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IN THE SPRING OF 1970, the Rolling Stones’ contract with Decca Records—the deal that had changed their fortunes and ushered in Allen Klein as their business manager—was about to come to an end. They began searching for a new record company.
Now deeply immersed in the business of the Beatles, Klein discussed the Stones’ impending availability with executives at RCA, EMI, and Capitol, but it was Jagger who personally handled the discussions with the executives and labels the band seemed most interested in, Ahmet Ertegun at Atlantic Records and Clive Davis at Columbia. In mid-July, Allen accompanied Mick Jagger to a meeting with executives from Capitol Records, but the odds were slim the Stones would sign there. Capitol already had the Beatles and Apple—why would the Stones go into any deal where they weren’t the biggest act?
Of course, they already knew they were seen as smaller than the Beatles, not just by the world at large, but by Allen Klein in particular. “The moment Klein got the Beatles he began to ignore and spend less time on the Stones business,” said Harold Seider. So it shouldn’t have surprised Klein when, less than two weeks after he visited Capitol with Jagger, a letter arrived from the Rolling Stones’ lawyers informing him that ABKCO would not be negotiating the band’s new record deal and that Prince Rupert Loewenstein would henceforth handle all financial affairs.
Yet Klein was surprised.
“Allen lives by denial,” said Seider, adding that Klein believed he could ultimately overcome any obstacle, even the unnecessary ones he had created. Now suddenly eager to hang on to the Stones, Klein launched a charm offensive, inviting Jagger to a sit-down in his suite at the Dorchester Hotel. Jagger was happy to oblige and used the meeting to pry an advance out of Klein. “He knows he’s going to leave and he just wants to get cash out of Allen,” said Seider, who was at the meeting. “It was that kind of thing.”
Klein’s surprise and dismay at finding the Stones, and Jagger in particular, unhappy is perplexing. He had given them short shrift in favor of the Beatles, and there were several other issues as well. Allen had recognized early on that Oldham’s financial overreach and lack of support during the drug arrest and trial had contributed to the end of that relationship with the Stones, and Allen’s own financial interests in the band were similar to Oldham’s; in fact, they were deeper, more valuable, and more complicated.
In his earliest days with them, Allen truly cost the Stones nothing; his 20 percent commission was paid out of Easton and Oldham’s cut. However, after Klein bought out Oldham’s interest in the Stones and settled the various lawsuits brought by Eric Easton against the band and their representatives, ABKCO emerged as the owner of all recording rights previously held by Easton and Oldham—which is to say that ABKCO now received 50 percent of all royalties on every Rolling Stones record released on Decca or London. Jagger hadn’t liked Oldham and Easton making five times as much as he did on his own records, and he couldn’t have been pleased to have Klein replacing them.
When asked why he didn’t sell his interest in the records to the Rolling Stones, Andrew Loog Oldham said he didn’t believe they’d be willing to pay for them. Whether that means he thought the band had come to view their original management agreement as unconscionable and indefensible or that there was just too much bad blood for them to make a deal with him—or both—he knew that Klein had the money and the desire to acquire the rights. And as Oldham said, he believed making a deal with Klein would also preserve some of his leverage in the business.
The questions in Klein’s case are just as fraught. He could fairly say that his legal obligation to the Rolling Stones had limits; he was not a CPA and did not have a contract to advise the band. Yet when Oldham departed, he and Jagger had clearly come to an agreement for Klein to look after the Stones’ interests, particularly in America. If Klein himself wanted the suddenly available 50 percent interest in the Stones’ recordings, didn’t he have an obligation as their business manager to recommend the same deal to them? Oldham may very well have been right in believing that Jagger and company would not be willing to pay for something that they felt shouldn’t have been taken from them to begin with, but there’s nothing to indicate Klein ever asked them, let alone advised them of the wisdom of buying out Oldham and Easton.
