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January 06, 2006

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Publication Date: Friday, January 06, 2006

Shoreline owners on defensive now Shoreline owners on defensive now (January 06, 2006)

In retrospect, Bill Graham Presents might not have shorted the city out of a few hundred thousand dollars each year if it knew it would face such a high price for it. The Clear Channel subsidiary that operates Shoreline Amphitheatre is headed for a February trial that could cost it tens of millions of dollars, or leave the city with a whopping legal bill.

Before it came to this, there were numerous opportunities to settle, but the Texas-based media giant decided to take on Mountain View, apparently thinking that a high-priced legal team could easily squash the city's claims that it intentionally withheld up to $400,000 a year on its Shoreline rental contract over a six-year period. Clear Channel's team held nothing back, mounting a full-court press against virtually every legal move made by the city, including a period when Clear Channel lawyers deposed all city officials quoted in Voice stories published about the case. On one occasion, former city council member Rosemary Stasek was served with a deposition order just hours after returning home from a trip to Afghanistan.

In its attempt to prove its case, the city has had to spend a lot of money. It refuses to say how much, and Clear Channel desperately wants to know, but the total includes more than $181,000 for an audit of the amphitheater's finances. The auditors found, among other things, that Clear Channel may have intentionally misstated its income in order to lower its rent obligations, mainly payment to the city of 6.75 percent of all revenues.

And now, despite frantic efforts by Clear Channel attorneys to have the case thrown out or at least pared down, Superior Court Judge William Elfving has ruled that most of the city's charges deserve to be heard in court, starting next month. If the charges are upheld -- and there is always the possibility of an out-of-court settlement -- they will show that Clear Channel knew exactly what it was doing in underreporting its revenue at the amphitheater by more than $20 million. Here is a partial list of what the city alleges:
* The company underreported ticket and concession sales on a regular basis * The company illicitly rented out Shoreline to Clear Channel-owned radio stations for several shows each year, and hid the money it collected * The company assessed a part of each ticket for "parking" in order to exclude that portion from rental payments * The company took in-kind payments from sponsors that it refused to report as revenue, despite doing so for purposes of its own internal accounting.

Whether any or all of these charges will hold up is impossible to predict. One thing is clear: Clear Channel has a lot of explaining to do.

Mountain View may be the first city to fight back, and if it wins, Clear Channel will very likely have to pay all the city's costs, including the audit and attorney's fees. And if the racketeering charges stand up, the city is eligible to recover triple damages, which could drive the penalty into the multi-million-dollar range. That would be a huge return on what started out as a simple disagreement over rent.


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