Bill Graham Presents and its parent company Clear Channel Entertainment have shortchanged Mountain View, Calif., by at least $3.6 million since 1999, according to an independent audit, city officials
NASHVILLE -- Bill Graham Presents and its parent company Clear Channel Entertainment have shortchanged Mountain View, Calif., by at least $3.6 million since 1999, according to an independent audit, city officials say.
The audit seems to lend credence to a multimillion-dollar lawsuit filed by the city in 2003, which alleges BGP grossly underpaid Mountain View under the terms of the lease signed when the Shoreline Amphitheatre was being developed.
"There is material underreporting and underpayment of rent for all six years," Mountain View City Attorney Michael Martello says. Auditors "essentially found nearly a 50% underpayment of rent in many, many categories."
The cross-complaint, filed in California Superior Court for Santa Clara County, cites accounting fraud, breach of lease, conversion, racketeering, false claims, theft of public funds and other claims relating to BGP's long-term lease to operate the Shoreline Amphitheatre and share the generated revenue.
The suit further charges that BGP knowingly submitted false documentation and inaccurate records in order to reduce its rent obligation.
"They are significant charges," Martello says. "You're stealing from a public agency . . . California governments have to run pretty lean anyway. We've been cutting budgets while they've been hiding money."
Under the terms of the 30-year lease, BGP agreed to pay the city 6.75% of all revenue, including parking and concessions. The suit seeks to terminate the lease and triple damages on several causes of action.
The conflict dates back to 2000, when BGP incorporated parking charges into the Shoreline ticket price at $3 a ticket, and did not increase the city's percentage accordingly. BGP originally filed a lawsuit in 2003 against the city to prevent an audit report from being released, and the city countersued.
Martello says BGP's reluctance to cooperate with the audit sent up red flags. He adds that the "parking on ticket" deal was a big part of what made the audit contentious. "Essentially what they were doing was calling part of the ticket price parking and they were giving out free parking."
Andy Levin, executive VP/chief legal officer for Clear Channel, declined to talk to Billboard, but earlier told the Mountain View Voice that the audit was "misleading." Shoreline GM Matt Prieshoff also declined to comment.
The amphitheater was originally built by San Francisco area promoter Bill Graham in 1986. SFX Entertainment acquired the lease as part of BGP in 1997. Clear Channel Communications bought SFX in 2000, creating CCE.
Martello says the city had not had such accounting problems with BGP in the days before Clear Channel's involvement. "We had disagreements, but we were always able to close the books," he says. "In 2003 we were already two years late for closing the books for concert year 2000, Clear Channel's first year of involvement."
According to Martello, the $3.6 million the city claims it is owed by BGP comes from $1.3 million in unpaid rent that is doubled under a clause in the lease, another $800,000 owed that is not doubled and auditors' fees.
Martello says the city needs more information from BGP to clarify the situation. "We still don't have all the documents," he says.
Martello says BGP has sent the city some sizable checks -- totalling about $400,000 -- since Mountain View filed the cross-complaint. "Out of the blue we started getting paid under the second provision of the lease," he says. "It's certainly not paid out of guilt. I'm sure it was paid because somewhere along the line their lawyers told them you can't be skimming this money, you'll be breaching the lease."
The audit was conducted by Alix Partners of Los Angeles. A jury trial has been set for February.
The deal between Shoreline and the city is similar to many promoter/municipality agreements forged during the shed construction boom of the late 1980s and early 1990s. Such leases could come under closer scrutiny in the coming months. Martello says another municipality, the city of Concord, Calif., where BGP promotes shows at the Concord Pavilion, "is starting to question what they've been paid.