Once Klein acquired them himself, there was a clear conflict of interest. “You can’t manage on one hand and have the artist signed to you on the other,” said Michael Kramer. “When [Allen] bought the rights to the Stones’ masters from Andrew, he became an owner as well as the business manager. It can’t end well. That becomes part of the Stones’ dissatisfaction later. ‘Hey, Allen Klein—you were our business manager. Why didn’t you buy it for us?’”
Klein’s conflict wasn’t unique; if anything, it was typical of the record business. A record contract made the company the owner of a performer’s recordings, and often the publishing rights as well, and paid the artist the lowest royalty possible, which meant that the vast majority of any money earned on a hit and all its asset value remained with the company. The artist’s manager could be expected to create career-long ties to the artist, either by becoming a partner in ventures such as publishing or production companies or by retaining an interest in any contract he negotiated even if the artist ceased to be his client.
A manager who came early to a rapidly developing commercial music scene or who was able to negotiate better deals than other managers—and Klein was both the first and sharpest of the managers of the modern rock era—could demand the biggest fees and the best percentages. Before Klein, in the 1950s, Elvis Presley’s manager, Colonel Tom Parker, had been a fifty-fifty partner with his client. After Klein, the next major businessman in the record industry, David Geffen, grew enormously wealthy and powerful by being even bolder; he acted as agent, publisher, and record company for the artists he managed, and the obvious question—who is looking out for the artist’s interests when the manager owns the record company and the publisher?—was never asked. Or at least, it wasn’t asked until the artists became successful and those rights valuable. Until then, Geffen’s clients were happy to have him help them produce records, play concerts, find an audience, and make money.
The situation was much the same in the concert business. The contemporary whose professional practices and career most resembled Klein’s was Bill Graham, the impresario who owned the Fillmore East and West and who did more than anyone else to invent the modern rock concert.* Like Klein, Graham was the first hardball player in what had been, until then, a slow-pitch league. Graham created an appropriate format for presenting bands and then helped make rock concerts a real industry. And while he treated concertgoers well by providing a professional show at a fair price, woe to the band or manager who did not recognize that Graham was in business; bad contracts and fictitious ticket counts were the usual result. Nor was he averse to using his leverage to block bands from taking gigs with rival promoters or bullying them to sign their merchandising rights to his Winterland company. The band Santana owed much to Graham, who insisted that the then unknowns be given their career-making slot at Woodstock. But they split with Graham after he made himself both their booking agent and their manager, which was illegal. The Grateful Dead spent decades going back and forth between collaborating and fighting with Graham, and the promoter was ultimately supplanted at the top of his industry in 1989 when the Rolling Stones spurned him for the more financially inventive Canadian promoter Michael Cohl, a one-time manager of Ontario strip clubs, at least in part because Mick Jagger was said to have tired of Graham’s funny ticket counts.
Like Graham, Klein didn’t change with the times. In the early days, when each was ahead of the pack, they created the market and dictated the terms. Later, when others saw how it was done and the artists began to better appreciate the financial value of their own work, they didn’t make appropriate adjustments. Or maybe Klein just didn’t care if the Rolling Stones became unhappy. Though he never said as much, he could have concluded that owning a piece of the Rolling Stones was a far better and more lucrative approach than trying to stay in their good graces for the rest of his life.
Whatever Klein’s motives, his decisions would lead to nearly two decades of litigation with the Rolling Stones marked by few real financial victories for the band. In public, Jagger was at first cordial and politic, telling a reporter three weeks after breaking with ABKCO that he was “grateful to Allen for what he has done for us” and volunteering that the split had nothing to do with the Beatles. “His involvement with Apple was not what worried me,” he said. Yet behind closed doors, Mick was seething. According to Prince Rupert Loewenstein, Jagger believed Klein had made him look like a fool. “He felt very aggrieved,” said Loewenstein, adding that Jagger had to be physically restrained from attacking Klein in a meeting. Nor was the 50 percent interest in the Rolling Stones’ royalties the only annoyance. Aside from being Jagger and Richards’s music publisher for all songs written through 1971, ABKCO was the sole controller of the Rolling Stones’ master recordings in America, meaning it oversaw manufacturing. Though the records couldn’t be moved from London Records or its successors, first PolyGram and then Universal Music Group, there was still money to be made and it was to become a flash point for both sides in their subsequent battles.
