Speaker 1: Hey, guys, ready or not, twenty twenty four is here,
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Speaker 1: Would Boeing murder a whistleblower? My name is James Lee,
Speaker 1: and you're watching Beyond the Headlines on Breaking.
Speaker 4: Points this morning.
Speaker 1: Police in Charleston, South Carolina tel NBC News they are
Speaker 1: aware of the death of a former Boeing employee turned whistleblower,
Speaker 1: John Mitchell Barnett, a notable whistleblower known for his substantial
Speaker 1: safety and quality reports to the Federal Aviation Administration concerning
Speaker 1: Boeing's production of the seven eighty seven Dreamliner, who also
Speaker 1: appeared in the twenty twenty two Netflix documentary Downfall the
Speaker 1: case against Boeing, tragically passed away on March ninth, twenty
Speaker 1: twenty four. The mainstream media have mostly reported his death
Speaker 1: as an apparent suicide. Barnett was found dead in his
Speaker 1: car in the parking lot of his hotel on the
Speaker 1: final day of depositions in his whistleblower case against Boeing.
Speaker 1: The curious timing of his death have sparked some suspicions
Speaker 1: of foul play, and adding to that mystery, reports also
Speaker 1: indicate that he had previously cautioned a family friend not
Speaker 1: to accept any official narratives about his death as a suicide.
Speaker 3: He wasn't concerned about, thank you, because I asked him.
Speaker 3: I said, aren't you scared?
Speaker 2: And he said in his boy and hit the.
Speaker 3: Way he which are I ain't scared? He said, but
Speaker 3: if anything happens to me, it's not suicide.
Speaker 1: Joining us today is mode tactic. She is the investigations
Speaker 1: editor at The American Prospect who has done some fantastic
Speaker 1: reporting on Boeing. Thank you for being here.
Speaker 5: Thanks for having me. I really appreciate it.
Speaker 1: All right, we're not going to bury the lead today.
Speaker 1: Did Boeing put out a hit on whistleblower John Barnett?
Speaker 1: Obviously everything is still under investigation, but I know in
Speaker 1: your recent article you mentioned talking to a few of
Speaker 1: his old colleagues. Also, a former Boeing executive. What are
Speaker 1: their thoughts also at this point, what do we know
Speaker 1: for sure?
Speaker 4: Well, what we know for sure is that John Barnett
Speaker 4: was found dead in his Dodge Ram in the parking
Speaker 4: lot of a hotel where he was staying in Charleston,
Speaker 4: South Carolina, to give a deposition that had lasted.
Speaker 5: It was a three day deposition.
Speaker 4: He was on the third day and he was founded
Speaker 4: in his car from an apparently self inflicted gunshot wound.
Speaker 4: He was holding a silver pistol. My sense is that
Speaker 4: the pistol did belong to him, but that that hasn't
Speaker 4: been confirmed one way or the other. And there was
Speaker 4: something that was in the driver's seat that looked like
Speaker 4: something like a note. Again, the details of that have
Speaker 4: not really released yet, you know. So my first impression
Speaker 4: was that, oh, this, you know, this guy must have
Speaker 4: killed himself, right, I mean it kind of doesn't you
Speaker 4: know it? Really Like, I'm always open to the idea that,
Speaker 4: you know, you know, foul play might be there.
Speaker 5: I started to change my mind when I think.
Speaker 4: A lot of a lot of workers for former boat
Speaker 4: Boeing workers in both the factories and in the executive offices,
Speaker 4: were completely open to the notion that Boeing might have
Speaker 4: done it. I spoke to uh one of his former
Speaker 4: co workers in particular, who was very terrified. This person
Speaker 4: did not want to be identified, didn't want you know,
Speaker 4: anything that they told me to be you know, to
Speaker 4: make them identifiable. But this person told me that in
Speaker 4: this person and had you know, blow in the whistle
Speaker 4: at this same Boeing factory and dealt with a lot
Speaker 4: of fallout as a result of that. And this person
Speaker 4: told me straight up, if I die, you know, please
Speaker 4: like I'm There's no way I would ever commit suicide,
Speaker 4: like even if it is a car accident, like, please
Speaker 4: like get it investigated. I mean, that was just not
Speaker 4: what I expected. I didn't I did not expect anybody
Speaker 4: who worked at Boeing to think that Boeing would do this.
Speaker 4: There's incredibly bad morale within that company. Everybody who cared
Speaker 4: about the company for decades, sometimes a half century, you know,
Speaker 4: the people who have you know, I've written about Boeing
Speaker 4: for about five years on and off, and most of
Speaker 4: my sources you know, worked there for at least thirty years.
