Musicians’ money manager faces scrutiny

Sean Larkin was a Cal State Northridge accounting grad trying to break into the entertainment industry when he met a hip-hop act that performed in local clubs.

The Black Eyed Peas didn’t need high-level financial advising in the mid-1990s, when they were often broke and handed out fliers to fill their shows. Larkin signed on as their business manager anyway and remained at their side as they became international superstars who routinely pulled in $1 million a night.

What seemed a rare story of loyalty rewarded in the music industry has revealed itself as a cautionary tale in recent years. The Peas jettisoned Larkin after discovering that he had gone years without filing their federal and state income tax returns. Other clients stepped forward with similar allegations and federal authorities began looking into his handling of client money.

Larkin’s own finances also are troubled. His 5% cut of the Peas’ revenue should have made him a multimillionaire, but public records indicate he owes more than $1.1 million in taxes, and American Express recently sued him over failure to pay a $58,000 credit card bill.

“I’ve tried my hardest to make sense of it,” said Peas’ guitarist George Pajon, who is suing Larkin for breach of contract. “It’s ugly. It’s really nasty.”

He and other former clients said finding out they owed hundreds of thousands of dollars in delinquent taxes hurt all the more because they regarded Larkin as reliable and candid in a shark-infested industry.

“It was a very slow heartbreak,” recalled singer Laura Dawn Murphy, who used Larkin as a business manager for years. “We were begging him to be the person who he said he was.”

Larkin did not return messages, and his lawyer declined to comment, citing ongoing litigation with Pajon and another client. He has acknowledged in court filings that he failed to file tax returns and, in a deposition last month, blamed his sudden success.

“I was overwhelmed by work flow,” he testified.

Those who know Larkin describe an understated, conservative presence in a business of flash and noise. He drove a Prius, dressed in unremarkable suits and lived for years in a modest Sherman Oaks condominium by the Ventura Freeway.

In a club, he could stretch one cocktail out over an entire evening, said Murphy, who occasionally socialized with him. Asked in a deposition last year if Larkin gambled a lot in Las Vegas, one longtime employee laughed in disbelief.

He shared a Sherman Oaks office with his father, John, a veteran business manager, an arrangement some clients found heartwarming and reassuring. (John Larkin came under police investigation this week following a Times report about his handling of an elderly heiress’ affairs.)

Sean Larkin’s long-standing relationship with the Peas, whose gold records and photos once decorated his office, was his calling card. Although singer Stacy “Fergie” Ferguson had her own business manager, Larkin handled the affairs of the group, its other members, and associated musicians. At industry events, he was frequently with the Peas and he spoke of traveling around the world to see them.

In an unusual move, frontman will.i.am gave Larkin an associate producer credit on the “Yes We Can” video he made in support of Barack Obama’s 2008 campaign. Larkin, a registered Republican, voted in the GOP primary the same week the video launched, records show. When it won an Emmy, he was at will.i.am’s side to pick up the award.

Larkin’s professional relationships often grew into friendships. When Larkin got married, the late celebrity deejay Adam “DJ AM” Goldstein performed. When Pajon married, Larkin delivered a toast.

“It’s just obscene to me,” Pajon said. “He knew what he was doing and had no problem speaking at my wedding.”

The erosion of Larkin’s position as a trusted advisor to the Peas and others is detailed in court filings, breach-of-contract suits by Pajon and another client, a Fox executive, and a defamation claim that Larkin filed against an attorney.

In spring 2009, the Peas learned that the California secretary of state had suspended the band’s corporate entities because of delinquent taxes. It quickly emerged that Larkin had not filed tax returns for at least five years — a period in which the Peas had toured constantly; sold millions of records; signed endorsement deals with Apple, Best Buy, Verizon and other major companies; and brought in tens of millions of dollars.

Lawyers for Larkin would later call the failure to file returns “an inadvertent oversight.” Larkin told Pajon that the Peas had gotten too big too fast for him to handle, the guitarist said. Larkin apologized, agreed to pay the money owed and asked the group to “keep it in the family,” according to Pajon’s complaint.

A former Larkin employee, Jean-Luc Tahou, said Larkin didn’t appear worried. “He said that he had it under control,” Tahou said in an interview.

But, according to Pajon’s complaint, Larkin reneged on his repayment plan. That fall, an attorney for some band members sent an anonymous letter to Interscope, the group’s record label, accusing Larkin of mishandling the Peas’ money, according to court filings.

Larkin filed a defamation suit against the attorney, Helen Yu, asserting that she was trying to poach his clients. Yu’s lawyer responded in court papers that Yu was attempting to save the group from Larkin, who “has failed to meet his most basic obligations of a business manager.”

