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Rapper Accusing Accounting Giant of Misdeeds

Company Town | THE BIZ

August 29, 2000|CHUCK PHILIPS

Andre "Dr. Dre" Young rose to fame as a rap star chronicling the exploits of outlaws on the inner-city streets of Compton.

But the Grammy-winning hip-hop star said in a lawsuit those gangsters can't hold a candle to PricewaterhouseCoopers, the Big Five accounting firm he contends ripped him off for more than $20 million. The firm denies any wrongdoing.

"They stuck it to me big time," said the burly rapper, who co-founded the Death Row record label. "They lure you in with this pitch about how expert they are in the art of money management, then they just rob you blind."

Young, one of the industry's most respected producers responsible for nearly $400 million in record sales since he entered the business in 1989, has spent the last two years in court fighting the giant accounting firm. Now, with his career peaking with a top-selling solo album and a successful rap concert tour, Young said he is more determined than ever to win the case.

PricewaterhouseCoopers has already paid about $10 million in out-of-court settlements in two other Death Row-related fraud claims to his former partner Marion "Suge" Knight and rapping comrade Calvin "Snoop Dogg" Broadus.

Young is looking to recoup twice that amount in the fraud and negligence suit he filed against Coopers & Lybrand on Feb. 6, 1998. Coopers & Lybrand has since merged to become PricewaterhouseCoopers.

Young's suit contends that the PwC's Gelfand, Rennert & Feldman arm mismanaged his finances during the period when the rapper was co-owner of Death Row Records--the controversial music label that ended up being the target of a federal probe focusing on allegations of drug trafficking, money laundering and violent acts. Young quit the label in 1996 just before the probe began.

According to the lawsuit, PwC diverted millions of dollars from Young's earnings and failed to disclose it had conflicts of interest that cost him additional millions in damages. During the same time that the firm was managing Young's finances, it also represented his former partner Knight, who is now in prison on an assault-related probation violation.

PwC spokesman Steven Silber denied the allegations contained in the rapper's litigation.

"The complaints leveled by Dr. Dre are better directed at Death Row Records and other parties," said Silber on Monday.

The gangsta rap star isn't the only one upset about the way the world's biggest accounting firm handles its affairs.

The Securities and Exchange Commission censured PwC in January for conflict-of-interest violations involving employees who bought stock in companies that were audit clients. The firm also paid handsomely in recent years to settle a number of legal cases, including a $108-million fine for overlooking financial irregularities leading to the collapse of the late Robert Maxwell's British media empire.

PwC's Silber said the "only thing Mr. Young's case has in common with the other lawsuits mentioned is a quest for money on the part of the plaintiffs and their attorneys," adding that the SEC "independence issue has nothing to do with the type of services provided to Mr. Young, making that association even more irrelevant."

Assuming Young and PwC continue to lock horns, the case is likely to go to trial next spring. PwC has already spent nearly $1 million fighting the case, sources said.

Silber declined to comment on why the firm refused to budge in Young's case when it had already paid millions to resolve the two other Death Row-related suits. As in Young's suit, Knight and Broadus also accused the firm's Gelfand division of misappropriating funds for its own gain.

Four years ago, Knight told The Times that Steven Cantrock, the PwC accountant who represented Death Row, had stolen $4.5 million from him and signed an IOU admitting it. At the time, the accounting firm told authorities that they believed Cantrock had signed the IOU under duress and, fearing for his life, helped him go into hiding.

Soon after, however, the accounting firm conducted an internal probe into the matter and fired Cantrock. Sources said PwC paid about $8 million last year to resolve the matter with Knight, who denied in The Times that he or anyone at Death Row had threatened Cantrock.

Cantrock, who has recently resurfaced as a bookkeeper in the San Fernando Valley, could not be reached for comment. And his attorney Vincent Marella did not return calls seeking comment.

So far, Cantrock, Knight and Death Row attorney David Kenner have refused to be deposed in Young's case, pleading the 5th Amendment because of an ongoing federal investigation into the rap label. A federal grand jury reviewed allegations that Death Row was a criminal enterprise, but after several years has never issued a single indictment. Sources said the probe has been inactive for months.

Young hired PwC's Gelfand division in 1993 to watch over his finances at the urging of Knight, the suit said. Young contends he was hoodwinked from the beginning by Cantrock and Gelfand.

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