Under the original management agreement, Easton and Oldham owned the Rolling Stones’ master recordings and leased them to Decca. In the United States, those rights were leased to Decca’s American subsidiary, London Records. When Klein came into the picture, he created an American company, Nanker Phelge Music, to house those rights, which were then leased by Nanker Phelge to London Records for the term of the contract. The American company was supposed to allow the Stones to repatriate their U.S. income without paying the ruinous British taxes on foreign income by taking it out through a similarly named extant British company, Nanker Phelge Ltd.—although that company had a completely different function and nothing to do with master recordings. Ultimately, Klein’s scheme failed to impress the Inland Revenue, who said it would still tax the money at the foreign rate of approximately 90 percent—disastrous for the band, since they were guaranteed at least $1.25 million from London Records. Klein came up with paying the musicians’ American guarantee through Nanker Phelge in twenty annual installments in order to reduce the taxes. As he had done with Sam Cooke, Klein explained to Oldham and the Stones that this would be recognized as a legitimate arrangement only if it was an outside corporation; if it wasn’t, they would be taxed at once. Though the Stones would later claim they had no idea that they didn’t own the company, this doesn’t appear to be the case. In a 1968 letter to a record company, Jagger referred to Nanker Phelge Music as a firm owned by Allen Klein.*
Having the rights to assign the master recordings made it easy for ABKCO to manufacture the records and then sell them to London, which the company did. That was valuable and made money for ABKCO—but not as much as 50 percent of the royalties from Easton and Oldham brought in. Yet despite the fact that none of the rights controlled by Nanker Phelge Music would ever be available for re-lease or sale—a subsequent deal negotiated by Klein between London and the Stones had already guaranteed that London would keep the records “in perpetuity”—Nanker Phelge Music became a potent symbol to the Stones of how Klein had burrowed his way permanently into their business. The idea that they could never completely separate from him came as a shock. Allen Klein wasn’t their business manager—he was their partner. Forever.
“What did he want from us?” Jagger would later ask rhetorically after spending over a decade trying to separate the Stones from Klein. “Apart from the moon, I don’t know. He wanted everything. He wanted a hold on us, on our futures.”
How quickly Jagger and the others came to this realization is unclear. But the Stones’ recording contract with Decca ended August 31, 1970, as did Easton and Oldham’s original production deal with the band. Unless the band extended the contract, the Rolling Stones were sole owners of anything they recorded in the future. The last week in July, they informed Klein that they were breaking with him.
Klein had lost the Rolling Stones, but he was eager to impress and take care of the three former Beatles who were still talking to him. John had long been his focus; now he sought to improve the fortunes of Ringo and George as well.
For Ringo, who wanted to expand his acting career, there was a feature role in Blindman, the first of three spaghetti Westerns Klein produced with his friend and longtime associate actor Tony Anthony. In the movie, filmed in Spain, Klein made a tongue-in-cheek cameo as a gruff-looking outlaw dynamited into oblivion in the production’s opening sequence.
Harrison presented a more complex and idiosyncratic challenge for Klein. The Beatles had left George with issues. The youngest member, he’d been brought into the band specifically as lead guitarist, and John and Paul had never treated him as an equal. In the ensuing years, as he grew as a musician and sought to expand his role to include more vocal features and then his own compositions, he found Lennon and McCartney uninterested. His junior status and their continuing condescension had touched off the incident during the Get Back sessions in which he’d walked out and threatened to quit the band. That had been fine with Lennon—he seemed inclined to hire Eric Clapton rather than placate Harrison. When George was treated as an icon and superstar during a stint as a sideman with the American group Delaney and Bonnie, it only reinforced his sense that he didn’t have to take any abuse from Paul or John.
