Allen Klein: The Man Who Transformed Rock & Roll

by Fred Goodman

  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 Kl
ein 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.
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br />   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.’”