Pop star Rihanna has sued her former accountants for mismanaging the singer’s finances, including claiming they earned huge commissions from concert tours that resulted in her losing millions of dollars.
In a lawsuit filed in Manhattan federal court that surfaced on Thursday, the 24-year-old singer and her tour company, Tourihanna, is seeking an unspecified amount of compensatory damages and loss of earnings from accountancy firm Berdon LLP and former employees Michael Mitnick and Peter Gounis.
The suit, first filed late in Tuesday ahead of the July 4 U.S. holiday, claims the accounting firm caused “significant financial losses” between 2005 and 2010 by charging “exorbitant” commissions from Rihanna’s 2010 “Last Girl on Earth Tour.” It also accuses Berdon of mishandling Rihanna’s foreign and domestic taxes and failing to monitor unpaid song royalties.
“Between 2005 and 2010, Tourihanna suffered significant losses due to defendants’ financial mismanagement and other acts and omissions,” the lawsuit said.
Ron Storch, a partner at Berdon, said the company could not comment on pending litigation. Mitnick and Gounis have since left the firm and could not be reached for comment.
Rihanna, whose real name is Robyn Fenty, has produced a string of worldwide hits including “Umbrella” and “We Found Love.” She is referred to in the suit as a financial novice who found fame at a young age and relied heavily on her accountants.
Her music management introduced her to Berdon in 2005 when she was a 16-year-old and “a minor with a booming music career and no knowledge or understanding of financial matters whatsoever.”
The lawsuit said the accountants concealed facts regarding her finances and, in a deal Rihanna’s lawyers called unusual, earned commissions based on a percentage of Rihanna’s gross receipts that were “exorbitant and expensive.”
In addition, the firm assumed control over the singer’s affairs beyond the industry standard and failed to maximize her personal net worth and long term wealth, the lawsuit said.
The lawsuit said several of the Barbados-born singer’s national and international tours between 2005 and 2010 suffered losses compared with her last tour, “Loud”, that was a financial success after she parted ways with Berdon.
The lawsuit said Rihanna lost millions of dollars during “The Last Girl On Earth” tour after the firm failed to reconcile costs versus revenues while still paying itself millions in fees.
It estimated that between 2007 and 2010, the accountants earned millions in commissions on tour gross receipts in an amount equaling 23 percent of total tour income, compared with 6 percent for Rihanna.
The firm did not do monthly planning reports and performed little record-keeping of Rihanna’s personal and business expenses, including those for Tourihanna. For example, during 2008 and 2009, the accountants kept only 2 percent to 4 percent of all receipts for expenses charged on the singer’s personal credit card, the suit said.
It also failed to uncover millions in unpaid royalties and problems with the way in which Universal Music Group (UMG) label Recordings was tracking song royalties. The suit did not mention Rihanna’s direct label, Def Jam, also owned by UMG.
Accountants mishandled foreign and domestic taxes by withholding more funds than necessary, leading to “a significant losses of tax benefits” and failed to file taxes on time, causing late penalties.
The singer further claims that, as a result, the IRS is now auditing her because Berdon mishandled tax returns between 2008 and 2010. The suit includes claims of breach of contract, negligence, breach of fiduciary duty and unjust enrichment.