Klein was sympathetic to Harrison. As a rule, Lennon and McCartney split singles; if one was the primary author of the A-side, a song by the other became the B-side. Listening to the just-completed Abbey Road, Allen found his favorite song on the album was a Harrison composition, “Something.” He pushed Lennon to make it the B-side to the album’s single “Come Together,” and Lennon did; it was only the third Harrison song to appear on a Beatles single. The record was a two-sided hit—“Come Together” reached number one on the U.S. charts and “Something” got to number three—and it became George’s only hit as a Beatle.*
Looking forward, Klein was eager for Harrison to succeed as a solo artist. “Allen always gave George a lot of attention,” said former ABKCO executive Paul Mozian. Klein was particularly aggressive in negotiating a big promotional budget and a lavish packaging allowance for George’s three-record solo album, All Things Must Pass. He also recognized that he shouldn’t interfere or impose arbitrary cost restrictions on the work. Al Steckler, ABKCO’s creative director, functioned as an in-house advocate for the artists and made it a point to turn a blind eye to costs.
Ultimately, the album proved an enormous success for Harrison; its lead single, “My Sweet Lord,” became a worldwide hit. Most important, it liberated him once and for all from the shadow of Lennon and McCartney, both in the public eye and his own. When George first played All Things Must Pass for Steckler, the executive was effusive, predicting it would produce at least three bona fide hits—an assessment that surprised and pleased the musician. “Really? You think so?” he asked. “They never let me release anything.”
Such an improvement in Harrison’s self-image pleased Klein. Not only did it augur well for George’s future career, but it fed Allen’s own ego. He liked to think of himself as the Beatles’ great defender and facilitator, believing that he was finding opportunities for them and helping them in ways no one else could, freeing them to expand their work and creativity. No doubt they would recognize this and be grateful. But despite the honeymoon his financial know-how provided, that would not prove to be the case. And Harrison certainly wasn’t displaying any gratitude.
As Klein recalled, “George once said to me, ‘If you think John is difficult, give me one hit and you’ll see what difficult is.’ And he was right.”
Despite the handholding he was obliged to do, Klein basked in his role as Beatles manager, taking a star turn with an expansive and boastful interview about his intimate relationship with them and his business acumen in Playboy. And while he considered it a matter of course and validation that he had critics and enemies, he seemed to have no sense of how precarious his position was. If he remembered from time to time that there was another man in New York taking responsibility for a Beatle’s business, he didn’t give it much thought.
John Eastman told his father that something needed to be done if Paul McCartney was to gain control over his career and financial future. But the elder attorney wanted no part of a war with Allen Klein. “This is going to be a dirty battle and you’re probably going to lose,” he said.
It was a frightening proposition, but Eastman saw little recourse. He’d talked to Klein about trying to separate McCartney’s business, insisting Paul would be happy to just go his way, but gotten nowhere. Klein viewed the legal partnership among the four musicians as an insurmountable wall that would take years to dissolve before the assets could be distributed. In the interim, Eastman knew he had a problem. He and Klein had gone at it pretty hard when both were wooing the Beatles, and there was no love or trust between them. Now that Klein was in control, Eastman worried that McCartney would suffer. He also worried about what he didn’t know about finances, fearing in particular that Paul might find himself in a lifelong tax hole.
With no chance that Klein would simply let Paul walk away with his 25 percent, Eastman began thinking about a legal remedy. Before long, he hit on a good common-sense argument: the Beatles had had a partnership and its sole purpose was to exploit the Beatles. Now that they’d broken up, the partnership had no purpose.
Eastman began scouting around London for legal representation. What he found didn’t cheer him. There were only about twenty-five hundred barristers who could argue in British courts at the time, and the Chancery, where a challenge to the Beatles’ partnership would be heard, was rarefied air. With no idea whom to engage, he came up with a very clever strategy: he’d let the British banking establishment tell him whom to hire.