Speaker 5: They it was very close to their heart.
Speaker 4: And that's why, you know, when you hear when you
Speaker 4: talk to the old Boeing heads, they always bring up
Speaker 4: the McDonald Douglas merger. You know, this is twenty six
Speaker 4: years ago, but it feels like yesterday to a lot
Speaker 4: of these because that is when everything changed. And learning
Speaker 4: more about John Barnett, he was at this point in
Speaker 4: his in his case where the home stretch was in sight.
Speaker 4: He was really excited. He was thinking about writing a book.
Speaker 4: He was thinking about trying to, you know, do some
Speaker 4: sort of a podcast. He was thinking about, you know,
Speaker 4: finally enjoying his retirement for once. He was slated to
Speaker 4: likely you know, receive a fair bit of money because
Speaker 4: he'd been kind of pushed out of the company early.
Speaker 4: He had no real motive to kill himself, especially on
Speaker 4: day three of a three day deposition. On the other's hand.
Speaker 4: Of course, again, they did a very good job. Anyone
Speaker 4: who's seen the Octopus murders, you know, if somebody assassinated him,
Speaker 4: they weren't sloppy about it, you know, they they really
Speaker 4: did a very good job at making it look like
Speaker 4: a potential suicide. Of course, you know, there's a lot
Speaker 4: that we don't know. We don't know what that note
Speaker 4: looks like, that's extremely important evidence. We don't know what
Speaker 4: the you know, what the wound looks like. All of
Speaker 4: that has yet to come out.
Speaker 1: Yeah, do we have a I'm wondering if we have
Speaker 1: a timeline for the investigation. So you said it was
Speaker 1: the Charleston Police Department that's involved. Is it just them
Speaker 1: or they're federal agencies getting in on the action.
Speaker 5: No federal agencies as of yet.
Speaker 4: I you know, again, the law enforcement has has been,
Speaker 4: you know, repeatedly said hey, it's still under investigation, and
Speaker 4: everybody who knows anything, like his family and his lawyer,
Speaker 4: they've been pretty tight lipped because they don't want to
Speaker 4: antagonize the thing that I you know, that is a
Speaker 4: little bit bit troubling. I spoke with I'm a medical
Speaker 4: examiner in Jacksonville.
Speaker 5: And he said, you know, like in suicide.
Speaker 4: And one thing about suspected suicides is that generally the
Speaker 4: in a lot of you know, bigger areas these days,
Speaker 4: they don't actually have medical examiners doing the autopsies. Those
Speaker 4: autopsies are oftentimes performed by corner assistants. And I spoke
Speaker 4: to some a criminal profile or from you know, who
Speaker 4: haven't been with the FBI for a long time worked
Speaker 4: on the UNI bomber case, and this guy, Jim Fitzgerald,
Speaker 4: told me that.
Speaker 5: It seemed like it was the type of.
Speaker 4: The type of thing that, you know, if you were
Speaker 4: going to look at it as a potential assassination. The
Speaker 4: whole aspect, you know, that the whole saga made him
Speaker 4: think that it was like a warning sign. That it
Speaker 4: wasn't necessarily that they were trying to prevent him from testifying,
Speaker 4: since he had already given two days of depositions, but
Speaker 4: that they were trying to send out a warning to
Speaker 4: anybody else who might think about, you know, potentially blowing
Speaker 4: and the whistle themselves.
Speaker 1: Yeah, I wanted to ask you about There's one interesting
Speaker 1: quote that I read in your article. I believe it
Speaker 1: was an anonymous quote from a former Boeing executive and
Speaker 1: you wrote or he said that it's a top secret
Speaker 1: military contractor remember there are spies everywhere. And more importantly,
Speaker 1: there is a principle in American law that there's no
Speaker 1: such thing as an accidental death during the commission of
Speaker 1: a felony. I was wondering if you could expand on that,
Speaker 1: what did he mean by this?
Speaker 4: So here's the thing. And this is the broader context here.
Speaker 4: Boeing has been extraordinary lucky up till now. You know,
Speaker 4: three hundred and three hundred and forty six people passenger
Speaker 4: and crew died on seven thirty seven Max crashes in
Speaker 4: twenty eighteen and twenty nineteen, four and a half months
Speaker 4: apart unless identical crashes, and after the first one hundred
Speaker 4: and eighty nine died on a liner accident, they knew
Speaker 4: that there was something wrong. Everybody in Boeing knew that
Speaker 4: this was going to happen again. It was just a
Speaker 4: matter of when not if they did not. They should
Speaker 4: have obviously grounded the plane after the first one hundred
Speaker 4: and eighty nine passengers and crew died, That is obvious.
