Allen Klein

Allen Klein (December 18, 1931 – July 4, 2009) was an American businessman who was the manager of the Rolling Stones and later the Beatles, along with many other artists. This made him one of the most powerful individuals in the music industry during his era.

Klein acquired a reputation as a tough negotiator who could bring money to his clients. Klein set up what he called "buy/sell agreements" through which a company that Klein owned became an intermediary between his client and the record label, owning the rights to the music, financing the recording and production of the music, and selling them to record labels to manufacture and distribute the music. Klein would subsequently pay royalties and cash advances to his client. Although Klein greatly increased his clients' incomes, he also enriched himself, sometimes without his clients' knowledge. The Rolling Stones' $1.25 million advance from the Decca Records label in 1965, for example, was deposited into a company that Klein had established, and the fine print of the contract did not require Klein to release it for 20 years (it was paid in 1971 after the Stones sued Klein). Klein's involvement with both the Beatles and the Rolling Stones would lead to years of litigation. The Rolling Stones in particular accused Klein of withholding royalty payments, stealing the publishing rights to their songs, and neglecting to pay their taxes for five years, thereby necessitating their French "exile" in 1971.

Klein was born in Newark, New Jersey, the fourth child and only son of Jewish immigrants. His mother died of cancer soon afterward, and Klein lived for a time with his grandparents, then in a Jewish orphanage, until his father remarried shortly before Klein's 10th birthday. An indifferent student, he graduated from Weequahic High School in 1950; fellow graduate Philip Roth was the only classmate to sign his yearbook.

In early work experience with a magazine and newspaper distribution company, Klein showed skill with numbers, and learned about how profits were often concealed from those who had been crucial in generating them. Eventually he realized that much the same situation existed in popular music, where labels routinely took much profit from the transitory careers of the artists who created the profit-generating music, paying them less than Klein thought they should.

Klein enlisted in the U.S. Army in 1951, and served as a clerk typist on Governors Island, New York. After military service, and with the assistance of the G.I. Bill, Klein majored in accounting at Upsala College, graduating in 1957, and was hired by a Manhattan accounting firm, Joseph Fenton and Company. He was assigned to assist Joe Fenton in an audit of a music publishers' organization, the Harry Fox Agency, and several record companies, including Dot Records, Liberty Records, and Monarch Records. In an early setback to Klein's career, Joseph Fenton and Company fired him after four months because of chronic lateness. The company wrote to the State of New Jersey urging officials not to approve him as a Certified Public Accountant, and Klein chose not to take the examination. He briefly attended law school but soon dropped out.

Aided by his friendship with music publisher Don Kirshner, a fellow Upsala College alumnus, Klein worked as an accountant for the next several years, assisted by Henry Newfeld, a CPA who was a friend from school and the Army, and Marty Weinberg, another CPA, under the name Allen Klein and Company. Klein's clients included Ersel Hickey, Dimitri Tiomkin, Steve Lawrence, Eydie Gormé, Sam Cooke, Buddy Knox, Jimmy Bowen, Lloyd Price, Neil Sedaka, Bobby Darin, Bobby Vinton, Scepter Records, and the estate of Mike Todd. A key early contact was attorney Marty Machat, who frequently did legal work for Klein.

In June 1958, Klein married Betty Rosenblum, a Hunter College student seven years his junior. The couple had three children.

Two of Klein's early clients, rockabilly singers Knox and Bowen, were owed royalties by Roulette Records. Morris Levy, co-owner of Roulette, was feared because of his organized crime connections, and was known to pay artists as little as possible. Klein persuaded him to pay Knox and Bowen the royalties they were owed over a four-year period. Klein's success with the Knox and Bowen negotiation brought him new clients, and he and Levy became lifelong friends.

In 1963, Klein began a business partnership with Jocko Henderson, an urbane black disc jockey who had daily radio shows in both Philadelphia and New York City. Henderson hosted lavish, profitable live rhythm-and-blues shows at the Apollo Theater in Harlem, and formed a partnership with Klein to begin doing the same in Philadelphia. As Henderson's partner, Klein was introduced to Sam Cooke, a preeminent talent equally adept at writing, producing, and performing his numerous hit records. Cooke had four top-ten hits between 1957 and 1963, including his number one hit, "You Send Me," among 33 records in the top 100 in that period. Although Cooke was clearly making his label, RCA Records, a great deal of money, label executives nonetheless repeatedly refused to honor his many requests for a review of his accounts. Klein forced the label to open its books for a thorough audit. Shortly afterward, RCA agreed to renegotiate Cooke's contract.

Klein secured Cooke a genuinely groundbreaking deal. Cooke created a holding company, Tracey Ltd., named after Cooke's middle daughter. Klein, Cooke's manager, sneakily changed paperwork and listed himself as owner instead (and Cooke as his employee). Cooke trusted him to protect him against crooked music executives but Klein used that trust to his own advantage.