McCartney’s accountant, Geoffrey Maitland Smith, opened a checking account for Paul at N. M. Rothschild and Sons with an initial deposit of fifty thousand pounds. When McCartney added an additional hundred thousand, it was enough to catch the eye of Rothschild partner Philip Sherburne, who called John to ask where McCartney wanted his checks sent. Eastman thanked the banker, who was also a tax attorney, and said they were interested in having McCartney’s loan stock from Northern Songs handled by the bank. He also wondered if Sherburne wouldn’t mind giving them a little advice.
Meeting Sherburne in New York, Eastman outlined McCartney’s situation and his own fruitless search for top-notch legal representation in London. Sherburne offered to introduce him to solicitor Martin Lampard. A senior partner at the City powerhouse Ashurst, Morris, Crisp, and Company, Lampard had a style and reputation not unlike Klein’s; he was considered a cunning and brilliant strategist and a brawling, unorthodox fighter with a taste for confrontation. He was also Rothschild’s go-to lawyer for takeovers.
Huddling with Lampard, Eastman quickly realized that the partnership laws weren’t on his side; the Beatles were a corporation and three of the four directors had voted to make Allen Klein their business manager. All Klein had to do to win a case, he feared, was keep the court’s focus on that. Since corporate law wasn’t with him, McCartney could win only by making a case for equity, the English legal tradition of granting discretionary rulings in the service of a broader justice. That meant only one strategy: painting Klein as an imminent and obvious danger to McCartney’s career and financial future and insisting that a court-appointed receiver had to replace Klein in order to protect Paul’s interests.
Lampard steered Eastman to barrister David Hirst. Though he’d never tried a commercial case, Hirst had just the kind of background that made him perfect for going after Klein: he specialized in libel suits. Hirst and two junior associates spent six weeks with Eastman in New York, getting a handle on the ins and outs of the music industry and planning their case. Confident the team was ready, Eastman had one more call to make.
Since the public outcry that had met McCartney’s announcement that he had quit the Beatles, Paul and Linda had largely been holed up on his farm in Scotland. John Eastman, accompanied by his wife, joined them for a week. Though he’d kept McCartney in the loop, he now had to convince him that the only way to target and hopefully separate himself from Klein was to sue the other Beatles and Apple, demanding that the Beatles’ partnership be dissolved. It was a huge step—and enough to give McCartney pause. He’d already been knocked about in the press for breaking up the Beatles; did he really want to sue them?
“Are you sure?” McCartney asked.
“If we don’t sue,” Eastman told him, “I worry about your partners bankrupting you.”
McCartney agreed, but he was nervous. He insisted Eastman go back to London for a week and review the plans again before he made a final decision.
But there was little left to review. McCartney’s team knew what to do and how to do it. Klein was going down—and Eastman couldn’t wait.
A business meeting of the four Beatles had been slated for January in London, so the others were stunned to receive a letter during Christmas week from McCartney alerting them that he was about to serve papers to dissolve the partnership. The writ itself arrived on New Year’s Eve.
“I still cannot understand why Paul acted as he did,” a flabbergasted Harrison would tell the Chancery court two months later. Harrison and McCartney had met in New York in November and discussed Paul’s continuing unhappiness over Klein’s appointment and his own desire to dissolve the Beatles’ partnership. George thought the conversation had been amicable and that they’d agreed to discuss the issue with the other ex-Beatles in January. Harrison felt strongly that he, John, and Ringo had the right to appoint Klein as the manager for the Beatles over McCartney’s objections. “The reality is we’re a partnership,” he’d told an interviewer the previous spring. “Like in any other business or group you have a vote and he was outvoted three to one and if he doesn’t like it, it’s really a pity. We’re trying to do what’s best for the Beatles as a group or Apple as a company. We’re not trying to do what’s best for Paul and his in-laws.” Harrison also believed that nothing was written in stone—if McCartney was unhappy, they should work something out. But George worried that a hasty dissolution of the partnership could cause large financial problems. “He seemed to think all we had to do was sign a piece of paper.” Harrison suggested that all four should discuss it with financial advisers when they got together in January. Since Paul seemed to agree, George “just could not believe it when instead—just before Christmas—I received the letter from Paul’s lawyers.” Ringo, equally upset at being sued by McCartney, saw the suit as willful and incendiary. “Paul is the greatest bass guitar player in the world,” he told the court. “But he is also very determined; he goes on and on to see if he can get his own way . . . I am as shocked and dismayed as George that, after Paul’s promises about all of us meeting in January, the solicitor’s letter should have been sent on the twenty-first of December and the writ issued on the thirty-first of December. Nothing happened to my knowledge which would have provided Paul with a good reason for going back on the arrangements for the January meeting. My own personal view is that all four of us together, having the opportunity to consult our separate advisers if necessary, could even yet work something out satisfactorily.”
