After extracting millions of dollars and a new lease from concert promoter Live Nation, the city is preparing to go to court again over accounting at Shoreline Amphitheatre, this time with a lawsuit against the auditing firm that city officials say helped cover up the venue’s questionable record-keeping practices.
City attorney Michael Martello announced at the end of last Tuesday’s city council meeting that the city had decided in closed session to initiate litigation against “one or more defendants.”
Martello told the Voice that he expected to file the lawsuit against auditing firm Daoro, Zydel & Holland by the end of the month.
“The city council has an obligation to protect the financial interests of the city, and an auditor retained to assist in that regard is expected to perform in a manner consistent with that obligation,” said Mayor Nick Galiotto.
Daoro had served as the city’s independent auditor for years, responsible for ensuring that the operator was paying all of the money it owed under the percentage rent provision of the lease.
But unbeknownst to the city, the venue operator, Bill Graham Presents, had also hired Daoro to audit the same records for the company. As a result, the firm was in a position to help BGP cover up potential disputes without ever informing the city or the public.
“It was real clear they were not watching out for our interests,” said Martello. “Rather than turn to us, they turned to the client, and resolved them pretty much always against us.”
The city first learned about Daoro’s agreement with BGP last year, as part of the pretrial discovery in its bitter lawsuit with BGP parent Clear Channel. The city promptly fired the firm, and the two sides have had no contact since a deposition last fall.
In a stinging indictment of the firm, city finance director Bob Locke wrote in a new, city-sponsored audit report that Daoro had compromised its independence and violated “a foundational principle of the audit function.”
They were “working both sides of the fence,” Locke told the Voice. .
The San Francisco-based firm has not responded to several requests for comment.
After the new audit report, prepared by Los Angeles-based Alix Partners, accused BGP of concealing more than $80 million in revenue, Clear Channel spin-off Live Nation settled the case in May for a lump sum payment of $10 million, and agreed to an annual lease payment of $1.8 million for the next 15 years. As part of the settlement agreement, the city reserved the right to sue Daoro for its alleged misconduct.
E-mail Jon Wiener at jwiener@mv-voice.com
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