BANGLADESH: THE BENEFIT THAT ALMOST WASN’T

The need was immediate, sitarist Ravi Shankar told his friend, Beatle George Harrison. Floods had killed 40,000 people in Shankar’s native Bangladesh. Millions were homeless. The scope of the disaster exceeded human imagination.

That conversation took place not last week, after nature went on a rampage with a killer cyclone and flooding that devastated Bangladesh and killed tens of thousands.

It took place 14 years ago, when flooding ravaged Bangladesh and Third World poverty was a subject that concerned few Americans.

Shankar’s pleas moved Harrison to organize a benefit concert. It was decided that the proceeds would be pledged specifically to help children. That would make it politically less risky, since Bangladesh then was ravaged by civil war and the United States didn’t recognize the emerging government.

The 75 stars, including Bob Dylan, Ringo Starr and Eric Clapton, billed themselves George Harrison and Friends. They staged the heralded Concert for Bangladesh on Aug. 1, 1971, in Madison Square Garden.

For the first time, rock ‘n’ roll met charity on a grand scale. It opened a new era of rock musicians as philanthropists who were as interested in helping Third World multitudes as in finding groupies and tax shelters.

The Concert for Bangladesh began a rock-star movement beyond the love-and-peace theme of opposing America’s war in Vietnam to espousing the cause of the Third World poor, whose plight lacked the drama, as well as the popular and media attention, of combat.

The concert, a three-disc album and audio cassette and a film held the promise of millions of dollars to aid the children of Bangladesh. Americans responded generously. The concert--actually there were two that day--quickly sold out, and the press even donated $12,000 instead of just accepting the usual free tickets for covering a concert.

So far, nearly $12 million has been sent to Bangladesh as a result of the concert proceeds and subsequent investments.

But there was one major problem: 85% of that money did not get to to Bangladesh for more than a decade, long after the 1971 flood waters had ebbed and a stable government assumed power, according to reports by the U.S. Committee for UNICEF.

During those years, more than eight million Bangladeshi children died of starvation and disease, according to an estimate by UNICEF, the permanent United Nations fund for children.

The catastrophic delay arose because the proceeds were handled by a profit-making company--the Beatles’ record concern, known as the Apple Corp.--instead of a legally qualified charity. (The Beatles’ business has no connection to the Apple Computer firm.)

Flinty eyed auditors from the Internal Revenue Service, reviewing Apple Corp. records, looked skeptically at claims that the Concert for Bangladesh money consisted of tax-exempt charity dollars. They ruled it was business income and thus taxable, according to an attorney at the U.S Committee for UNICEF.

Untangling the mess took 11 years.

How profits got in the way of charity in the Bangladesh concert--and how Uncle Sam took some of the money--illustrates how the most charitable of intentions can go awry.

The problems that tied up the proceeds hold important lessons for Americans buying records and products, as well as donating money, to the rapidly proliferating groups organized by entertainers to help Earth’s destitute multitudes, as well as to other charities.

Just how much money could, or should, have gone to Bangladesh remains a mystery because the principals refuse to divulge basic information about the concert finances.

How much the concert, recordings and film earned in gross revenues, how much costs totaled and what those costs were, how much was paid in taxes and penalties, at what interest rates the proceeds were invested and other basic information is all being kept secret by the principals.

There is no suggestion that any of the proceeds were diverted or misused, especially since they were under watchful IRS eyes for more than a decade.

But beyond that, about all that is known for certain is that to date just under $12 million has been turned over to the U.S. Committee for UNICEF, $10 million of it since 1982.

Further complicating matters, both the Beatles’ manager and promoter were indicted in Manhattan on federal income tax charges for allegedly selling thousands of promotional copies of the Bangladesh album and pocketing the proceeds. Ultimately one of the men pleaded guilty and testified against the other, who was acquitted.

The promoter, Peter Benadetto, who works under the name Pete Bennett, pleaded guilty in 1977 and testified against Allen Klein, who was then the Beatles manager. Bennett was hailed as the “World’s Top Entertainment Promotion Man” in a 16-page special advertising section in Billboard magazine last October filled with adulatory advertisements bought by business associates and performers.

Bennett pleaded guilty and a federal judge temporarily sealed the court record after Bennett’s lawyer expressed concern that Bennett or his family might be harmed. No harm ever came to Bennett.