In an affidavit filed along with the writ, McCartney cited four motives for his actions: the Beatles had ceased to perform as a group; an unacceptable manager—Klein—had been imposed on him by the others; he feared a continuing business partnership would impinge on his artistic freedom; and financial accounts were not being properly handled. Until the partnership could be dissolved, the action sought the appointment of a receiver. Though Klein was not named as a defendant, he was clearly the impetus for the lawsuit and its primary target.
He was also the person who would have to craft and oversee the response. Few in the music business relished a court case as much as Klein—Keith Richards accurately pegged Allen as a “lawyer manqué”—and he would have taken on the role under any circumstances. But since Eastman and McCartney were clearly building a case on impugning his reputation, he was doubly motivated. In fact, the McCartney team’s strategy would prove brilliant.
Anticipating McCartney’s barristers would wave the Sunday Times article planted by Triumph that portrayed him as “The Toughest Wheeler-Dealer in the Pop Jungle”—an article that had upset Klein enough to make him sue for a retraction—and expecting a rehash of the Cameo-Parkway stock issues that Eastman had previously used to tar him with the other Beatles, Klein focused on defending himself. But his weapons were limited. He wasn’t a named defendant so he couldn’t give testimony, be cross-examined, or provide direct answers to anything McCartney’s representatives said in court. His only tools were an affidavit—and he offered an exhaustive, 142-paragraph filing that attempted to anticipate every avenue of personal and professional attack—and the overall defense strategy mounted by the Beatles’ attorneys. Klein was determined to counter what he perceived as slander and give the Chancery judge voluminous proof that he had rescued the Beatles from financial disaster.
It was a mistake born of pride.
McCartney and Eastman’s lawyers had recognized that corporate law was not on their side; Harrison had accurately observed that Apple was a partnership and McCartney was just an aggrieved minority voter and should get over it. The proper response was far simpler than the one Klein gave; the Beatles’ team should offer as little information to McCartney as possible and bludgeon him over and over again with the law on corporate partnerships until the judge would be hard-pressed to rule any other way.
Instead, Klein offered a personal and professional defense so vigorous and wide-ranging that it covered virtually every aspect of the Beatles’ business. Indeed, Eastman would later admit that one of the chief complaints offered in court by McCartney’s barrister, David Hirst—that Klein’s commission had been revised and adjusted by the others without McCartney’s knowledge or consent—wasn’t even known to McCartney’s team before it was found as a footnote in an accountant’s report that Klein gave them. Said Eastman: “I wouldn’t have even replied to our complaint except to say, ‘Seventy-five percent in the partnership want this arrangement—so this is ridiculous!’”
McCartney and Klein attended all eleven days of the March trial; the three Beatles who were the actual defendants weren’t there. But their affidavits gave credence to McCartney’s claims by answering them—he’d touched some nerves. Lennon, in particular, was angry at McCartney’s contention that the Beatles’ partnership hampered his artistic freedom. “We always thought of ourselves as Beatles whether we recorded singly or in twos or threes . . . I have always thought of the partnership agreement as an organization of our business affairs drawn up by lawyers and accountants. I have never thought of it as a document which tells us ‘You have got to do this, that or the other kind of work as a group.’”
