36 More Ways to Screw An Artist, by Warner Bros. Music…

Last year, we detailed the 52 different ways that Warner Bros. Records had screwed James Taylor, based on a detailed lawsuit from the singer.  But it looks like these tricks extend to other artists in the Warner Music family as well, including those as timeless as George Gershwin.  Of course, Gershwin passed in 1937, but the relationship between publisher Warner Bros. Music (including Warner/Chappell) and Gershwin’s heirs stretches back more than 75 years.    

The more recent period of that relationship has been extremely rocky, to say the least.  In a recently-filed lawsuit in the Supreme Court of New York, the Gershwin Trust alleges that Warner bilked them of roughly $4.5 million, though a non-stop game of fiscal fudgery and under-reporting.  Overall, attorneys for the Gershwin Trust are seeking damages north of $15 million. 

And with that, these are the many ways in which Warner Bros. Music, Warner/Chappell Music, and Warner Music Group screwed George Gershwin, according to the lawsuit…

(1) On April 18th, 2007, the Gershwin estate (or ‘GG Parties’) initiated a financial audit dating back to January 1, 2001, though auditing firm Premier Media, LLC.  The audit ultimately found underpayments of $4,469,612.07.

(2) During that process, the Gershwin auditor was repeatedly unable to secure the proper documentation, and therefore was forced to estimate certain figures and shortfalls in its initial report on October 10, 2008.

“In many cases the Initial Report was based upon assumptions and extrapolations necessitated by the Defendants’ continued failure to supply all of the required information for Premiere’s review, notwithstanding numerous requests for same and notwithstanding the Defendants fiduciary and contractual obligations with regard thereto.”

(3) In matters of foreign licensing, rentals, and distribution, Warner Music Group frequently permitted affiliated foreign companies to retain excessive and unnecessary fees.

(4) In some cases, Warner authorized non-affiliated agents to rent music and orchestrations and deduct fees beyond those permitted in the agreement.  “Although such sub-licensing arrangements were financially beneficial to [Warner] and their affiliated companies, the ultimate royalties and profits paid over to [Gershwin Trust] were significantly diluted by such practice,” the lawsuit read.

(5) On October 10, 2010, roughly three years after the inquiry, Warner Bros. Music supplied “some, but not all” details related to transactions and payments on Foreign Rentals, Ballet Licensing and Concert Grand Rights Licensing.  There was absolutely no documentation to back these figures.

(6) Moreover, Warner failed to offer any documentation related to its PRO registrations, despite repeatedly asserting that all registrations had occurred in a timely fashion.  “To date, [Warner Bros. has] failed to provide any source documentation supporting this blanket assertion,” the complaint continues.

(7) By April 23rd, 2012, the Gershwin auditing firm released another report using additional information from Warner Bros., though substantial documentation remained missing.  “To date, much of the requested source documentation has still not been provided to Premiere,” the complaint asserts.

(8) In the report, Premiere asserted that Warner Bros. had failed to account for all rentals of orchestrations and parts for the compositions in numerous foreign territories.

(9) The audit further determined that Warner failed to account for all ballet licensing and concert grand rights licensing, both in the US and foreign territories.

(10) Warner Bros. repeatedly deducted improper administration fees in excess of those permitted by existing contractual agreements.

(11) Warner Bros. allowed excessive commissions by third-party sub-agents contracted by Warner (with potential profit-sharing at the expense of Gershwin).

(12) Warner further permitted excessive commissions by the affiliates and agents of those third-party sub-agents (with potential profit-sharing at the expense of Gershwin).

(13) Warner failed to obtain written authorization or approval for the rentals of the individual compositions in Porgy and Bess, not to mention other compositions that required similar approvals.  These approvals were stipulated in existing agreements between the parties.

(14) Warner further allowed the improper and unauthorized rental of more than three orchestrations of compositions for one performance, also in violation of agreements.

(15) Additionally, Warner rented compositions to various parties after March 31st, 2008, without authorization and following the termination of the agreement between the groups.

(16) On top of that, Warner did not properly account for the income it obtained from these unauthorized rentals.

(17) Warner is further accused of failing to register numerous arrangements “in a timely manner” with foreign performance rights organizations (or PROs).

(18) Beyond all of that, the auditing team discovered “various other areas of underpayment.”

(19) All in all, the audit of April 23rd, 2012 found $4,469,612.07 in non-payments.  But those amounts are merely a static figure.  “Interest continues to accrue on these defaults in payment under the Agreements,” the complaint alleges.

“As noted above, the review of the Defendants’ books and records revealed that the Defendants have improperly permitted their own affiliated companies, and those of their agents, in foreign territories to retain excessive and unnecessary sub-publishing and/or third-party sub- agent fees in connection with the exploitation of the Compositions in foreign territories.”

(20) With respect to a reported rental of Concerto in F in Italy during 2003, the audit found that Warner Bros. improperly allowed a 25% commission for Ricordi Music Publishing SPA, on an initial payout of $1,903.27.

(21) On the same license, Warner/Chappell Italy then took a 15% commission, also beyond the limits of the agreement.

(22) Also on that same, Concerto in F license, Warner/Chappell US took another, 15% cut.

(23) The payment ultimately handed to the Gershwin estate, on the initial payment of $1,903.27 payment, was $994.44.

(24) On top of that, the payment was paid to Gershwin four years after the initial payment was rendered to Ricordi.

(25) Ultimately, the audit determined that the George Gershwin Family Trust only received 52 cents of every dollar remitted, with an aggregate commission of 47% of the “At-Source” receipts retained by Warner Bros. and their various foreign affiliates and sub-agents.

(26) Other, more extreme examples were cited, including an astounding 60% commission extracted by sub-licensor Leduc in France on the same composition, Concerto in F.  In that scenario, Warner/Chappell-France took another 15%, while Warner/Chappell US extracted another 10%.  “Approximately 30.6% of the actual ‘at-source’ payments made for rentals of Concerto in F in France in 2006 was ultimately paid to the GG Parties,” the complaint continued.

(27) In both cases, Warner was contractually obligated to pay the Gershwin Trust 80 percent of all ‘At-Source’ foreign receipts (not 47% or 30.6%).  “By permitting and authorizing such arrangements, the Defendants have not only breached their contractual obligations… but also placed their own self-interest ahead of the interests of the George Gershwin Family Trust,” the lawsuit continued.

(28) Furthermore, Warner Bros. did not pay any interest or fees on late payments, including those that stretched past four years.

(29) Warner further did not comply with ‘Most Favored Nations’ stipulations contained within the various agreements with the George Gershwin Family Trust.

(30) In quarterly royalty accounts sent to the Gershwin Trust, amounts were falsely identified as being received ‘At-Source’ in various foreign countries, when in actuality, these were not the amounts collected ‘At-Source’.

(31) Warner repeatedly failed to negotiate the best licensing deals in foreign territories, at the expense of the Gershwin Trust.

(32) Warner Bros. is further accused of repeatedly failing to oversee and monitor the activities of various affiliates and sub-agents, resulting in improper, missed or non-payments.

(33) Warner is accused of “abandoning” numerous, massive markets around the world, most notably Australia and Asia.

(34) Despite receiving the audit report on April 23rd, 2012, Warner has not offered a “substantive” response at all to the claims.

(35) On July 25th, 2012, attorneys for the George Gershwin Family Trust demanded a response to the audit within 30 days, but still did not receive a response.

(36) On November 21st, 2012, Warner finally responded to the audit, but “failed to cure or meaningfully address the vast majority of the defaults and breaches set forth in the April 23, 2012 Report.”

Source: Hyperbot