Allen Klein: The Man Who Transformed Rock & Roll

by Fred Goodman

  A meeting in April between the Beatles, Klein, and John’s dapper father, Lee Eastman, was even uglier. Though they were all there to discuss publishing, Allen threw the first verbal roundhouse, announcing with too much relish that he’d done a little research and discovered that the eminent Harvard-trained Lee Eastman was actually Bronx-born Leo Epstein, the son of Russian-Jewish immigrants who’d met at Ellis Island. The obvious implication—that Eastman had buried a past that looked a lot like Klein’s—hit a nerve with Lee.

  A well-known art collector who’d married a department-store heiress and moved in prestigious Manhattan circles, the elder Eastman had nonetheless been considered something of a hustler while on his way up. As an attorney working with music publishers, Eastman had put together his own music holdings; sometimes, it was reputed, by taking deals away from his own clients and steering them to confederates. Later, as the attorney for several notable painters, including Josef Albers and Willem de Kooning, he amassed a renowned art collection. At his death in 1991, his estate—which included pieces given to him by clients as gifts or in payment—would be valued at $300 million.

  Under the pressure of Klein’s needling, the elder Eastman quickly lost his composure and began screaming insults at him, calling Allen “the lowest scum on earth.” Klein, by contrast, kept his mouth shut and just took it—a strategy that made Eastman look doubly bad.

  Lennon loved it. Though he later claimed he had been willing to go with Eastman “if he would have turned out something other than what he was,” he never liked him, or the idea that McCartney’s in-laws should manage the Beatles.

  “Lennon understood power,” said attorney Harold Seider, who worked first for Klein and then for Lennon. “He was very astute. And this was critical: Lennon always thought he was the leader. Rightly so or not. The idea of Paul and his family overseeing, advising, whatever, was anathema, pure heresy. So Klein was the alternative. His aura—the New York Jew, the tough guy—this was the theme that created the relationship. Similarly, Ringo and George would not be happy. They’d rather follow John against Paul; they just did not like the idea.”

  Lennon also had an inferiority complex and a fear of being condescended to, which gave him another reason to rebuff the Eastmans. He had found the attorneys’ midtown office, with its Picassos and de Koonings, and Lee’s talk of Kafka novels unconvincing.

  “Lee was a climber,” said Seider. “From Epstein to Eastman. John told me he and Yoko went to Lee’s apartment and he was trying to impress them with the paintings on the wall. Whatever Lennon’s failings, his perceptions were unbelievable. He learned by experience and really had an understanding when it came to people. It was real world and he understood who the phonies were. And here was Lee trying to impress him with the artwork, because that was the way he sold. Most people would say, ‘Oh, this guy is terrific!’ Only it had the opposite effect on Lennon. He wanted a guy who was a fighter. So all these things worked in Allen’s favor.”

  Eastman’s costliest mistake was mocking Klein’s taste; it confirmed Lennon’s suspicion that Lee was a snob. “Fuck it!” Lennon said. “I wouldn’t let Eastman near me. I wouldn’t let a fuckin’ animal like that who has a mind like that near me. Who despises me too, despises me because of what I am and what I look like.”

  It was classic Klein; he had come out on top because he’d done his homework and made an intense study of his quarry while Lee Eastman had not. As much as anything Klein had done himself, Lee Eastman’s tantrum sealed his relationship with Lennon. Allen was everything Lee was not and therefore everything Lennon wanted.

  A few days later, Eastman and Eastman changed course and agreed to Klein’s suggestion that they act as attorneys for the Beatles.

  Klein met with Clive Epstein at NEMS and asked him to hold off on any decision about selling the management company until he’d had three more weeks to look into the Beatles’ situation and make an informed offer. The next day he went back to New York.

  It had been the most successful week of his career, and Allen couldn’t wait to tell someone how he’d landed the Beatles. He was pleasantly surprised to discover that he knew the person seated next to him in first class on the flight home: music-publishing executive Freddy Bienstock.