As to McCartney’s charge that financial accounts weren’t being handled in a proper or timely manner, Lennon suggested that Eastman’s continuous objections and obstructions were actually the culprit. And as far as Lennon was concerned, McCartney had accepted Klein, even if he didn’t like him; the proof was that he’d asked Allen to come to London and sort out the Northern Songs situation. Besides, there were already controls in place—as McCartney knew, Klein’s deal could be terminated annually with a month’s notice. The whole case was just more of what Lennon termed “the Eastmans-Klein power struggle.”
McCartney’s other complaints were both general and specific. He reiterated in his affidavit how his work had been abused and altered against his will with Spector’s production on “The Long and Winding Road” and how Klein and the others had tried to sabotage the release of his first solo album.* But mostly he was worried about Klein co-opting his career and his future through self-serving and shoddy management. As proof of how worried he was, he had instructed EMI Records not to pay his royalties through Apple but to hold them until a way could be found for the money not to pass through Klein’s hands. Klein, aggressively maintaining that McCartney had no right to ignore his own relationship with Apple, took a commission on the record anyhow from other EMI payments.
Being portrayed as untrustworthy and unprofessional pressed all of Klein’s buttons. He prepared a defense based on showing just the opposite, that he had done an exceptional job of sorting through a disastrous financial mess. “Mr. Epstein was not a businessman,” Morris Finer, the representative for the three Beatles, told the court. “They inherited a mass of trouble when he died, and that trouble increased over the following two years. It is plain from the evidence, and no one disputes it, that their situation in 1969 was desperate. They were insolvent. All that vast sum of money had flowed through their hands like sand. That was the position in 1969. That is not Mr. Klein’s fault, whatever one says about Mr. Klein. This is why my clients are fighting so hard to make sure that he is not thrown out. He has rescued them.” To bolster the case, Finer submitted extensive documentation meant to demonstrate that Klein had greatly improved the Beatles’ financial strength and solvency. Yet it was quickly apparent that none of that mattered. On the first morning of testimony, Hirst surprised Klein and Finer by submitting a copy of a U.S. federal court’s recent conviction of Klein—handed up by a New York jury only the previous month—on ten counts of failing to file tax forms in a timely manner.
The U.S. court case proved a huge embarrassment for Klein, and it was his own fault. It had grown out of the incident years earlier in which Klein had petulantly kept an IRS auditor waiting outside his office for hours and then refused to see him. It was nothing more than Klein being willful and intransigent; what should have been settled in a fifteen-minute meeting instead became a senseless and years-long battle of wills between the U.S. government and Klein, who’d already paid the taxes and appeared to take umbrage at the notion that the IRS could break his chops and fine him over late paperwork. It was strange behavior for an accountant but vintage Klein: challenged over virtually anything, he’d rather fight than settle, certain he’d figure out how to get his way eventually. Attorneys who worked with him frequently found that Klein was more eager to try cases than they were and that he would ignore warnings against wasting money on litigation. “Allen did a lot of things based on principle,” said attorney Donald Zakarin, who represented him in several cases. “He didn’t necessarily do things based on pure dollars and cents. Also, he liked litigation. He liked the sport of it.” That sport was about to cost Klein his reputation.
Hirst was extremely well prepared, and he knew the tics of the judge, the Right Honorable Lord Justice Stamp, including that he was a man of habit who recessed for lunch every day at precisely 1:00 p.m. Hirst introduced news of Klein’s recent conviction, along with documentation, at 12:55. The Beatles’ counsel, unaware of Klein’s American case, had no immediate rejoinder. Since Finer couldn’t explain that it resulted from a silly skirmish over paperwork and that painting Klein as a tax cheat was inaccurate, Stamp had his entire lunch hour to consider whether he could afford to ignore McCartney’s plea that the court use its equity to protect him from a toothy New York shark. If Hirst had made a mountain out of a molehill, Klein had only himself to blame for kicking up dirt in the first place.
