Rihanna In Hot Soup With IRS, Sues Accountants

by Darrin Mish, Tampa Tax Attorney
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Pop star Rihana is facing an audit from the IRS and is suing her accountants in response, blaming them for allegedly mismanaging her funds, failing to warn her about losses of some of her tours and not putting in place sufficient financial safeguards to her fortune. The singer filed her lawsuit in a Manhattan court against Berdon LLP and two accountants. In court papers Rihanna claims that her accountants siphoned off tens of millions of dollars from revenues from 4 of her national and international tours over a five-year period.

From Rihanna’s “Last Girl on Earth” tour in 2009, the defendants pocketed 22% of the revenue collected while the singer took home only 6%, according to the lawsuit. The tour made a significant loss despite a warm response from Rihanna fans that generated good revenue. The lawsuit went on to charge the accounting firm of not giving any counsel to Rihanna on cost-cutting measures or implementing financial controls because it had no incentive to do so, having made money from gross revenue. This practice of the accounting firm paying itself a percentage of tour revenue was not a standard practice in the accounting and finance industry and represented a clear conflict of interest.

The lawsuit also took Berdon LLP to task for the singer’s purchase of a new house in 2009, blaming the firm for not advising against buying such an expensive home at that time because her tour was losing money.

The Barbadian singer, whose real name is Robyn Fenty, hired Berdon LLP in 2005 when she was a then 16-year old budding star just at the start of her career. The accounting firm was also blamed for an ongoing IRS audit of Rihanna’s tax returns. Her attorneys claim that the singer had no choice but to spend a lot of money to correct errors resulting from their negligence. In her lawsuit, Rihanna alleged that her accountants breached their agreements time and again, engaged in misconduct and malfeasance, paid themselves excessive commissions, created entities disregarding how they will affect her taxes and did not properly document income and expenses and put in place a proper budget. Rihanna fired Berdon LLP in 2010.

But the good news is that since firing her accountants, Rihanna has gone on to scale greater heights in her career. Her “Loud” tour from June to December last year raked in a cool profit of more than 40% of total gross revenue.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Darrin Mish, Tampa Tax Attorney, The Law Offices of Darrin Mish, P.A. | Attorney Advertising

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