Beyond the failure to file taxes, Yu alleged, Larkin had not kept accounting ledgers on the Peas’ income and had hidden or lost millions. Larkin initially sought $5 million in damages, but as the trial neared and Yu’s lawyers pressed him to turn over records, the two sides settled the case on confidential terms. In an email, Yu said she paid Larkin nothing.

“My reasons for settling were purely practical,” she wrote, citing “substantial legal fees.” She added: “I stand by my actions.”

Larkin continued to handle the Peas’ affairs for some time, but one by one, band members left.

“When you do an act like that, it’s just grounds for termination and he’s gone,” said Polo Molina, the Peas’ manager. Representatives for Interscope declined to comment. A publicist for will.i.am did not return messages.

Others were also asking questions about the filing of client tax returns. After Goldstein, the celebrity deejay, died in 2009, lawyers for his mother discovered that he hadn’t filed returns for several years and owed $89,000 in back taxes, probate records show. Goldstein’s mother, Andrea Gross, said Larkin, whom she called “a really nice guy,” told her that her son hadn’t given him the information to complete his taxes.

“He can only do so much,” Gross said of Larkin.

Others were less understanding. TV executive Darlene Lieblich Tipton was one of many clients who had their mail sent to Larkin’s office. In a 2010 suit, still winding its way through the courts, Tipton said Larkin never gave her letters from the Internal Revenue Service — more than 100 by her attorney’s count — demanding payment of delinquent taxes. It wasn’t until the agency sent a registered letter to her residence that she learned her tax returns had not been filed for nearly a decade and that she owed nearly half a million dollars, according to her complaint.

In a February deposition in her case, Larkin said he “got in over my head with the amount of clients I had.”

“I always thought I would be able to take care of the issue,” he testified.

Laura Dawn Murphy said that years after she hired Larkin, she and her husband changed their mailing address from Larkin’s office to their residence and soon after received a letter from the IRS demanding payment of delinquent taxes. “Sean said, ‘It’s a mistake,’ ” Murphy recalled. “He was really good at giving you … the sense that he’s going to take care of it right away.”

But Larkin didn’t, according to the Murphys and public records. Tax authorities froze their bank accounts and garnished their wages. Their returns had not been filed for six years, and with penalties and interest, their bill had mushroomed to more than $200,000, lien records show. Murphy, who now works at Moveon.org, said it will take them a decade to pay off the debt.

“The IRS has been so aggressive with us, but nothing is being done about Sean,” she said.

Agents from the IRS’ criminal investigation division in Los Angeles, working with federal prosecutors, have collected records related to Larkin’s management of client money, according to two people familiar with their efforts. An IRS spokeswoman said the agency could not comment.

Some Larkin clients may be unaware of unpaid tax bills.

“I have tax liens?” said a longtime client, veteran TV executive Susan A. Banks, after The Times inquired about more than $100,000 in federal and state tax liens filed against her since 2008. “I was unaware of this. I need to make a call. I have to hang up right now.”

Asked about a $35,000 lien filed against him last fall, Chris J. Clancy, manager of the rap act Odd Future, said he never received a notice, which was sent to Larkin’s office. Later, he sent emails saying he had talked to Larkin and realized he had known about the lien. “Sean is rectifying this,” he wrote.

Molina, the Peas’ manager, called a $22,000 lien filed against him a year ago and paid off in November “news to me.”

The Peas have new business managers, but several Peas’ corporations that list Larkin’s office as their address remain suspended. BEP Music, was slapped with a $60,000 lien last summer. An attorney for the group, Ken Hertz, declined to answer questions about the tax bill or the Peas’ relationship with Larkin.

“Assuming some, or all of the allegations you are making are accurate, our clients might be in a position to pursue legal action to protect their interests. We must therefore refrain from commenting publicly,” he wrote in an email.

By his own account, Larkin doesn’t have the money to pay anyone’s taxes. At the recent deposition, he listed assets of a heavily mortgaged condominium, two cars, furniture, office equipment and bank accounts containing less than $10,000. He said he owed credit card companies at least $120,000 and lawyers $100,000. Asked when he last filed an income tax return for himself, he replied, “I don’t recall.”

Pajon said he has hired a forensic accountant to track down money he entrusted to Larkin, including amounts removed each spring to pay taxes he now knows were never filed.

“Everybody around me hates him, but I can’t,” Pajon said. “I want to believe there is some reason for this.”

harriet.ryan@latimes.com