Billboard Q&A with Music Biz Attorney Helen Yu

An authority on entertainment business strategies, lawyer Helen Yu is a firm believer in building a strong team with managers, business advisers and others to assist musicians, songwriters and producers. When she sees a wrong being committed-as occurred when the Black Eyed Peas’ corporation was suspended — she makes it her goal to set a situation straight.

“While deals have gotten better, the same problem persists-artists can be taken advantage of,” Yu says over lunch downstairs from her Century City office in Los Angeles near Beverly Hills. “Ethics and backbone. Managers, business managers and lawyers make a commitment to a creator to do what’s in their best interest, but only lawyers are bound by a legal code of ethics. Keeping that commitment [to point out misdeeds] is hard to do. But it has to be done.”

Yu represented the Black Eyed Peas when the group sued its longtime business manager, Sean Larkin, for failing to file income tax returns covering the band’s touring operation. In April, Larkin fled for bankruptcy protection with debts of up to $1 million.

Yu is the managing member of North Hudson Music, a boutique publishing administration company, and a principal at the law firm Yu Leseberg, where her clients include songwriters, producers, musicians and the estate of T-Rex’s Marc Bolan. She hopes to spread the word among artists that they need to better protect themselves, even as it becomes tougher to keep an eye on every deal.

How did you discover the financial inequities with the Black Eyed Peas?

I was doing a deal for [band guitarist George Pajon] and I needed documents from the business manager, and he failed to provide them to me. It was a very simple document — the articles of incorporation. I needed to verify the client’s corporate status, and when I couldn’t get them through the business manager, I had to order them from the state. The state said it was suspended, which means the corporation is invalid. But there are several reasons a corporation can be invalid and, in their particular case, taxes had not been paid.

This led to lawsuits, the band firing Larkin and countersuits between you and Larkin, whose suit was tossed before Larkin filed for bankruptcy. Is this kind of negligence commonplace but just doesn’t make it into the news?

I’ve become more conscious of it because I’ve seen it become relevant to my clients. I would say, without fail, creative clients are in need of guidance when it comes to their business and their finances. They’re prey. They can be easily exploited by people who don’t have their best interests at heart. Even if you’ve been in the business for a long time, it does not mean you know how finances work. People like Steven Tyler have had a lot of trouble.

It used to be that there would be news of unscrupulous managers running off with a band’s money-even Mickey Hart’s father ripped off the Grateful Dead. Are business managers the culprits that musicians need to look out for the most?

When a band picks their business manager, they need to be careful. They really have to do their homework. Some business managers are not licensed certified public accountants and their function becomes extremely important in tax situations, especially if you are a touring artist. You need a CPA. But I’m not trying to pick at business managers. I don’t like people who are ethically challenged in any field, whether it’s the dry cleaner or the mechanic who fixes my car. When you cross a line, I have an issue. It’s not necessarily a legal issue, but a moral one.

What’s your best advice for a musician or producer or songwriter?

An artist should look at their team the way the United States government works. There are three branches of government, with a checks and balances system. The three branches would be analogous to the manager, the business manager and the lawyer. They can all cross-check and double-check each other: That’s really how to be protected. But an artist can still get in trouble, because too often there’s a quid pro quo that happens.

You do a lot of business with songwriters and producers. Is it any different for them?

The publishing administrator becomes important. Writer/producers don’t have endorsements or touring income, but they do have publishing and writer royalties, so you have to have a four-member team.

Obviously, the needs of any of these people shift over time. Is there a barometer for knowing when an artist needs to make a change?

There’s something to be said for loyalty, and for growing with an artist. When you’re in the trenches and growing as a brand-new artist, there are not many people willing to help. If someone is willing to help you at that stage and they’re smart, it’s good to be loyal to those people. But all too often, whenever a client needs a new business manager or a lawyer or a manager, sometimes the other [members of the team] put their head in the sand.

It seems that it’s often the artists who put their own heads in the sand, correct?

I had one client say to me, “I knew this guy was a shark, but he was our shark.” So they knew he was doing things that were unscrupulous, but they thought those things were done to benefit them. A manager should help artists filter out some of the other people who come in. It’s basic research. I had an artist who once went to a lawyer’s office for a 10 a.m. meeting, and the lawyer said, “Hey, do you guys want to do shots?,” thinking that this is what the band wanted. Do you really want an attorney who is doing shots at 10 a.m.?

That sounds like something you would have heard about 20 or 30 years ago.

It’s much less so now than before, but plenty of artists do drugs or drink heavily. The artist or creative person overspends on partying, so there isn’t enough left to pay the bills. If you don’t have businesspeople with the highest level of ethics, you can easily be victimized. Predators gain the trust and then start to press the lines. Once they push that line, maybe they push a bit more.

That seems to be the sort of thing that can happen with more established artists, people like Leonard Cohen or Billy Joel. You have to wonder if they ever looked at any of their financial statements.

They don’t. And even if they did, they wouldn’t know what they were looking at. These relationships are so close in a lot of instances, the employees can become like family to you. George Pajon said he couldn’t believe what [Larkin] was doing to him because he gave a toast at the guy’s wedding. [Artists] don’t want to believe it. People get comfortable with what they know and they don’t like any disruptions. Even if they have an instinctual feeling that they need to change, they might bury that instinct and not face the change just so they can remain comfortable.