Thomas Engel, a former assistant U.S. attorney who prosecuted Klein for income-tax evasion at his first trial, said the government alleged that “Klein got 10,000 promotional copies of the Concert for Bangladesh album and he and Bennett sold them and pocketed the proceeds.”

Klein’s trial ended with a hung jury. A second jury acquitted Klein on five income-tax evasion charges related to the Bangladesh album, but did convict him on another tax charge, filing a false tax return in 1970.

Klein told The Times he never sold promotional recordings or took money from Bennett for such sales, as Bennett testified.

U.S. District Judge Vincent L. Broderick sentenced Klein to two months in prison the false tax return charge. Judge Broderick said in passing sentence in 1977 that he took into consideration his belief that Klein “lied during the trial.”

A dispute among the Beatles over whether their manager should be Klein or a New York attorney who is related to Paul McCartney by marriage has been widely cited as one of the key factors that broke up the Beatles.

In a telephone interview, Klein took full credit for arranging the Concert for Bangladesh deal and contracts.

He blamed the IRS for tying up the proceeds on what he characterized as frivolous grounds. And he said the IRS audit of the Apple Corp. was prompted by a 1972 New York magazine article that raised questions about whether $1.14 from every Bangladesh recording was unaccounted for. Klein filed a libel suit against the magazine and writer Peter McCabe, but Klein said he did not pursue it.

Klein added that if he had it to do over again, he would have handled it differently. Instead of having Apple Corp. put up the cash to finance the Concert for Bangladesh, Klein said, he would have had Apple make a donation to the U.S. Committee for UNICEF so the committee, a properly qualified charity, would have been the undisputed sponsor of the event.

That way, Klein said, the IRS would have been less likely to tie up the money in an audit.

Ever since a BBC news crew filmed the plight of starving Ethiopians and caught the media attention of the Western World last fall, singing stars have been donating their time and talents to help the Ethiopians and other victims of drought and civil war in East Africa.

Last week’s cyclone in Bangladesh--which hit hardest the poorest of the poor who lived in low-lying lands near the Indian Ocean--already has rekindled memories of the Concert for Bangladesh and suggestions that the album and film be actively marketed again.

(Recently the concert film became available in videocassette, a technology not commercially available in 1971, because of George Harrison’s determined efforts to get the necessary contractual releases from the performers and their recording companies.)

Officials of the United Support of Artists for Africa Foundation and other musician-led charities anxious to help the poor both in the Third World and in America say their efforts would be seriously harmed by a repeat of the kind of errors made by the Concert for Bangladesh principals.

So far, USA for Africa has $10.8 million in the bank and expects eventually to raise $45 million. The British Band-Aid rock relief effort has raised about $10 million with its “Do They Know It’s Christmas” recordings.

Marty Rogel, who previously ran the world-hunger charities founded by the late singer Harry Chapin and has been a consultant to other relief and development organizations, was hired by USA for Africa as its executive director because of his knowledge of how to organize a legally qualified charity. Attorney Jay Cooper of the Los Angeles law firm of Cooper, Epstein and Hurewitz has donated his services to deal with the complex legal problems.

Before recording the ubiquitous “We Are the World,” superstar manager Ken Kragen also took steps to avoid the kinds of contractual problems that complicated the Concert for Bangladesh proceeds. Key among these, say Rogel and others, was getting the singers to sign contracts before, rather than after, they performed.

Significantly complicating the Concert for Bangladesh recording deal was the fact that, at the time, Klein was engaged in negotiating other business deals with Capitol Records, according to Meggs Brown, who was then Capitol’s vice president for marketing. Capitol was the distributor of both the Bangladesh album and Beatles albums.

Further, CBS Records demanded 25 cents on each copy of the Bangladesh album from Capitol as a “use royalty” for allowing Bob Dylan’s songs to be included. This money didn’t go to Dylan, his attorney said at the time, but to CBS Records, which distributed Dylan’s recordings.

Organizers of other entertainment-industry groups who have come to Rogel for guidance have expressed a desire to avoid repeating the Concert for Bangladesh’s mistakes, Rogel said.

And unlike the secrecy surrounding the Bangladesh money, USA for Africa has disclosed extensive financial data.

