(CN) - Pop star Rihanna claims in court that her former accountants' blatant mismanagement cost her millions on her 2009 Last Girl on Earth tour and got her audited by the IRS, while they charged "exorbitant and excessive" commissions.
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Robyn Fenty aka Rihanna and her concert touring company, Tourihanna, sued Berdon LLP and its certified public accountants Michael Mitnick and Peter Gounis in federal court in Manhattan for fraud, professional negligence, breach of contract, breach of fiduciary duty, unjust enrichment.
In 2005, when she was 16, Fenty says she hired Berdon for accounting and business management services, and extended their agreement in 2007 and 2009.
She continues: "On February 1, 2010, Fenty entered into a fourth written engagement agreement with Berdon, pursuant to which defendants agreed they would provide certified public accounting and other services. In the 2010 Engagement Agreement, defendants again agreed, among other things, to review investment opportunities upon Fenty's request, to advise her of their economic and tax implications and income potential and to invest excess funds in short term securities to maximize Fenty's return on her funds.
The singer says Berdon had an unusual system of making commissions off her money, and that the accounting firm hid the true state of her finances from her in order to keep the commissions rolling in.
"Under the Engagement Agreements, defendants earned 'commissions' based on a percentage of Fenty's gross receipts. Plaintiffs are informed and believe, and on that basis allege, that this type of arrangement was not standard for the accounting and business management industry, and that defendants' 'commissions' were exorbitant and excessive. Plaintiffs are further informed and believe, and on that basis allege, that this financial arrangement motivated defendants to conceal material facts regarding plaintiffs' finances from them, in that, had they known the true facts regarding defendants' negligence and wrongful conduct, as alleged herein, plaintiffs would have terminated defendants, thereby depriving defendants of their 'commissions.' Moreover, defendants drafted the Engagement Agreements without negotiation or review of their terms, including terms governing compensation, by independent financial and legal professionals chosen by Fenty.
And the firm took on extra duties while neglecting to paint an accurate picture of her financial situation, Fenty says.
"Plaintiffs are informed and believe, and on that basis allege, that from 2005 through 2010, defendants assumed business management, accounting and advisory roles well beyond the services provided for in the written Engagement Agreements and, in providing their services to Plaintiffs, exerted substantial control over Plaintiffs' financial affairs.
"Plaintiffs are informed and believe, and on that basis allege, that in providing these services to plaintiffs, defendants failed to follow applicable industry standard accounting and business management practices, as alleged herein. In particular, plaintiffs are informed and believe, and on that basis allege, that, among other omissions and failures, defendants' recordkeeping and accounting methods failed to provide sufficient information and/or detail regarding, and/or failed entirely to account for, Plaintiffs' revenue and expenses and failed to ensure maximization of Plaintiffs' revenue and Fenty's personal net worth and long term wealth.
Berdon formed her touring company without planning for its taxes and transferred money between her companies without accounting for the transfers, Fenty claims.