| The late Morris Levy, music
industry entrepreneur and raconteur, was infamous for his uncaring
attitude concerning royalties. Rumored once to have agreed to
double a particular artist’s royalty rate, he reasoned that it
made no difference to him since he didn’t pay royalties anyway.
One would expect such an arrogant individual to be shunned. On the
contrary, Levy was a well-known and well-liked music industry
figure.
Unfortunately, his words were indicative of the record
business, which still holds the distinction of not paying
musicians their fair share of royalties. However, this problem is
not restricted purely to the music industry. This attitude is
regrettably commonplace regarding royalty theft throughout the
world. It is not unusual to find this opinion widespread among
those who control the destiny of royalty agreements. These
individuals attempt to find ways to justify royalty theft.
However, the truth is that royalty theft is a crime and should be
treated as such.
It is often said that imitation is the greatest form of
flattery. This is not always the case. When imitation compromises
the creation of another, there is cause to worry. Theories vary
when it comes to Intellectual Property and the rights of the
copyright owners, both in the real world and on the Internet. Some
individuals believe that creativity is enhanced if others are
allowed to build off of an original work of another, subsequently
creating a work that will benefit society as a whole. Others feel
that the holder of a copyright or parent should maintain total
control. |
Times are rapidly changing,
access to intellectual property is easier than ever via the
Internet and therefore has greatly increased the risk of royalty
theft. Courts are currently bombarded with cases involving the
unfair payment of royalties to royalty holders. As evidenced by
court papers, these cases are not limited to any one industry or
any particular group of people.
In March of last year, the estates of Buddy Holly and
Duane Allman sued their respective record companies for
fraudulently withholding royalties starting in the sixties. A
class action suit is pending in New York against Sony for royalty
fraud concerning foreign earnings and reporting. Even giant
media moguls are faced with suits claiming royalty theft, such as
the 1996 suit brought by a group of freelance writers against the
New York Times for copyright infringement after the Times sold
their articles to the electronic database NEXIS without permission
or payment. In this case, the courts initially found for the New
York Times, ruling that the electronic re-use in question was not
a copyright violation, but an electronic revision of a collective
work. However, in 1999 this ruling was over-turned by the Second
Circuit Court of Appeals finding that the Times and other
publishers were not protected by the privilege against copyright
infringement afforded to the publisher of collective works. The
Times has said it may appeal, but a final decision has not yet
been made.
Royalty theft, however, is not purely a crime perpetrated
upon the creative individual. Certainly the song writers, authors,
and poets of our time find royalty theft to be an unpleasant
part
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Imagine the situation. You’re
the owner of a large company. Business is flourishing. Times are
good. Suddenly, numbers don’t seem to be adding up right.
Expenses are unusually high or revenues too low. You suspect
employee fraud. You could hire a CPA to look over your books, but
won’t that just confirm something you already know? You need
Sherlock Holmes . . . with an accounting degree. You need a
forensic accountant!
Forensic accountant? What’s that? Don’t feel too out
of the loop. Although it is a finely tuned, advanced field,
forensic accounting is still a relatively new development. Defined
in The Accountant’s Handbook of Fraud & Commercial Crime as
“the application of financial skills and an investigative
mentality to unresolved issues, conducted within the context of
the rules of evidence,” forensic accounting is, more simply, an
accountant who possesses the investigative knowledge and
experience. Michael G. Kessler, a grandfather of forensic
accounting trade-marked the phrase, “accountants look at the
numbers, forensic accountants look behind the numbers.”
Accountants are watchdogs. They keep, audit, and inspect
the financial records of individuals or business concerns, and
prepare financial and tax reports. They also are hired to complete
royalty audits to make sure their clients are not being cheated
out of royalties they’ve been promised. The best CPAs are
flawlessly accurate mathematicians. There’s no arguing they know
their numbers well. But unfortunately sometimes they lack the
investigative skills needed to dig out a deeply buried problem.
They also lack the experience to come up with a solution or offer
litigation support. |
Forensic accountants, like those
at Kessler International, are bloodhounds. They don’t merely
accept financial records at face value. Instead, they search
beyond the numbers, thinking in terms of how and why a particular
fraud may have been committed. They don’t just use their eyes
when looking for problems, they sniff them out. Kessler
International’s forensic accountants offer litigation support as
well, and provide expert witness testimony. They are extremely
comfortable in the courtroom, presenting their findings clearly
and professionally. And when it comes to royalty compliance,
Kessler International’s forensic accountants will find an
existing problem, and help you take the steps toward getting the
royalties you deserve.
Most CPAs have very limited experience in fraud
detection, and even less in presenting a defense for an individual
accused of fraud, so be careful when looking for litigation
support. Many “alleged” forensic accountants are actually only
extensions of conventional accounting firms. In addition, many of
the associations that are issuing fraud credentials today are
for-profit organizations that offer certifications for yearly
dues. Unfortunately, just because an individual has their
certification, it doesn’t necessarily mean that they are
competent. Experience is the key. Only true forensic accountants
are accustomed to the specialized work, so make sure you get the
real thing. |
