Recording Academy Paid $4.5M in Legal Fees in 2019, Filings Show

Firms Greenberg Traurig and Proskauer Rose alone were paid more than $2.5 million, according to the nonprofit’s IRS filing for the 2019 fiscal year.

The Recording Academy paid $4,522,077 in legal expenditures from August 2018 to July 2019, according to the nonprofit’s most recent 990 filing with the IRS — with 65.6% of that total going to two outside law firms accused by former chairman/CEO Deborah Dugan of receiving “exorbitant” fees.

The academy has been criticized for continuing to pay millions to outside law firms when it could hire in-house counsel. During an October roundtable discussion with academy interim president/CEO Harvey Mason Jr. and chief diversity, equity and inclusion officer Valeisha Butterfield Jones, omalilly projects founder Binta Niambi Brown and others, Brown told Billboard that she had been in talks to become the academy’s in-house counsel before Dugan was fired. This would have translated into “substantial savings” for the nonprofit, Brown said in a separate interview. 

The 990 filing covers fiscal year 2019 for the academy, which ended July 31, 2019, the day that Neil Portnow’s contract expired, and he stepped down as chairman/CEO. 

Dugan’s short-lived tenure as Portnow’s successor began Aug.1, 2019, and her salary — as well as any changes in expenditures that occurred under her short-lived tenure — are not indicated in this filing. 

Five days after being put on administrative leave on Jan. 16, 2020 — just 10 days before the 62nd Grammy Awards — and eventually terminated, Dugan filed a discrimination complaint with the Equal Employment Opportunity Commission (EEOC). According to Dugan’s EEOC complaint, she learned in May 2019 that “[Joel] Katz and his law firm [Greenberg Traurig] are paid an exorbitant amount of money by the Academy.” She accused the academy of being “boys’ club network” — a place “where men work together to the disadvantage of women and disenfranchised groups in order to line their own pockets and maintain a firm grip of control on the Academy’s dealings.” 

“This is evident in many ways,” the complaint elaborated, “including, but not limited to, the Board’s willingness to acquiesce to the payment of exorbitant legal fees to male partners of large law firms who are extremely conflicted with respect to their work for the Academy.”

Dugan is still engaged in arbitration proceedings with the academy, according to sources. Sources say that Greenberg Traurig and Proskauer Rose continue to conduct legal work for the academy.

During the Billboard Roundtable, Mason said that the academy had considered hiring an in-house counsel “for probably the last five or so years,” But he added that it was not a decision he could make unilaterally. “The finance committee, the trustees — these are decisions that would go beyond just the CEO or even the chair. It is something that we are evaluating,” he said. 

Dugan’s EEOC complaint claims that she was removed from office, not because of complaints that she had bullied coworkers, but because she raised concerns about “egregious conflicts of interest, improper self-dealing by Board members and voting irregularities with respect to nominations for Grammy Awards, all made possible by the ‘boys’ club’ mentality and approach to governance at the Academy.”  

In addition to Katz and Greenberg Traurig, Dugan’s EEOC complaint contends that media reports have identified Proskauer Rose (and former Proskauer Rose partner, Chuck Ortner) as another firm that has billed millions of dollars to the Academy.”

“Both Mr. Katz and Mr. Ortner are currently Board members of the Academy’s museum,” the report continues, claiming that “during the first week of her employment Ms. Dugan was asked to approve a $250,000 retainer agreement to Mr. Ortner for “consulting” services.”

The academy’s most recent 990 shows that 65.6%, of the legal fees the academy paid in fiscal year 2019 went to those two firms: Greenberg Traurig received $1,472,364 and Proskauer Rose received $1,035,240l, of a total $4,522,077 in legal fees — of which, according to the Recording Academy CFO Wayne Zahner, $700,000 was an amortization from the CBS contract negotiation that was paid prior in 2017. (Zahner says $5 million was paid to Greenberg Traurig for the CBS deal, less than 1% of the contract value.)

With the exception of 2016, those totals are in line with the amounts paid to the two firms over the last three years. According to the last six 990 filings, Greenberg has been paid $13,144,028 in legal fees and Proskauer Rose $3,644,576 since 2013:

• 2017: The academy paid Greenberg Traurig $1,758,388 and Proskauer Rose $906,691 of a total $3,737,440 in legal fees. 
• 2016: Greenberg Traurig was paid $6,309,936. (The significant increase may related to the academy’s negotiations to extend CBS’ broadcast of the Grammys through 2026, given Mason’s comment during the Roundtable that, “We’ve done two contracts with CBS — deals that were in the hundreds of millions of dollars — and the commissions from those deals are part of the legal fees we paid over the last few years.) Proskauer Rose received $873,611. Legal fees totaled $3,922,593 that year.
• 2015: The academy paid Greenberg Traurig $1,167,029 and Proskauer Rose $829,034 of a total $2,169,229 in legal fees.
• 2014: The academy paid Greenberg Traurig $1,107,705 of a total $1,925,119 in legal fees (Proskauer Rose is not listed in the filing). 
• 2013: The academy paid Greenberg Traurig $1,328,606 of a total $1,824,446 in legal fees (Proskauer Rose is not listed in the filing).

By comparison, the Academy of Motion Pictures’ most recent 990, indicates a total of $1,724,551 in legal fees in 2018. That included $313,137 for an in-house general counsel and additional legal fees of $1,411,414.

The Recording Academy’s fiscal 2019 filing also indicates that its income from the Grammys totaled $82,984,592 and that it spent $22.4 million in salaries and employee benefits in 2018 — including Portnow’s $1,174,972 base salary. It also paid $17,822,438 to AEG Ehrlich Ventures, which produced the Grammys telecast, and distributed $8 million in grants.

Greenberg Traurig and Proskauer Rose did not provide comment at time of publishing.

UPDATE: This story was updated at 8:20 EST on Dec. 15 to correct the total legal fees for the 2019 fiscal year as $4,522,077, not $7,029,681 million as previously published, as well as note the $700,000 amortization from the CBS contract negotiation. The original article counted what’s listed as additional legal fees in addition to the payments to Greenberg Traurig and Proskauer Rose, but their payments are actually included in that total.