Speaker 4: They did not do that. Instead of doing that, they
Speaker 4: authorized twenty billion dollars in additional share buybacks and introduced
Speaker 4: a program to eliminate quality control. Essentially, so when they
Speaker 4: talk about the commission of a felony, they're talking about
Speaker 4: that the murder of those one hundred and fifty seven
Speaker 4: additional passengers. And this is a felony that required a
Speaker 4: lot of, you know, a pretty vast conspiracy to actually
Speaker 4: get away with because Boeing was under criminal investigation after
Speaker 4: the first mcast crash in twenty eighteen. The criminal investigation
Speaker 4: widn't understandably, after the second crash, it WI didn't to
Speaker 4: include the seven eight seven factory. It WI didn't to
Speaker 4: include an investigation that involved in you know, extensive interviews
Speaker 4: of John Barnett, and then didn't narrow. Then sometime in
Speaker 4: twenty twenty, the prosecutors that were handling the case against
Speaker 4: Boeing got changed and the case got transferred to Texas
Speaker 4: from New York Fraud Department, and Boeing ended up on
Speaker 4: January sixth, twenty twenty one. Understandably, this knit never made
Speaker 4: any headlines. But on January sixth, twenty twenty one, Boeing
Speaker 4: stein what is in as a deferred prosecution agreement, and
Speaker 4: the Justice Department essentially agreed to not prosecute Boeing because,
Speaker 4: as it said, you know, the problems that they found
Speaker 4: in the company were not systemic and they involved very
Speaker 4: few people. So while Boeing got away with it, you know,
Speaker 4: with this this real I mean, you can't even call
Speaker 4: it a slap on the wrist. It's it's like a
Speaker 4: risk massage.
Speaker 1: Yeah, I think you compared that, Yeah, I think you
Speaker 1: compared that to in one of your articles as like
Speaker 1: similar to the sweetheart deal that Jeffrey Epstein got in
Speaker 1: two thousand and seven. So I'm wondering, how how is
Speaker 1: Boeing able to secure such a deal from the DOJ.
Speaker 4: Well, it's it's not simply similar. It involves a lot
Speaker 4: of the same people. It involves, you know, very senior
Speaker 4: partners at the mega law firm kirk Ellis. Crucially, Boeing's
Speaker 4: chief criminal defense attorney in this case was the Deputy
Speaker 4: Attorney General under I believe it was mckayzy during the
Speaker 4: Bish administration who is the highest known official to sign
Speaker 4: off on Jeffrey Epstein's two thousand and seven non prosecution agreement.
Speaker 4: Both of those agreements were very similar in that they
Speaker 4: required lies, right, you know that the government actually lies,
Speaker 4: and it's the third prosecution agreement on Boeing saying that
Speaker 4: you know, there were no systemic problems everything that we found.
Speaker 4: You know, this is this is a solidly ethical company.
Speaker 4: Nothing happened. This is just provably false. And similarly with Epstein,
Speaker 4: you know, the I forget what the exact phrasing was,
Speaker 4: but that agreement actually indemnified all of his conspirators, even
Speaker 4: those who were not even named. Both agreements drafted by
Speaker 4: senior partners at Kirkland and Ellis and put together by
Speaker 4: a lot of there's a lot of cross pollination in
Speaker 4: those two agreements. In fact, the Merrick Garlands DOJ made
Speaker 4: the case that they aren't actually victims. The four people
Speaker 4: who died on Ethiopia three oh one, they were not
Speaker 4: actually the victims of the crime. The only victim of
Speaker 4: Boeing's crime is the FAA.
Speaker 1: Yeah. Yeah, it's a lot of disturbing details coming out
Speaker 1: right now. But before we wrap, I just I wanted
Speaker 1: to ask or I wanted to talk about Boeing's future
Speaker 1: for a minute, because I think it's important that maybe
Speaker 1: it's in America's best interest to have a competent commercial
Speaker 1: airline manufacturer. And we did see some leadership reshuffle after
Speaker 1: the Max crashes you were talking about in twenty eighteen
Speaker 1: twenty nineteen, and now we're also seeing another leadership reshuffle
Speaker 1: with Dave Calhoun. He's stepping down along with some other
Speaker 1: executives at the end of the year with some pretty
Speaker 1: robust exit packages. And then it all depends on it's
Speaker 1: like tied to the company's stock price in the coming years.
