Rihanna is seeking retribution against accountants from her past. Tens of millions of dollars are in dispute, and Rihanna has filed a case with a court in Manhattan hoping to recoup these losses that she believes are a result of lavish fees and gross negligence.
At the beginning of her music career, Rihanna at 16 years old signed an accounting contract with Berdon LLP in 2005. From that time period until 2010, the firm managed her personal and professional finances. However, given all of the successful milestones in her career, her financial profits never seemed to reflect it. Now she’s holding Berdon and two other accountants accountable. (Pun intended)
Yahoo Finance provides insight into the lawsuit:
By the “Last Girl on Earth” tour in 2009, Rihanna learned that the tour had managed “significant net losses” despite robust revenues, though the defendants had managed to pocket 22 percent of the tour’s total revenues while paying Rihanna just 6 percent of revenues, the lawsuit said. It said Berdon’s unusual accounting practice of paying itself a percentage of gross tour income as commissions left it no incentive to “counsel” Rihanna to reduce expenses or put in place appropriate financial controls.
The lawsuit alleged that the practice of paying itself commissions on revenues was not standard in the accounting and business management industry and created a clear conflict of interest.
Rihanna’s lawyers also blamed the accounting firm for an ongoing IRS audit of her tax returns, saying she was forced to spend significant resources to correct errors resulting from negligence.
The lawsuit also blamed the company for Rihanna’s 2009 purchase of a new home, saying competent business managers would have told her that her tour was losing money and that it would not be advisable to buy such an expensive home at that time.
With that much money in question, it’s certain that there is someone to blame. The only question is, is it Rihanna’s fault, or is it the accounting firm’s fault, or is it both?
Rihanna was 16 years old at the time she first entered a relationship with this accounting firm. It’s understandable that a teenager would have limited abilities to manage the cash flow of million dollar accounts. While she may have been 16 years old, her parents should have known better. The industry thrives on taking advantage of artists, and artists should know their worth and learn the industry. The accounting firm may explained the terms of their transactions in their contract, which surely was never read and reviewed by Rihanna or her guardians.
Another thing to determine is whether Rihanna is expecting money that should rightfully be reflected in her account, or is she demanding money that “should” be in her account? Many artists still fail to grasp that for every dollar they earn, only a mere fraction will actually end up in their pocket. Given these complex contract deals and more, any money that she may have earned from those tours probably went towards paying her labels back the advance money and other various obligations.
The other and more likely scenario is that Rihanna spent way more money than she’s willing to acknowledge. Although she’s ballooned into a more popular artist, her early career came with more expenses and more financial obligations than she could have ever realized. While tours can make lots of money for independent artists, it isn’t a guarantee at all for major artists after all the financial obligations have been taken care of. The accounting firm’s expenses may indeed have been high or exorbitant, but they dont necessarily have to be illegal.
In a perfect world, these financial institutions would charge reasonably. Sadly, it just isn’t reality. To protect your own bottom line, you must do the following:
- Take responsibility for your finances. Rihanna’s fear of being taken advantage of may just be a delusion. How many times do we look at our bank account and assume that it can’t possibly be that low, only to go back review the transactions and realize that we truly did spend more than we thought we did? You’ll never know what’s really going on unless you’re looking after your own finances.
- Always sign your own checks. Take the advice of many wealthy elite, like Oprah. If you want to know where your money is going, sign your checks.
- Educate yourself on cash flow. Rihanna’s now in an industry where money disappears quick and fast. She should take advantage of being around the people behind the scenes and learn how to preserve her wealth for an eternity. Instead of mimicing the behavior of hardly wealthy pop stars, take notes from the people who own the industry and preserve her wealth in the same fashion.
Rihanna’s only 7 years into her career, and it’s a great lesson to learn at this point. Hopefully, she moves forward making better financial decisions in the future. No one is ever to blame for managing your finances, only yourself. The faster you learn that, the better your bank account.
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