Tracey manufactured Cooke's recordings and gave exclusive rights to RCA to sell them for 30 years, after which the rights would revert to Tracey. Cooke received a cash advance of $100,000 per year for three years, followed by $75,000 for each of two option years. Instead of being paid the first $100,000 in cash, Cooke was paid in Tracey preferred stock, which would be taxed only when he sold it. The deal benefited Cooke, but also greatly benefited Klein, who ended up owning the rights to all of Cooke's recordings made since the contract renegotiation when Cooke was killed in 1964 and his widow sold Cooke's remaining rights to Klein.

Klein's successful negotiations on Cooke's behalf brought him new clients, including Bobby Vinton and the Dave Clark Five. As with Cooke, Klein arranged for his clients to be paid over a period of time to reduce their tax liability. This also benefited Klein, who took advantage of the earning potential of money over time to "make money from the money."

In 1964, Klein became the American business manager of Mickie Most, a former singer who was the producer of hits for the Animals and Herman's Hermits. Klein extended to Most a million-dollar promise, adding that if he failed to deliver in only one month, Most owed him nothing. Klein did deliver, through strategic renegotiations of existing contracts and new producing opportunities for RCA, including offers for Most to produce for both Cooke and Elvis Presley. Though the latter two prospects did not materialize, Most was suddenly one of the most talked-about and financially gratified figures in the English recording industry, and Klein was a step closer to eventual agreements with both the Beatles and the Rolling Stones.

His victories for Most won Klein access to several key English musicians. He eventually negotiated vastly improved deals for The Animals, Herman's Hermits, the Kinks, Lulu, Donovan, and Pete Townshend of the Who. But Klein's help came at a price. To shelter his clients' money from Britain's high taxation rate on income earned abroad, Klein held it for them at the Chemical Bank in New York City and paid it to them over periods of time of up to 20 years. Klein invested that money, which earned far more than Klein was obligated to pay his clients, and kept the difference, thereby maintaining control over the money.

In the spring of 1965 Andrew Loog Oldham, co-manager of the Rolling Stones, saw in Klein a terrific business adviser and ally, one who could help him win an incipient power struggle with Eric Easton, a music business veteran who was then the other half of the band's management team. Barely 21, Oldham was profoundly important in the development of the Stones' image, and in initiating the songwriting partnership of Keith Richards and Mick Jagger. After some management mishaps, blame for which fell at Easton's feet, and Jagger's ascension in the band's hierarchy following "(I Can't Get No) Satisfaction", the Stones' first number one record in the U.S., Oldham received Jagger's blessing to bring Klein aboard to renegotiate the band's contract with Decca Records. The label offered the band the opportunity to make $300,000 if their records continued to sell. Klein countered with, and quickly secured, an arrangement paying the Stones twice as much, in the form of an advance. He also forced London Records, Decca's American subsidiary, to sign a separate contract. It too was for $600,000. By the time Klein renegotiated the deal a year later, Easton having been removed as co-manager, the Stones were guaranteed $2.6 million—more than the Beatles were making.

When Klein examined the Stones' management contract with Easton and Oldham, he found that the two were receiving a disproportionate share of the group's income: not only did Easton and Oldham receive an 8% royalty on sales of the Stones' singles—the Stones themselves received only 6%—but they also received a 25% commission on the Stones' income. At Klein's insistence, Oldham increased the Stones' royalties to 7% and relinquished his commission. Klein offered the Stones a million-dollar minimum guarantee, paid over a 20-year period to reduce the Stones' tax liability, to let him become their music publisher, based on his faith in the Jagger–Richards songwriting team. He also arranged for a level of tour support and publicity far above anything the band had previously experienced for the Stones' 1965 American tour in support of the album December's Children.

Jagger, who had studied at the London School of Economics, gradually became distrustful of Klein, particularly because of Klein's ability to insert himself as a profit participant in the group's ever-growing financial affairs. For example, in 1968 Klein very profitably bought out Oldham's share in the band for $750,000. By 1968 the Stones were so concerned with how Klein was handling their finances that they hired a London law firm, Berger Oliver & Co, to look into it, and Jagger hired the merchant banker Prince Rupert Löwenstein as his personal financial adviser. Another possible factor in the Stones' dissatisfaction with Klein was that when he began to manage the Beatles he focused more of his attention on that band's affairs than on the concerns of the Stones. In 1970, on the occasion of needing to negotiate a new contract with Decca, Jagger announced that Löwenstein would replace Klein as manager.

The split between Klein and the Stones led to years of litigation. In 1971 the Stones sued Klein over U.S. publishing rights. The suit was settled the following year, with the Stones receiving $1.2 million as a settlement of all U.S. royalties earned up to that point (essentially the $1.25 million advance that Decca had paid the Stones in 1965 that Klein had been withholding since August 1965). But the Stones were unable to break their contract with Klein, who held an additional $2 million of their money to be paid over a 15-year period, ostensibly for tax purposes. Klein's company, ABKCO, continued to control the rights to publish the Stones' music and Klein made a fortune off the band's all-time best-selling album, Hot Rocks 1964–1971.