Speaker 1: So my question is can Boeing actually course correct you
Speaker 1: if stock performance is still the number one incentive that's
Speaker 1: driving executive compensation.
Speaker 4: I I don't really understand the stock I you know,
Speaker 4: I would say no, I would say that gowing that
Speaker 4: the stock price, there needs to be some sort of
Speaker 4: extreme management overhaul. When they did a point, I mean,
Speaker 4: it was very obvious. Calhoun was like it was like
Speaker 4: when Tim Geitner was nominated for Treasury Secretary. Pretty much
Speaker 4: everyone who knew who Tim Geitner was was like, oh God,
Speaker 4: this is nothing's gonna happen. No one's gonna get in
Speaker 4: trouble city for everybody is just going to get away
Speaker 4: with it. And that's what happened. And David Calhoun is
Speaker 4: a similar figure. He was the lead, you know, director
Speaker 4: of the board. He was the biggest. I mean he's
Speaker 4: a guy who worked at ge and Blackstone. He doesn't
Speaker 4: actually show up to the office ever. He changed where
Speaker 4: the office was. He you know, uses the perch to
Speaker 4: fly his plane around. I mean it's completely worthless piece
Speaker 4: of shit. You know, I say that without knowing it.
Speaker 4: But the latest trinity. Thing to say about Boeing is
Speaker 4: that what they really need is Larry Culp, the current
Speaker 4: CEO of GE. A sort of an irony because Boeing's
Speaker 4: three out of their last four CEOs have come from
Speaker 4: GE has been protegees of Jack Welch, and they've absolutely
Speaker 4: fucked the you know, Boeing just the same way that
Speaker 4: Jack Welch ultimately fucked GE by completely financializing it and
Speaker 4: refusing to grapple with the fact that building something that
Speaker 4: involves four million parts is not the same thing as
Speaker 4: you know, like manufacturing light bulbs or post it notes,
Speaker 4: which is what you know Narnie used to do. So
Speaker 4: I think that there is a real effort within the
Speaker 4: sort of you know, dog bos set to say hey, no,
Speaker 4: you know that actually the market can take care of this,
Speaker 4: and if they just hire the right guy, the right MBA,
Speaker 4: this guy Larry Culp, who maybe isn't as much a sociopath,
Speaker 4: who believe in building companies and putting them on the
Speaker 4: road to growth and who believe in quality. Because it
Speaker 4: has been such a you know, total it's very clear
Speaker 4: to like everyone in aviation now that Boeing actually can't
Speaker 4: build a plane that they have lost the ability to
Speaker 4: competently build an airplane, and that is like an existential
Speaker 4: problem and it's not reflected in the stock price. I
Speaker 4: think a lot of that stuff is, you know, the
Speaker 4: product of algorithms and and you know this sort of
Speaker 4: conspiracy of algorithms and fraud. Yeah.
Speaker 1: As a as an MBA myself, I can confirm a
Speaker 1: lot of sociopathic behavior that I see and they don't know.
Speaker 1: They don't think that's it's that way, but it is
Speaker 1: from outside looking in, it definitely is. Anyways, this is
Speaker 1: obviously developing stories, so I hope to have you back
Speaker 1: on really quick anywhere you want to point the audience too,
Speaker 1: if they want to find or if you want them
Speaker 1: to find more of your work.
Speaker 4: If you look at prospects dot org again and search
Speaker 4: for Boeing, I think you'll find a lot of my stories.
Speaker 4: I also write a lot about healthcare and you know.
Speaker 5: All kinds of things.
Speaker 4: So anything that involves the intersection of organized crime and finance,
Speaker 4: I like to sniffer out on those cases.
Speaker 1: Awesome, Well, everybody go follow mo. Thank you so much
Speaker 1: for coming on the show today.
Speaker 5: Awesome, Thank you so much for having me.
Speaker 1: That is it for me this week. If you're looking
Speaker 1: for more documentary style deep dives on various topics related
Speaker 1: to business, politics and society, you can follow me on
Speaker 1: my YouTube channel fifty one forty nine with James Lee.
Speaker 1: The link will be in the description below. As always,
Speaker 1: keep on tuning into breaking points and thank you for
Speaker 1: your time today.
Speaker 6: Hi, I'm author of monopoly focused newsletter Big and an
Speaker 6: anti trust policy analyst. In this Big breakdown, I'm going
Speaker 6: to ask the question, is Live Nation Ticketmaster, the company
Speaker 6: that controls most of the live entertainment industry, in fact
Speaker 6: a criminal conspiracy. You might think that's a bold question,
Speaker 6: and it is, But some explosive new documents just came
Speaker 6: to light that suggests that, well, it's a question worth asking.