The three-record Concert for Bangladesh album sold for $12.98. Capitol Records, which distributed it in the United States, said 949,384 copies were sold before it was pulled from release in December, 1983. CBS Records said it sold 213,770 copies of the $14.98 audio cassette.

In addition, there were revenues from the foreign recording rights and the movie that were not readily available.

Klein, the former Beatles manager who said he engineered the record deal, claimed that “the entire deal was structured” so that “the U.S. Committee for UNICEF got $5 on 90% of the records manufactured by Apple.” The usual practice, he noted, is to pay royalties based on the number of copies actually sold.

Meggs Brown, the former Capitol Records marketing vice president, and Capitol Chairman Bhaskar Menon said the Apple Corp. “controlled” how the proceeds were divided. Brown said his best recollection was that about $5 per recording was to go to the U.S. Committee for UNICEF.

But, Klein said, after he broke with the Beatles the deal he made may have been altered because “it so happened that the contract between the U.S. Committee and Apple did not get signed because the U.S. Committee wanted, and so did Apple, a tax clearance.”

If $5 was designated to go to the U.S. Committee for UNICEF for each of the nearly 1.2 million albums and tapes sold in the United States, it would have generated $5.8 million. But Klein said the $5 was for each recording manufactured , which would result in an even higher figure.

Klein said he believes at least 1.2 million albums were pressed and that he did not know how many tapes were recorded.

Most of the sales occurred soon after the recordings were released. The foreign rights and film would have generated additional money.

Whatever the actual sum held by the Apple Corp. during the 11-year audit, the money was invested and the interest added to the account, according to the U.S. Committee for UNICEF.

So just how much cash did Apple set aside for the U.S. Committee for UNICEF? How much was earned by investing this money? What did the costs total? What were the costs for? And how much did Uncle Sam take in taxes?

That’s all a mystery.

Neil Aspinall, who heads the Apple Corp., declined to talk to a reporter who spoke to his secretary in London six times. The secretary finally said that Aspinall wanted the reporter to speak to Martin Rabinowitz, a New York tax lawyer who worked for Apple on the audit.

“I assure you that if you had the details you would be entirely satisfied with how the money was handled, but I’m afraid I can’t speak about the specifics without a clearance from Apple,” Rabinowitz said.

Aspinall then was asked, through his secretary, to authorize Rabinowitz to disclose the details. Aspinall didn’t do so.

Robert D. McQuiston, the Philadelphia lawyer who now serves as general counsel to the U.S. Committee for UNICEF, likewise issued broad assurances that all was proper and said the UNICEF group agreed to the settlement between the IRS and Apple Corp. McQuiston said he is privy to all the details surrounding the Concert for Bangladesh proceeds, but isn’t authorized to disclose financial details.

Denis O’Brien, George Harrison’s London manager and business partner, also is privy to the financial details, according to the other principals. O’Brien didn’t respond to repeated requests for an interview.

McQuiston, who wasn’t involved in the concert matters until after the IRS audit began, characterized the IRS audit as a “garden-variety dispute in which the principal issue was whether the concert (and related) funds were earned and received by the Apple Corp. or by UNICEF. The problem arose because no one at the time paid much attention to the paper work and the IRS took the position that this was business income and taxes have to be paid on business income.”

Klein said he cannot understand why if it was only a “garden-variety dispute” it took the IRS and Apple Corp. 11 years to reach a settlement.

Klein said such a delay would be understandable, in his view, if all Apple Corp. dealings were being audited and the firm wanted to resolve all audit matters at one time. He said that after he left Apple, “I think they redid the deal I arranged,” further delaying release of the money.

McQuiston insisted that release of the Bangladesh money wasn’t delayed by other aspects of the IRS audit of the Apple Corp.

“I never understood why at least half the money didn’t get sent on right away,” Klein said. “The maximum tax liability was 50%, so why not just release half the money? How did Apple arrive at the amount they sent on? I have asked for that information, but I’ve never gotten it.

“If anybody has an obligation to tell, it is Apple,” Klein said, adding that “Apple should reveal exactly what the proceeds were, how much interest it earned.”

That’s the standard required for legally qualified charities when they file their tax returns, which are public record, unlike those of private concerns such as the Apple Corp.

The USA for Africa Foundation has adopted even more open policies, disclosing extensive information before being required to file its tax returns because, its founders say, they believe openness is the best policy when asking people to be charitable.