In 1972, Klein alleged that some of the songs on Exile on Main Street had been composed while the Stones were still under contract with ABKCO. As a result, ABKCO acquired ownership of the disputed songs and was able to publish another Rolling Stones album, More Hot Rocks (Big Hits and Fazed Cookies). In 1974 negotiations over royalties led to a payment of $375,000 to the Stones and ABKCO's release of an additional Rolling Stones album, Metamorphosis. In 1975 more lawsuits and negotiations resulted in a $1 million payment to the Stones for non-payment by Klein of songwriting royalties, and the release of four Rolling Stones albums, including Rock and Roll Circus and Rolled Gold: The Very Best of the Rolling Stones. In 1984 Jagger and Richards sued to break their publishing agreement with ABKCO because of non-payment of royalties. The judge encouraged the two sides to reach a settlement.

In February 1967, with an eye toward producing films and finding a way to invest his clients' money, Klein attempted to acquire Metro-Goldwyn-Mayer. His hopes were blunted when Edgar Bronfman, Sr., heir to the Seagram fortune, instead took control of the firm. Klein then turned his attention to Cameo-Parkway Records, a Philadelphia-born, Los Angeles-based label that had enjoyed hits in the late 1950s and early 1960s, thanks to Chubby Checker, Bobby Rydell, Dee Dee Sharp, and others, but that by 1967 was no longer prospering. It was one of the first publicly traded record companies, making it ideal for a financial maneuver Klein had in mind, known as a reverse acquisition. It was meant to take Allen Klein and Company public via its being acquired on paper by Cameo-Parkway. By July 1967, Klein and his associate Abbey Butler had acquired a controlling interest and filed to rename Cameo-Parkway ABKCO, an acronym for "The Allen and Betty Klein Company." Fueled by speculation, the stock price increased from $1.75 a share in July 1967 to a peak of 76+3⁄8 in February 1968 before the SEC halted trading. The American Stock Exchange declined to reinstate the stock; instead, ABKCO continued to trade over the counter, and the stock price dropped to more realistic levels. In 1987, Klein made ABKCO a privately held company.

In 1964, Klein approached the Beatles' manager, Brian Epstein, with an offer for the Beatles to sign with RCA for $2 million. Epstein was not interested, saying he was loyal to EMI. After Epstein died in August 1967, the group formed Apple Corps in the following January. They hoped it would provide the means for correcting Epstein's unfortunate business decisions, which had both limited their incomes and ensured high tax burdens. Although "Hey Jude", the Beatles' first Apple release, was an enormous success, the label was a financial mess, with little accountability for how money was spent.

Klein contacted John Lennon after reading his press comment that the Beatles would be "broke in six months" if things continued as they were. On January 26, 1969, he met with Lennon, who retained Klein as his financial representative, and the next day met with the other Beatles. Paul McCartney preferred to be represented by Lee and John Eastman, the father and brother respectively of McCartney's girlfriend Linda, whom he married on March 12. Given a choice between Klein and the Eastmans, George Harrison and Ringo Starr preferred Klein. Following rancorous London meetings with both Eastmans in April, Klein was appointed as the Beatles' manager on an interim basis, with the Eastmans appointed as their attorneys. Continued conflict between Klein and the Eastmans made this arrangement unworkable. The Eastmans were dismissed as the Beatles' attorneys, and on May 8 Klein was given a three-year contract as the Beatles' business manager. McCartney refused to sign the contract but was outvoted by the other Beatles.

Once in charge of Apple, Klein fired many of its employees, including president Ron Kass, and replaced them with his own people. He closed Apple Electronics, which was headed by Alexis Mardas. Mardas resigned his directorship in May 1971. Klein's attempt to fire Neil Aspinall, a longtime confidant of the Beatles, was immediately thwarted by the band.

Klein was hit with his first crisis in managing the Beatles when Clive Epstein, brother of Brian and chief heir to NEMS, the management company Brian had founded, sold NEMS to Triumph, a British investment group managed by Leonard Richenberg. NEMS held a 25% stake in the Beatles' earnings, which Klein and the Beatles desperately wanted to buy out. This led to tough negotiations with Triumph. Klein ultimately secured the Beatles' rights in their previous work for just four annual payments amounting to 5% of their earnings. But in the lead-up to those negotiations Richenberg commissioned a hostile investigative report on Klein, which The Sunday Times ran under the headline "The Toughest Wheeler-Dealer in the Pop Jungle".

An even more important battle to secure the Beatles a financial situation commensurate with their acclaim was with Northern Songs Ltd., the publishing company. Northern Songs was managed by Dick James, whom Brian Epstein had rewarded with the Beatles' publishing rights in return for helping them get placed on a TV show, Thank Your Lucky Stars, early in their career. But James had constructed a contract that gave him an outsize share and Epstein had not understood its implications. James knew that Klein would soon eliminate his perks, so he quickly offered to sell Northern Songs to ATV, run by entertainment mogul Lew Grade, rather than allow Lennon and McCartney an opportunity to buy back publishing rights to their songs. Klein worked feverishly to pull together a consortium that would beat Grade's offer, but infighting between McCartney and Lennon derailed his efforts.