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U.S. probes Death Row record label's money trail
Why did Steve Cantrock, a partner in a prestigious Los Angeles accounting firm, sign a document admitting that he stole $4.5 million from Death Row Records owner Marion "Suge" Knight?
Knight has a simple, if implausible, explanation for the unusual, handwritten IOU, which is now in the hands of federal investigators. "It was Steve's idea," he said.
"After I caught him stealing millions of dollars and confronted him, he started crying," Knight said in an interview from jail, where he has been since October for violating probation on a 1992 assault. "He said, 'Please, just give me time to get you all your money back.' I said, 'OK Steve, don't get so bent out of shape.' "
Sources close to Cantrock deny that he stole any money from Knight or Death Row and offer an equally simple explanation. They say he was threatened by Knight at an after-hours meeting attended by a handful of the rap mogul's closest associates at a San Fernando Valley residence.
They have told federal investigators that Cantrock was forced to his knees and feared for his life before agreeing to sign the two-page confession drafted on the spot by Knight's attorney David Kenner--an accusation that both Knight and Kenner deny.
Coopers & Lybrand, a nationwide accounting firm, has taken the threats seriously and helped Cantrock and his family go into hiding outside the state. Sources say Cantrock will soon provide federal agents with reams of documents detailing Death Row's financial dealings over the last three years.
The differing accounts of the confession signed by Cantrock could be a template for the rising troubles dogging Death Row, the most successful rap label in the country since Knight founded it in 1992.
It is increasingly apparent that the company faces even more serious problems than the recent jailing of Knight. Before the probe is over, some sources said, federal investigators might try to seize the company.
The rap label has been under investigation for months by the federal government, which is trying to determine whether Death Row is being run as a criminal enterprise. One reason federal authorities are pushing so hard, sources said, is that authorities suspect the rap label is tied somehow to organized crime in New York and Chicago.
Knight believes the probe must be racially motivated.
"This is the most outrageous story I have ever heard," Knight said. "A black brother from Compton creates a company that helps people in the ghetto, so what does the government do? They try to bring him down. Sometimes people get sacrificed when they stand up. Martin Luther King, Malcolm X. Sometimes they take away your life. Sometimes they take away your freedom. It's sad."
Sources said that the government is attempting to build a racketeering case against the company, and is investigating alleged links to street gangs, drug trafficking, money laundering, violent acts, extortion and gun running. The conclusion of the probe, which sources say is expected to result in criminal indictments, is months away.
Justice Department officials have routinely declined to either confirm or deny the existence of the probe. Law enforcement sources said, however, that phones have been tapped and agents from the FBI, the Internal Revenue Service, Bureau of Alcohol, Tobacco and Firearms and the Drug Enforcement Administration as well as police in Los Angeles and Las Vegas, continue to investigate a variety of leads.
* Known members of the "Bloods" street gang are alleged to have committed various crimes while on the Death Row payroll, according to court records.
* Investigators are tracing the "seed" money used to help launch Death Row in 1992 to learn whether any funds came from illegitimate sources.
* Authorities are also following a money trail that leads to a Las Vegas nightclub that opened only on a handful of occasions when Knight and others were in town. The club never obtained a liquor license as detectives probed connections to various individuals involved in the venture, some of whom allegedly have past connections to organized crime in New York and Chicago.
In an interview at the Los Angeles County Jail earlier this month, Knight denied that his company has any connection to criminal activities.
"Anybody who wants to follow us around is welcome to come check it out," Knight said. "If you don't like rap or R & B music though, you better bring some earplugs to the studio. Because that's where you're going to find us 24/7 (24 hours a day, seven days a week) making the hit records that generate all the money. And when the investigation is over, that's all the government is going to find out."
Death Row Records, the first black-owned and -operated rap label to consistently dominate the pop charts, has sold a spectacular 25 million albums during in its brief existence.
Its stars and executives, however, have been associated with violence. Among them: rappers Snoop Doggy Dogg, whose real name is Calvin Broadus, was acquitted of murder earlier this year; and Tupac Shakur, fatally wounded three months ago in Las Vegas in a car driven by Knight.