  A Viennese immigrant who favored monogrammed shirts and sported a monocle, the unlikely-looking Bienstock knew his way around the music business as well as anyone; he’d been deeply involved in Elvis Presley’s music publishing and song selection as an executive with Hill and Range, and his wife, Miriam, was one of Ahmet Ertegun’s original partners in Atlantic Records. He’d recently purchased Hill and Range’s British subsidiary and made it the basis of his own company, Carlin Music. In the coming years he would succeed where Klein had failed, buying Chappell Music and later selling it to Time Warner.

  Bienstock congratulated Allen when he heard the story, but he didn’t seem to share Allen’s enthusiasm for the Beatles. Indeed, he quickly ticked down what he knew about the band: they didn’t tour anymore, British publisher Dick James controlled their music publishing through Northern Songs, and EMI still had them signed worldwide for records. Where, Freddy wondered, did Allen think he could get the Beatles—and himself—paid? It was an excellent question. Klein, ebullient on boarding, was a good deal more sober by the time he landed. Bienstock was right—he might have the ball but it wasn’t a slam dunk. He’d better start looking at the Beatles’ audit statements and the two principal American deals, Capitol Records and United Artists Films.

  What he saw didn’t cheer him; a combination of substandard deals and a 95 percent tax rate had left the Beatles cash poor. On paper they’d made less than a hundred thousand pounds the prior year, and meanwhile they were each drawing cash out of Apple as if it were a bank. But before Klein could really dig into the various business arrangements, he was hit with the first crisis: despite what Clive Epstein had told him before he left London, NEMS had been sold—not to the Beatles, but to a British investment group, Triumph.

  Equally frustrating was the discovery that the apparent spur for the sale had been a letter from John Eastman to Clive Epstein saying Klein was going to audit NEMS—something Klein had neither planned nor suggested to Epstein. Regardless of whether Eastman simply misunderstood or was out to make life difficult for Klein—and Allen, of course, suspected the latter—the result was disastrous: Klein found Triumph’s chief, Leonard Richenberg, uninterested in selling the Beatles’ rights or NEMS’s share of their publishing back to them.

  If the news that Allen Klein was preparing an audit was Clive Epstein’s nightmare scenario, Richenberg looked like a made-to-order solution. He wasn’t in the music business, and he wasn’t impressed or cowed when Klein suggested that Triumph had just paid £750,000 for a lot of headaches, liabilities, and rights he would soon show it didn’t actually have title to. Turning a deaf ear to Klein’s overture, Richenberg didn’t wait to launch his own offensive. When Allen requested that Beatles’ record royalties be paid directly to Apple instead of through NEMS, Triumph sued EMI, and the court froze one million pounds in an escrow account pending the outcome. In a more personal attack, Richenberg commissioned an investigator’s report on Klein and then leaked the results to the Sunday Times, which roasted him.

  The snarky piece, headlined “The Toughest Wheeler-Dealer in the Pop Jungle,” knocked the wind out of Klein, who read anti-Semitic, anti-American undertones in its relentlessly personal portrayal of him as an unwashed, grubby lowlife who wore a dirty polo shirt. Harold Seider, ABKCO’s attorney at the time, believed Klein’s in-your-face style played particularly poorly with the English establishment.

  “The EMI people didn’t like him,” said Seider, “and the Decca people had to deal with him but they didn’t like him. He was essentially a New York Jew. It was that kind of thing and I’ll leave it at that. He had that aura about him and he never tried to dissuade people [out] of [believing in] that aura because that was how he got to Lennon, to a certain degree. Ultimately it came bac
k to bite him in the ass.”

  Attributing Klein’s success to a constant hunger for publicity and an ability to “lie like a trooper,” the article cast the Cameo-Parkway stock offering in a particularly unflattering light and painted Allen as a tax cheat for having failed to file paperwork on employee-withholding taxes in a timely manner a decade earlier (although the taxes themselves had been paid). It also intimated that he had swindled the Rolling Stones. Klein threatened to sue the paper for libel but later became friendly with the article’s author, John Fielding, and even hired him to work on a film he produced in 1978, The Greek Tycoon. Allen was a good deal less forgiving toward the article’s catalyst, Richenberg, who relished Allen’s discomfort. But there was little for Klein to do, as Richenberg just shrugged and characterized the attack as part of the game. Klein told him he was acting like a child. “I stopped playing in the mud,” Allen said.

