Funk band’s money misused, judge rules
For musicians George Porter Jr., Russell Batiste, and Brian Stoltz, a 31/2- year legal battle is coming to an end.
The trio performed together as funk band PBS until Porter left the group in 2009, prompting Highsteppin’ Productions, their management company, to file suit for $527,000.
The looming lawsuit forced band members to declare bankruptcy and found the products of decades of creativity — their royalties and copyrights, including Porter’s as a member of The Meters — in jeopardy.
But U.S. Bankruptcy Judge Elizabeth W. Magner recently ruled in favor of PBS, finding Highsteppin’ Productions had actually frittered away money on tour costs and other expenses without permission from the band.
“I am happy that this nightmare is over,” guitarist Stoltz said in a written statement.
The next step, he said, is a hearing for the judge to decide whether to award the musicians’ attorney fees and costs. A final judgment would be issued after that.
PBS formed in 2003 and handled its own management and finances. Highsteppin’ Productions’ Phil Stepanian approached Porter in 2005 with the idea of selling Porter and PBS merchandise at concerts — CDs, T-shirts and more that Stepanian paid for and solely profited from with the band’s consent. As their relationship grew, he suggested that Highsteppin’ Productions should manage the band, according to court documents.
“Stepanian argued that with professional management, PBS could increase its exposure, play more venues for higher fees and make significantly more money,” Magner wrote in her opinion. PBS signed a personal management agreement with Highsteppin’ on May 8, 2006.
In the almost three years that PBS existed prior to its relationship with Highsteppin’ Productions, it avoided any debt. When Highsteppin’ took over tour management, annual touring costs rose from $32,123 in 2006 to $98,227 in 2007, to $130,019 in 2008 without a significant change in income, causing tours to incur losses. The management company also racked up other expenses, including a $37,000 photo shoot with noted rock photographer Danny Clinch and a $53,000 deal with public relations firm Madison House.
Magner found that some of these expenses constituted breach of contract as they violated the management agreement, which specifically prohibited Stepanian from spending more than $750 without the musicians’ permission.
Stepanian did not respond to requests for comments.
Highsteppin’ was unable to show that it had ever notified PBS of how much the Clinch photo session and the PR firm would cost. The judge found that in the case of the tour costs, Highsteppin’ failed in its role as personal manager to budget in a manner that would improve the chances of profitability. When PBS handled its tour budget again in 2009, it was reduced to $36,547 and touring again became profitable.
In her opinion, Magner concluded that Highsteppin’ Productions was unable to show communication with the band on numerous decisions regarding band finances. Stepanian contended that the members of PBS knew how he was spending money on their behalf. But Magner found the band members’ testimony to the contrary credible, while other statements Stepanian made left ambiguity as to whether costs were being charged to the band or being absorbed by Highsteppin’ as part of his effort to grow the company.
She also found Highsteppin’s bookkeeping deficient. “Highsteppin’ Productions’ failure to account in a timely and accurate manner for all revenues and expenditures constitutes another breach of duty,” she wrote. “Its abject failure to provide detailed accountings of revenues and expenses has led to this very suit. Even as the trial progressed, this Court was shocked and dismayed by Highsteppin’ Productions’ lack of transparency and the inaccuracy in its accounting.”
In 2006, the band’s own accounting of profit and loss based on tour earnings and debts tracked on Porter’s credit card showed PBS made a profit of $56,457 that year. Highsteppin’s books showed a loss of more than $26,000. PBS didn’t receive a profit/loss statement for 2007 until October 2008, which showed a loss of $62,074.57.
Almost $310,000 of the debt Highsteppin’ claimed that the band owed came from advances paid directly to band members. Highsteppin’ claimed they were loans but couldn’t produce any documentation that the band authorized its management to pay them above what they earned, nor that they knew these stipends were loans.
Porter is glad it’s over, and glad his wife can stop worrying about whether they’re going to lose their house. But he’s also sad.
“We started off as friends,” he says of Stepanian. “I’ve lost something really important — my ability to trust. That’s what I’m walking away with. It’s going to be harder for me to trust.”
Magner noted in her ruling that Stepanian was “an ardent fan,” especially of Porter. “Stepanian possessed infinite enthusiasm for PBS’ potential but sorely lacked experience and training,” she wrote. “Stepanian took on a task well above his abilities at a severe cost to himself and the Artists. Highsteppin’ Productions argues that all of its expenditures were for the Artists’ benefit, but neglects to acknowledge that its actions also bankrupted PBS’ principals.”