportunity to buy back publishing rights to their own songs. Klein worked feverishly to pull together a consortium which would beat Grade’s offer, but ultimately his efforts were derailed by infighting between McCartney and Lennon themselves.

In September 1969, while Klein was in the midst of renegotiating the Beatles’ unsatisfactory recording agreements with EMI, Lennon told him of his plans to quit the group. It was agreed that this was the wrong time to either make or announce such a move. EMI was loath to re-negotiate, but their American subsidiary, Capitol Records, was so impressed by Abbey Road that they agreed to vastly improved royalty terms. McCartney joined his bandmates in endorsing the deal Klein had secured.

Abbey Road proved to be the Beatles’ last true collaboration, but Klein recognised an opportunity in the band’s shelved January 1969 album and related documentary project, both titled Get Back, to get another album release out of the splintered group while also fulfilling their obligation to provide one more film to United Artists, the studio that had previously released both A Hard Day’s Night and Help! Phil Spector, the producer famous for his “wall of sound” recordings with artists such as the Ronettes and the Righteous Brothers, was eager to sign on as producer for the album, which was eventually titled Let It Be. McCartney didn’t approve of Spector, but the other Beatles did. This proved to be McCartney and Klein’s last face-to-face meeting. However, Apple made $6 million in the first month following the May 1970 release of the record and the film.

Unhappy with production decisions on the Let It Be album and the other Beatles’ decision to hire Klein as their manager, McCartney went public with his plans to leave the Beatles in April 1970. He wanted to be released from his partnership with Lennon, Starr, and Harrison, who had in recent months proved a steady three-to-one majority against McCartney’s proposals. The Eastmans convinced McCartney to file suit against his former bandmates for dissolution of the Beatles’ partnership, which he did on December 31, 1970.

The judge ruled in McCartney’s favor in March 1971. He decided that the combined financial affairs of the former Beatles should be placed in the care of a receiver until mutually acceptable terms for their break-up could be found. Klein thereby retained a position in the post-breakup solo careers of Harrison, Starr, and Lennon, but was no longer in charge of their affairs as a partnership.

Solo Beatles

For a time after the Beatles’ contentious break-up, George Harrison was the most popular and successful of the former group. His November 1970 three-disc set, All Things Must Pass, was a sales triumph, and produced hit singles in “My Sweet Lord” and “What Is Life”. In the spring of 1971, Harrison learned from his friend and mentor, Ravi Shankar, about the desperate people of Bangladesh, who had been devastated both by military violence and a vicious cyclone. Harrison immediately set about organizing an event which would take place in Madison Square Garden within just five weeks—the Concert for Bangladesh—from which a live album could raise further funds for the Bangladeshi refugees. Klein hustled to get the invited artists, including Bob Dylan and Eric Clapton, to play for free while donating their shares of royalties to charity, and convinced Capitol Records to grant an unprecedented 50% royalty rate. The Concert for Bangladesh live album and film raised over $15 million. Klein had failed to register the shows as a UNICEF charity event, however; as a result, the proceeds were denied tax-exempt status in Britain and the US. The IRS attempted to tax the income, and $10 million of that amount was held back for years.

Both Harrison and John Lennon soon became disenchanted with Klein. By mid 1972, Harrison was appalled at the outcome of Klein’s handling of the Bangladesh relief effort. Aside from the question of its charity status, unwelcome attention had been drawn to the project after an article published in New York magazine accused Klein of pocketing $1.14 on each copy of the live album (priced at $10)—allegations that raised suspicions among the three former Beatles with regard to his conduct in their business affairs. Lennon also felt betrayed by Klein’s lack of support for his and Yoko Ono’s increasingly politically focused work, which was typified by the couple’s 1972 album Some Time in New York City. In early 1973 Lennon, Harrison and Starr served notice that they would not be renewing Klein’s management contract when it expired in March. Early the following month, Lennon told an interviewer: “Let’s say possibly Paul’s suspicions were right … and the timing was right.”

Klein responded by suing the Beatles and Apple in New York, in order to recoup the loans he had made to his three former clients and other costs owing to ABKCO. They then sued him in the London courts, citing excessive commission fees, the mishandling of the Concert for Bangladesh, his misrepresentation of their individual financial standings, and his failure to ensure that the roster of artists at Apple Records prospered under his control. While the suits were ongoing, Klein made a play for the US portion of Harrison’s publishing company, Harrisongs, in late 1974, without success. He also attempted to influence the outcome of Lennon’s arrangement with music publisher Morris Levy regarding an alleged copyright infringement (of the Chuck Berry song “You Can’t Catch Me”) in Lennon’s 1969 Beatles composition “Come Together“. Lennon’s song “Steel and Glass” from the 1974 album Walls and Bridges was his thinly veiled dig at Klein.

Klein’s 1973 lawsuit against the Beatles was settled out of court in January 1977, with Ono representing the former bandmates. Klein received a lump sum payment of approximately $5 million in lieu of future royalties and as repayment of the loans that ABKCO had made to the Beatles.

Harrison had been sued for plagiarism in 1971 because of the alleged similarity of his song “My Sweet Lord” to “He’s So Fine”, which had been recorded by the Chiffons in 1963 and was owned by Bright Tunes Music. The case was still pending in 1976; as an alternate strategy to access Harrison’s US publishing, Klein now purchased Bright Tunes and thus became the plaintiff in the lawsuit against Harrison. The judge ruled that Harrison had infringed on Bright Tunes’ copyright, and the ruling was upheld on appeal. The judge initially assessed damages of $2,133,316, which Harrison would have to pay to Klein, then reduced the figure to $1,599,987, but finally ruled in 1981 that Klein still had a fiduciary responsibility to Harrison and should not be allowed to profit from his acquisition of Bright Tunes. Klein was ordered to hold “He’s So Fine” in trust for Harrison provided that Harrison reimburse him the $587,000 that it had cost Klein to purchase the company. […]

The business problems at Apple Records […] really were horrible. The business meetings were just soul-destroying. We’d sit around in an office, and it was a place you just didn’t want to be, with people you didn’t want to be with. There’s a great picture that Linda took of Allen Klein, in which he’s got a hammer like Maxwell’s silver hammer. It’s very symbolic. And that’s why we have the little nod and a wink in the middle section to “You Never Give Me Your Money”, in the lines “I never give you my pillow / I only send you my invitations”

Paul McCartney – From “The Lyrics: 1956 to the Present” book (2021)

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