PHOENIX (CN) - Brian "Head" Welch, former lead guitarist for metal band KoRn, claims his attorney kicked him out of a music group that he helped form, forced him to buy touring merchandise at inflated prices, and conspired to convert and take ownership of his master recordings.
Welch, who claims he is "universally credited with pioneering the unique sound that helped make KoRn one of the most successful and iconic rock groups of all time," says W. Greg Shanaberger, his friend, attorney, business and investment adviser and agent, misrepresented multiple terms of his business venture, co-defendant Driven Music Group, to persuade Welch to devote his "economically valuable name recognition and accumulated good will."
Welch claims in Maricopa County Court that Shanaberger told him that Driven Music Group "would be a true, full service music label, with Welch as the featured artist," that it would be a joint, equal venture between Shanaberger, his friend Mark Nawara and Welch, and the "three owners would contribute equally to the initial funding/start-up of the company." Nawara also is named as a defendant.
Welch says Shanaberger claimed that "Head Touring Inc. would be established as the corporate vehicle for Welch's touring and merchandising business," that the three men would equally manage Driven Music, and that "Welch could rely upon Shanaberger and Nawara to ensure Driven was run fairly, efficiently and with expertise."
Shanaberger made himself and Nawara each one-third owners of Driven Music, gave themselves ownership stakes in Head Touring, and made themselves members of both boards of directors, according to the complaint.
Welch claims Shanaberger structured Head Touring to give himself and Nawara share of control and revenue although "the industry standard is for the artist to retain 100 percent of the touring and merchandise income."
Shanaberger's agreements required Welch to buy merchandise through Head Touring at an inflated price, far above industry standards, "for which Shanaberger and Nawara reaped the benefits," according to the complaint.
Welch adds that Shanaberger wrote the Driven Music and Head Touring agreements "to list his fiancée, [defendant] Ana Alatorre, rather than himself as the shareholder and board member of both corporations" in order to hide "his fraudulent, unethical and illegal behavior."
Driven Music's records show that Shanaberger, not Alatorre, "received shareholder distributions, made shareholder loans, acted on behalf of Driven, and controlled more aspects of the company's operation," Welch adds.
Shanaberger wrote the recording agreement between Welch and Driven Music, calling it "standard boilerplate B.S.," and discouraging Welch from reading it, Welch claims.
Welch says the agreement "is in fact predatory, unconscionable, and constitutes self dealing - particularly when drafted by an attorney in order to benefit himself at the expense of his client," and that "Shanaberger drafted the recording artist agreement to effectively rob Welch of his master recordings, which were worth upwards of $600,000."
Welch claims he received nothing in return for his master recordings - no "compensation, security interest, credit as a shareholder contribution, promissory note - nothing. No other owner made any similar contribution."
Welch says that when he was able to get access to some of Driven's financial records, the "documentation established that Shanaberger and Nawara were actively and intentionally defrauding Welch. For example, on April 17, 2008 and May 2, 2008, all three owners received payments of $10,000. Shanaberger and Nawara each received the money as a payment. However, only Welch's was classified as a 'recording advance,' meaning that it was allegedly 'recouperable' and had to be repaid."
Welch, under pressure from Shanaberger, agreed to take out a loan for Driven Music from defendant Dr. Lee Laris, the complaint states.
Welch says the "terms of the loan are unconscionable and, as implemented, are designed and intended to enrich Laris, Shanaberger and Nawara at Welch's expense."
Welch claims that while Shanaberger claimed that he and Nawara were also responsible for the loan, Welch was the only one who signed the security agreement, and Laris, a friend of Shanaberger, "has made no efforts to obtain funds from, and has taken no collection actions against Driven, Shanaberger or Nawara."
Shanaberger also allegedly drafted the Driven Music buy-sell agreement, and advised Welch that it "is a standard agreement so that if someone wants out, the remaining shareholders, or the company have the first opportunity to purchase the departing shareholder's stock. Pretty standard stuff."
And Welch says that Shanaberger's legal counsel did not tell Welch that the agreement allowed Shanaberger to expel Welch from the company, which he later did.
The Driven Music Group Website claims to represent Welch, and industrial rock bands Godhead and Crossbread, among other musicians.
Welch seeks punitive damages, appointment of a receiver, dissolution of Driven Music Group, and the appointment of a receiver, and costs. He alleges 27 causes of action, including fraud, conspiracy, conversion, breach of contract, unjust enrichment, aiding and abetting tortious conduct, mismanagement, shareholder oppression, self-dealing and negligent misrepresentation.
Welch is represented by Cameron Hall.Follow @jamierossCNS
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.