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Claims executives hid revenue from two albums
By Matthew Belloni

June 2, 2009, 08:29 PM ET

Cher has sued Universal Music Group, claiming that the label's creative accounting has shortchanged her and the heirs of her late ex-husband Sonny Bono to the tune of $5 million.

The lawsuit, filed Tuesday in Los Angeles Superior Court, claims an audit of UMG's accounting to the singer-actress from 2000 to 2003 showed that UMG execs "engaged in wrongful tactics" designed to hide revenue from two hit compilation albums.

The 5-count, 22-page complaint claims breach of two recording contracts Cher had with UMG predecessors, one with MCA division Kapp Records in 1972 and another 1987 deal with the David Geffen Company. Cher claims that those deals entitled her -- and, in the case of the 1972 deal, Bono -- to receive up to 50% of net royalties received by UMG.

But the complaint alleges that UMG later made a deal with Warner Music U.K. to distribute a 1999 compilation called "Cher The Greatest Hits," then funnelled the money through UMG's international arm to conceal the amount of royalties owed to Cher and the Bono heirs.

"Instead of reporting to and paying plaintiffs their share of the revenues generated by Warner UK, UMG Recordings, in an egregious example of self-dealing, apparently inserted Universal International as a middleman in the transaction ... for the sole purpose of diverting money that rightfully belonged to Plaitinffs to Universal International," the complaint says.

"The claims are meritless, and we are confident that we will prevail in court," said UMG spokesperson Peter Lofrumento.

Cher also challenges accounting on a second compilation, 2002's "The Very Best of Cher." UMG allegedly allowed the album to be distributed by a division of Warner Music Group but accounted to Cher on a royalty basis as though UMG had sold the records itself, thus decreasing her share.

"UMG Recordings is underreporting and underpaying the royalties due to plaintiffs based on UMG Recordings' improperly accounting to Plaintiffs based on a royalty rate instead of their respective shares of net receipts."

Cher also claims UMG improperly deducted $328,662 in television advertising expenses and a 6.5% service charge in reporting revenue from the 1999 greatest hits collection, and that more money is owed from 2004 through 2008. But she as not yet audited the label's books for those years.

Cher and Bono came to prominence in 1965 when their single "I Got You, Babe" hit No. 1 on the Billboard chart, and she has since become the only female recording artist to have a Top 10 hit in each of the past five decades.

When Cher and Bono divorced in 1977, they agreed to split revenue from the songs recorded together. When Bono died in a ski accident in 1998, one-third of his interest passed to wife Mary Bono-Mack, and one-sixth interests were split amongst his kids. Bono-Mack, as well as Cher's daughter with Bono, Chastity Bono, are plaintiffs in the case, as well as Bono children Christy Bono, Chianna Bono and son Chesare Bono.

"Universal is playing a game of catch-me-if-you-can with one of the most popular and iconic artists of all time," said Cher's lawyer, Mark Passin at Robbins Kaplan. "Unfortunately, record companies have learned over the years that they can increase their bottom line by under-reporting royalties to artists."

Music producer Snuff Garrett is also a plaintiff. He claims he is entitled to a 50% pro rata share of royalties from some of the recordings based on a producers deal with MCA Records. Cher sues UMG over royaltiesClaims executives hid revenue from two albumsBy Matthew Belloni

Source: The Hollywood Reporter