The impact of this legal ambush was obvious to Eastman.
“Did we just win this case?” he asked Hirst over lunch.
The barrister smiled. “There’s about three weeks left,” he replied. “But you can go home now if you’d like.”
Over the course of the next two weeks, Justice Stamp would prove consistently unmoved by the mountain of documentation offered on the defendants’ behalf. It didn’t seem to matter how much Klein had improved the Beatles’ finances or that the only financial issues McCartney’s attorneys could raise had to do with preexisting tax problems. Stamp seemed particularly keen on Hirst’s testimony regarding how Klein’s commission arrangement had been revised and the attendant and unsubstantiated suggestion that Klein had been more concerned with his own fee than with the Beatles’ taxes; it was immaterial that McCartney had voluntarily declined to deal with Klein.
Tipping his hand on the final day of testimony, Stamp wondered aloud if appointing a receiver might satisfy both sides: McCartney could hire a submanager to report to the receiver while the other Beatles could continue to employ Klein in the same capacity. The subsequent ruling, although seemingly Solomonic in its suggestion of a compromise, was actually a complete victory for McCartney: all the Beatles’ business would be handled by the receiver, their finances tied up and held in his care until they came to some agreement among themselves regarding the dissolution of the partnership. Klein’s work with Lennon, Harrison, and Starr would now encompass only their post-Beatles careers. In his remarks from the bench, Justice Stamp repeatedly said he passed no judgment on Klein’s character—words that stood in stark contrast to his actions.
It was a public shellacking. The great irony was that Klein had bailed the Beatles out of a financial hole at Apple and had improved the contracts and futures of all of them, McCartney included. Call it cosmic payback; if Klein appeared guilty of anything, it was of bringing Allen Klein’s formidable, messy reputation into the Beatles—of being the advocate that John Lennon wanted and the devil that Paul McCartney wouldn’t abide.
The only positive was that Klein’s three Beatles remained steadfast in their support. If anything, they were angrier than ever at McCartney. They saw his action as vengeful and unnecessary, the court’s decision a repudiation of common sense and corporate law. They hadn’t heard anything to change their opinion about Klein and wanted to move forward with him.
Across the aisle it proved a career-making victory for John Eastman. No one in the music business, including his own father, had given him odds against Klein. “The idea of John Eastman going up against Allen—it was a baby against a tumulter,” said Seider. In the coming years Eastman would count David Bowie, Tennessee Williams, Andrew Lloyd Webber, and Billy Joel among his clients. But none would prove more important than Paul McCartney, who, with the help of Eastman and Eastman, built a significant music-publishing company, MPL Communications. Along with Paul’s own post-Beatles compositions, the company bought a broad range of valuable work by Buddy Holly, Harold Arlen, Frank Loesser, Jelly Roll Morton, Hoagy Carmichael, Carl Perkins, and Louis Jordan, among others. It also administers songs from numerous Broadway shows, including Hello, Dolly!, Annie, Grease, and A Chorus Line. In the future, McCartney would emerge as the most financially successful of the former Beatles.
Whatever credit he deserved for his own intelligence and success in beating Klein, John Eastman knew he’d gotten lucky. Some years later, he ran into Allen in the first-class cabin of a flight, and John made it a point to show his one-time adversary that he bore him no lingering personal animosity. Quite the contrary. “You made my whole career,” Eastman told Klein. “It was like bringing down a blimp with a twenty-two.”
McCartney would not be as happy or gracious a winner. Three years after the Chancery ruled in his favor, McCartney was asked about Klein. “Even a murderer has a great line in his own defense,” he said. “But he’s nothing more than a trained New York crook. My back was against the wall. I’m not proud of it. But it had to be done.” Nearly forty years later, he was still battling Klein, at least in his mind. Asked about Klein in a television interview with David Frost, he mimicked delivering a roundhouse punch. The winner by knockout.