Knight's rap sheet features eight convictions, most for assault or weapons charges. He was transferred two weeks ago to Chino prison for a diagnostic evaluation and awaits a Superior Court hearing in February at which he could be sent back to state prison for up to nine years.
Knight had been on probation since Feb. 9, 1995, when he entered no-contest pleas to two counts of assault stemming from a 1992 attack on two aspiring rappers in a Hollywood recording studio.
Under a plea bargain, a judge imposed a suspended nine-year prison term and five years' probation. The original prosecutor was removed from the case in October after disclosures that Knight had cut a record deal with the prosecutor's 18-year-old daughter and that Knight lived this summer in a Malibu Colony house owned by the prosecutor's family.
Knight's probation was revoked Nov. 26 for his role in an assault at the MGM Hotel in Las Vegas on Sept. 7--just hours before Shakur was shot. Several of Knight's Death Row employees were captured on a hotel surveillance video tape attacking and kicking Orlando Anderson, 22, a reputed Crips gang member from Lakewood, according to court records.
No charges have been filed against the Death Row employees, although one of them has since been imprisoned on a weapons violation. The employees are believed to be members of the Mob Piru set of the Bloods street gang in Compton, law enforcement sources said.
In recent years, the government has had some success in using federal racketeering laws to go after street gangs by charging suspects with committing crimes as part of a continuing criminal enterprise. Initially, the Death Row federal probe was focused on uncovering evidence that Knight and his company were connected to street gangs such as the Mob Piru Bloods, according to a law enforcement memo.
Although Knight has long denied being a gang member, the 6-foot-3, 315-pound executive has frequently posed for publicity shots decked out in red suits and painted his Las Vegas nightclub and house in red, the color embraced by the Bloods gang.
Before he was imprisoned, Knight used to sport a diamond studded ring which spelled out the word "MOB." The Las Vegas nightspot was named "Club 662"--the numbers corresponding on a telephone keypad to the word "MOB."
Investigators believe that at least a handful of employees on Death Row's payroll are Bloods gang members and have participated in assaults and other criminal acts while working for Knight, a law enforcement report said. Authorities are trying to determine whether Knight authorized any of the alleged crimes, sources said.
Knight said: "There is no truth to the allegation that I had any knowledge of any crime committed by any of my employees. I don't even know what crimes they are talking about."
He added: "It is true that I have hired people who have been incarcerated in the past. But it's as simple as this. I'm a black guy from Compton who gives jobs to people from the ghetto.
"Just because somebody got in trouble once or twice with the law, whether it's Snoop or whoever, it's wrong to stop someone with talent from realizing their dream. Giving them a job helps them to stay on parole and out of trouble. How else do you expect people who have had run-ins with the law to overcome problems in the ghetto?"
Knight's continued affiliation with individuals who have had run-ins with the law has led authorities to focus on whether the "seed money" used to launch Death Row may have come from drug trafficking or other illicit means.
Federal agents have been examining Knight's relationships with convicted drug kingpins Michael Harris and Ricardo Crockett, both of whom are now in prison. One of Knight's eight convictions put him on federal probation for a 1994 weapons charge stemming from a probe into a cocaine trafficking case in Las Vegas that resulted in the incarceration of more than a dozen people, including Crockett.
Although Knight acknowledges that he knew both individuals during the period when he was trying to get Death Row off the ground, he denied that any money from illegal activity financed the start-up of the label.
"If the government is saying that these people gave me the money to start Death Row, they couldn't be more wrong," Knight said. "Every penny we have put into Death Row over the past five years came from a major entertainment corporation."
Indeed, Knight and his former partner, Andre "Dr. Dre" Young, received millions of dollars in financing from such entertainment giants as Sony, Time Warner, MCA and Interscope Records.
Knight and Young used about $1 million from music publishing deals struck in 1991 with Sony to underwrite the recording of Dre's "The Chronic," Death Row's debut album.
