Auditing & Accounting: Getting the Numbers Straight

Photo By Gary Miller

Auditing & Accounting: Getting the Numbers Straight

Attorney Dina LaPolt jokingly introduced this engaging all-business panel as "the sexiest topic at SXSW." While talk of royalties and recouping may not be as arousing as contemplating the creative process, there's nothing sexy about losing money in the labyrinth accounting systems of the record companies, either. "The most important thing is to know your business, because if you're getting ripped off, there's no one to blame but yourself," said LaPolt. Nashville attorney Fred Wilhelms works with veteran artists like Sam Moore and Brian Hyland, conducting information-gathering "desktop audits" on their behalf since most can't afford formal audits. "In the hundreds I've done, I've always found money due to artists," revealed Wilhelms. Furthermore, artists are often placed at a disadvantage by contractual clauses stating they cannot hire a CPA on contingency, or they can't hire a CPA already working on an audit with the artist's label. Record companies won't turn over their manufacturing records, general ledgers, foreign royalty records, or licensing records, either. Interscope/Geffen/A&M business affairs VP Darryl Franklin acknowledged the problems endemic in the current system. Universal Music Group issues about 25,000 royalty statements per quarter, and given the conglomerate's incompatible latticework of software and business models, mistakes are bound to happen. "It doesn't mean that it's right," he admitted. However, Franklin also accused California state Senator Kevin Murray of grandstanding with his probe of music industry accounting practices. "Music is much more interesting than sewage," said Franklin. "He's a politician and he's trying to make a name for himself." Perhaps, but the long, documented history of record company malfeasance toward artists makes any claim that labels are doing all they can to fix the system ring hollow. "In the 1800s, you didn't go to the plantation owners to abolish slavery," LaPolt asserted. "You went to the legislature." Take-home message: If you're about to sign a recording contract, make sure you have a damn good lawyer before enjoying that recoupable expense of a meal at Benihana.