Shoreline Suit Heats Up
In addition to the city-commissioned audit, an accompanying report drafted by city finance director Robert Locke claims Live Nation was involved in the “ethical and legal compromises” of a “neutral” previous auditor.
A spokesman for Live Nation disputed both of the findings in an e-mail to Pollstar.
The unnamed lease compliance auditor was hired to represent the city but was paid for by Clear Channel Entertainment, now operating as Live Nation, according to Mountain View officials. The city alleges that the auditor was “directed” on the audit by the company, which failed to report the income and continues to do so.
Los Angeles-based Alix Partners, another auditor hired by Mountain View, reported in August that LN owed the city $3.6 million in underreported revenue and damages, city attorney Michael Martello told Pollstar.
In his latest report, Locke said that Alix Partners discovered some $54 million from gross receipts of Live Nation shows at nearby venues seating 7,000 or more was excluded.
Mountain View is to receive a percentage of that, according to the lease agreement struck by Bill Graham Presents and the city when the shed was built in 1986.
Mountain View provided 65 acres of land to Bill Graham to build and operate Shoreline. In return, the city wanted assurances he would direct tours into the shed rather than compete with the city. Part of the deal was that during the summer season a percentage of the gross receipts of shows booked within a 35-mile radius would be paid as “rent.”
Two of the current buildings the “rent” would be applicable to are
Alix Partners has been digging through financial records in an audit spanning the years 1999-2004 and to date has cost the city $484,000, according to the San Jose Mercury News.
If underreported rent exceeds 5 percent for any concert season, the cost of the city’s investigation is supposed to be reimbursed, according to the report cited by the newspaper.
Also not included in the August report is revenue the city says it was entitled to when BGP was sold, first to SFX in 1999 and to CCE in 2001. The city is reportedly entitled to 10 percent of the portion of the sale price exceeding $20 million attributed to the facility.
CCE first filed suit against Mountain View over parking issues in 2003. The city countersued. The audit report is just the latest development in the ongoing dispute, which was originally over parking receipts and lot conditions.
Complicating the picture is the issue of the lease compliance auditor.
“We found out as part of the litigation and, literally, just within the last six months or so, that the auditor was not only auditing [Shoreline’s] own books but BGP and [Live Nation] were directing them on how to do the compliance on it, when they should have been representing us,” Martello told Pollstar.
“The parties agreed back in 1986 that every year there would be a lease compliance officer that the city picked, to make sure the city got paid,” the city attorney continued. “What we didn’t know until we hired Alix Partners was that various people including [Live Nation] have compromised that audit. We had no way of knowing they were stealing because the auditor wasn’t calling it to our attention.”
And, according to Martello, Live Nation continues the practice.
“They continue to violate the lease. One of our big concerns about this is, throughout the lawsuit, most times when there’s a dispute between a landlord and the tenant, the tenant starts behaving. That hasn’t happened here. It’s just an unbelievable arrogance.”
Live Nation disputes both the claim that it has underreported revenues and that it influenced the city’s auditor. Despite the April 5th mandatory settlement hearing, it did not appear at press time that the two sides were anywhere near a position of compromise.
“The Mountain View city government’s characterization in the local media of the Shoreline Amphitheatre’s role in the dispute is grossly deceptive. The city government’s contention that we have somehow hidden gross receipts from them is untrue,” LN spokesman John Vlautin told Pollstar, noting that the two sides enjoyed a mutually successful relationship for the two decades leading up to the dispute.
“The truth is that the city government has had fair access to our books through an auditor, hired with their approval, whose reports were later double-checked by an independent auditor, hired at their sole discretion.
“In fact, the funds that the city government claims it is owed depend entirely on its lawyers’ selective interpretation of the lease agreement in a manner that is at odds with what the contract says and how the parties have worked with one another for the past 20 years.”
LN stands by the original agreement and the court will agree that the company has honored its agreement with Mountain View, Vlautin said.
– Deborah Speer