  It took nearly six months, but a settlement with Triumph was finally hammered out. In the end, Klein got the better of Richenberg: the Beatles regained their rights, including NEMS’s shares in Northern Songs. Even better, the price was low, with Triumph’s only ongoing participation 5 percent of the Beatles’ record royalties for a period of four years.

  It proved just a warm-up for a fight Lennon and McCartney cared a good deal more about with Northern Songs and its publisher, Dick James.

  Just a few years earlier, in December of 1962, Dick James had been a singer turned music publisher with a small startup in Denmark Street. His life and fortunes changed dramatically when Beatles producer George Martin, who had also produced several records featuring James, included his name on a shortlist for Brian Epstein when he was seeking publishers for John Lennon and Paul McCartney. Epstein found James—who’d been advised by his son that the Beatles were unique and worth signing—eager and helpful. When Epstein said he wanted to get the Beatles on TV, the publisher used his contacts to get them booked on Thank Your Lucky Stars (where Epstein would meet Andrew Loog Oldham) and was rewarded with the Beatles’ publishing, which was incorporated as Northern Songs Ltd. As with other deals he made for the Beatles, Brian had undertaken it with good and earnest intentions but proved unduly and naively trusting.

  It was a typical publishing deal of the era. In the UK, Dick James and his financial partner, Charles Silver, got half of any earnings, and Lennon, McCartney, and Epstein split the rest twenty-twenty-ten. In 1966, the publisher’s share dropped to 45 percent in return for John and Paul extending the contract through 1973. They also created a tax dodge, Lenmac Ltd., to hold the writers’ share of their first fifty-six songs and then sold the company to Northern for £140,000 plus 15 percent of Northern’s stock each, which James had taken public. (NEMS received its 275,000 shares of Northern Songs in the same transaction.) It was the kind of deal that Klein frequently recommended to his British clients: exchange highly taxed royalty income for lower-taxed capital gains. A second rights company, Maclen, was set up to house all their compositions going forward.

  On the surface, it all sounded good. But James had stacked the deck in his favor in foreign deals, particularly the all-important U.S. market, where the Beatles made the lion’s share of their money. When James licensed Northern Songs to a foreign publisher, that publisher received 15 percent of any local income and James split the remaining 85 percent with Epstein and the songwriters; he set up the same arrangement with George Harrison, who began to publish the songs he wrote for the Beatles through his own James-administered company, Harrisongs. However, when James set up his own subpublisher in a foreign market—as he did in America—the split was fifty-fifty rather than fifteen–eighty-five. That meant James and Silver kept half of all publishing income earned in the market and sent the remainder to England, where they again took 50 percent, thus keeping seventy-five cents on every American dollar. Though far from unusual, it was classic double-dipping. To further muddy the waters, James wrote a letter that appeared to change the U.S. split to fifteen–eighty-five, but he worded it in such a way as to actually confirm the original fifty-fifty agreement.*

  Like Clive Epstein, Dick James viewed the arrival of Allen Klein as the worst possible news. Not only was Klein a publisher himself who would likely want to put the Beatles under his own umbrella—the deal he’d given the Rolling Stones was significantly better and fairer than the one Dick James had given the Beatles—but Klein had audited numerous publishing firms around the world and there weren’t many hustles he hadn’t seen. Klein was particularly down on the practices of wholly owned foreign subpublishers, whose actions he compared to “slicing cheese” because the publisher kept carving off another slice for itself in each successive market, and so he was sure to object to James’s arrangements. When Allen Klein started working with the Beatles, it could only mean the beginning of the end for Dick James.

  “Dick James had seen the writing on the wall; it was written in Allen Klein’s handwriting,” said Peter Brown, the Apple director and former assistant to Brian Epstein. “And James was determined to pull out.” But not by offering to sell the company to the Beatles or to Lennon and McCartney, who’d written all its songs and already owned 30 percent of the shares. Indeed, he never even told them he was selling Northern Songs—that would have necessitated opening the door to a tough adversarial negotiation with Klein or the Eastmans or both. Instead, he found a friendly buyer in Lord Lew Grade, the powerful British entertainment mogul with whom he’d worked as a singer.