In late 1992, Death Row received an additional $1.5 million advance from Interscope and Time Warner to fund the opening of an office, hire staff and record more music. Over the last five years, Death Row has generated more than $300 million in sales at retail--about $60 million of which came back to the company.
Nevertheless, sources say the company has yet to turn a profit, both because of paying back debt and Knight's extravagant spending habits.
"A lot of people don't like to see a black guy from Compton be so successful," Knight said. "I don't know who is telling the government all this nonsense. Just because we make a lot of money that doesn't mean we're doing anything wrong."
Knight's investments in Club 662, the now-defunct Las Vegas nightclub, have also sparked concerns in law enforcement circles as to whether Death Row may be tied to organized crime.
Investigators say Knight paid more than $800,000 over the last 16 months to several individuals who have been connected to figures associated with organized crime factions in New York and Chicago. The expenditures were meant to buy a stake in the club, renovate the venue and install a management team capable of obtaining a liquor license.
The building is owned by a Studio City entrepreneur who was indicted on racketeering charges and convicted for mail fraud in 1982 for his involvement in an arson-for-profit scheme in Las Vegas and Los Angeles.
The property has supported a series of nightspots since the early 1980s, when it was first opened by businesswoman Helen Thomas, who still controls a long-term lease on the venue.
At first, the club was called Botany's. And according to Thomas' attorney George Kelesis, Botany's was financed with a loan from her husband, Carl Thomas. He was convicted in the early 1980s of helping Chicago-based organized crime figures skim money from the Stardust hotel in Las Vegas. (Kelesis went on to represent Knight in his dealings with Thomas.)
The first individual Knight did business with in Las Vegas was Richard Herman, an East Coast attorney who has represented Scores, a topless nightclub in New York currently under investigation for alleged ties to organized crime. The FBI raided Herman's Park Avenue law office earlier this month and confiscated documents related to the Scores probe.
After a falling out with Herman, Cantrock introduced Knight to Robert Amira, a Las Vegas entrepreneur who was once indicted with New York Mafia figures Joseph Colombo Jr. and Alphonse "The Whale" Merolla for bilking the Dunes Hotel-Casino in an airline junket ticket scam. That case was dismissed in 1982 because of communications between the prosecutor and the grand jury foreman that the judge deemed improper.
Knight, who graduated from the University of Nevada at Las Vegas, said he wanted to establish a nightspot that would appeal to the musical tastes of black students at his old alma mater. He denied any knowledge of the club's alleged mob connections and said he entered into the venture on the advice of his accountant and several attorneys.
Far from being in cahoots with the mob, Knight said he believes he was cheated by several of the people with whom he did business.
"If I was part of some so-called organized crime circle, how is that I ended up getting beat out of my money?" Knight asked. "These allegations are ridiculous. I paid a lot of money to people who made a lot of promises and all I ended up was getting taken advantage of. I'm the victim here. These people stole my money and I want it back."
Herman, Amira and a representative for Thomas denied any wrongdoing or that they owed Knight any money. In separate interviews, Herman and Amira said Knight was represented by his attorney and accountant during all of their business transactions.
In fact, Herman said Knight still owes him money and filed a lawsuit in New York two months ago to recover it.
Knight says he is baffled as to why he is behind bars while the people who "took him for a ride" are out walking the streets.
He is especially furious that the government is investigating his black-owned company instead of what he calls the "giant, white-owned" Coopers & Lybrand, whose accountant he says ripped him off for millions of dollars. Coopers & Lybrand, a $2-billion New York accounting firm, owns Cantrock's firm, Gelfand, Rennert & Feldman.
"I'm just a fall guy here," Knight said. "It's the saddest thing in the world to me that everybody is trying to find so much wrong with Death Row. I busted my ass to build this company. All my employees work round the clock busting their asses too.
"I feel I gave a great dream, a great positive thing to the black community, to every ghetto in America. Because when little ghetto brothers and sisters look at me, even after all the negative criticism, they say to themselves, 'If Suge did it, I can do it too.' "
Times staff writer Jim Newton contributed to this story.