  The news that Dick James had sold their songs to Grade without telling them or offering them the opportunity to buy infuriated McCartney and devastated Lennon. To make matters worse, they didn’t like or trust Grade. Brian Epstein had once declined to have Grade’s brother Leslie act as the Beatles’ booking agent, and Brian and the Beatles subsequently came to believe the Grades had used their considerable power and connections to slow the group’s career and punish them; now the enemy would have their publishing. During a meeting with Harrison at Apple, a condescending James was full of excuses when answering George’s questions about the deal. Speaking as if to a child, James said that he’d been worried about the future value of his own shares in Northern Songs and that he’d had to move quickly before the price fell, adding that it was a serious matter. Harrison, who knew very well that James was selling the Beatles’ assets out from under them, went ballistic. “It’s fucking serious to John and Paul is what it is!” he yelled.

  Lennon and McCartney both telephoned Klein, who was on vacation in Puerto Rico, and insisted he return to London immediately and do something to counter the sale to Grade’s company, ATV. Klein huddled with executives of the English merchant bank Ansbacher and Company and proposed that Apple make an offer to shareholders to purchase a million shares of Northern Songs, enough to give them 51 percent. Where ATV had bid £1.85 per share—a modest price that produced a lukewarm response—the Beatles’ limited bid was significantly higher, £2.13. It was also a more complex deal than ATV’s, and the arrangement with Ansbacher required Apple to put up half the money. That meant the Beatles pledging their individual Northern Songs shares as security. While Lennon readily accepted, McCartney, who had agreed to the Ansbacher proposal, declined, apparently on advice from Eastman that it was too risky. When it looked like McCartney’s hedge would sink the deal with Ansbacher, Klein offered to put up 45,000 shares of MGM stock held by ABKCO and valued at £750,000. Klein would later say he did it solely to save the deal, but it’s hard to imagine he was being completely altruistic or that he would have relinquished ABKCO’s interest back to the Beatles.

  With the competing bids from ATV and Ansbacher and the Beatles in the market, Klein and Lennon made an unsettling discovery: McCartney had been using Peter Brown at Apple to secretly buy shares in Northern Songs and now had 751,000 shares; Lennon had only 644,000. Lennon, believing he and McCartney had agreed to have equal shares in Northern Songs, felt betrayed and characterized it as the first time a member of the band had gone behind the others’ backs to gain an advanta
ge.

  Looking for money and allies, Klein tried to get the Beatles’ record companies, EMI in Britain and Capitol in the United States, to buy an interest in Northern Songs or lend the Beatles money. Neither label would help, apparently unwilling to anger Grade. To allay people’s fears that he would personally take over Northern Songs and either kick out or ride roughshod over its directors, Allen put forward the established and respected music publisher David Platz, who headed Essex Music, to run the company. However, Essex was the British subpublisher for Klein and the Rolling Stones, and there was little doubt who Platz would be loyal to.

  Though Klein met frequently with Grade, the mogul clearly preferred a deal without the Beatles—or Allen. He would later characterize the meetings as tedious and unproductive; Klein, as he typically did, dragged out negotiations, fearful of overlooking something and constantly churning through the fine print for additional advantages. Grade was worried. He “didn’t like the way it was going.”

  A group of three London brokers holding a combined 15 percent of Northern Songs’ shares banded together, and it was clear they could make or break either the Beatles’ or ATV’s bid. What they wanted most was a cash deal, something ATV was loath to do, preferring a swap for its own stock. That reluctance gave Klein an opening. The consortium, as the London brokers were known, liked the offered price but also demanded an independent management in which neither they nor the Beatles would have a vote.

  That may have made intuitive sense for the brokers—after all, why would they want to oversee a publishing business they weren’t qualified to run?—but the notion that he would have nothing to say about his songs was unacceptable to Lennon, who continued to find the whole Dick James fiasco very upsetting. “I’m sick of being fucked about by men in suits sitting on their fat arses in the City,” he blurted to a reporter. Reading Lennon’s outburst, the consortium quickly opted to make a deal with ATV that gave Grade 54 percent of Northern Songs.