Speaker 3: Let's dive in.
Speaker 6: In twenty ten, the live entertainment industry was in shock
Speaker 6: when Live Nation, the nation's leading concert promoter, bought Ticketmaster,
Speaker 6: which basically had a monopolist a monopoly over ticketing software
Speaker 6: and was a major player in artist management. It was
Speaker 6: a very controversial deal, and Ticketmaster had already bought out
Speaker 6: most of its other competitors in ticketing software and really
Speaker 6: upset Pearl Jam in the nineteen nineties was well known
Speaker 6: market power problem, but the government's Anti Trust Division under
Speaker 6: Obama allowed the deal to go forward anyway. In fact,
Speaker 6: seems like they were sort of proud of doing that.
Speaker 6: Let's take a look at this public picture that was
Speaker 6: put on the DJ's website, So that publicly released photo
Speaker 6: shows the head of the Anti Trust Division, Christine Varney,
Speaker 6: her number two William Cavanaugh, and their advisor Gene Kimmelman
Speaker 6: announcing that they were allowing that merger and talking to
Speaker 6: reporters about it.
Speaker 1: Now.
Speaker 6: The Biden Anti Trust Division is very different than the
Speaker 6: Obama Anti Trust Division, and they have been investigating Live
Speaker 6: Nation Ticketmaster, the firm that the Obama administration allowed to form.
Speaker 6: They've been investigating it for years. And when firmsby are
Speaker 6: being investigated, they tend to lawyer up, and so that's
Speaker 6: what Live Nation did, hiring an old anti trust lawyer
Speaker 6: named Dan Wall to represent them against potential monopolization charges
Speaker 6: that could be coming from the Anti Trust Division. Wall
Speaker 6: defended Live Nation publicly as part of a PR campaign
Speaker 6: earlier last month. In a blog post, he wrote that
Speaker 6: you might think that Live Nation charges a lot for tickets,
Speaker 6: but that's really just supply and demand for popular artists.
Speaker 6: The corporation itself charges low prices, not high ones. He
Speaker 6: even put up a comparison of commissions charged by online
Speaker 6: marketplaces from Twitch to Airbnb to Uber to show how
Speaker 6: little Live Nation charges.
Speaker 3: Let's take a look.
Speaker 6: You see Live Nation charges less than Twitch, stub Hub, Uber, Airbnb, etc.
Speaker 3: Etc.
Speaker 6: Concert promotion, Wall wrote, is not a highly profitable business,
Speaker 6: even for a Live Nation end quote. So look at
Speaker 6: that commission. It's a measly seven percent for Live Nation ticketmaster.
Speaker 6: No sure, Live Nation charges consumers a lot of money
Speaker 6: and doesn't pay much to artists. And this is Wall's argument,
Speaker 6: But they don't, he wrote, set the ticket price and
Speaker 6: even worse for Live Nation shareholders.
Speaker 3: At least, it's just not a very good business.
Speaker 6: Wall concluded, quote The narrative that ticketmaster fees are responsible
Speaker 6: for high ticket prices makes no sense. According to Wall,
Speaker 6: the middleman giant affects at most two percent of the
Speaker 6: price of a ticket for its trouble. Still, all of
Speaker 6: that that argument from Dan Wall from Live Nation ticketmaster
Speaker 6: feels weird. It sounds like it's not true, considering that
Speaker 6: Live Nation CEO Michael Rapino made one hundred and thirty
Speaker 6: nine million dollars in twenty twenty two. That's a lot
Speaker 6: of money for someone in just such a terrible business.
Speaker 3: Well, the reason it sounds.
Speaker 6: Like it's not true is because, well it's not true,
Speaker 6: or at least it's not true, according to new documents
Speaker 6: released by Congressman Bill Pascrell from litigation in twenty nineteen,
Speaker 6: based on Live Nation's own financial data. These documents are
Speaker 6: from a court case involving a concert at the New
Speaker 6: Jersey State Fair in twenty eleven. Now, I just want
Speaker 6: to tell you where these documents came from, because it's
Speaker 6: kind of funny. We often think about Monopolis as sort
Speaker 6: of dominant and powerful and all knowing, and that litigation
Speaker 6: has been going on for thirteen years. At a certain point,
Speaker 6: the plaintiff's hired an expert. His name is Richard Barnett.
Speaker 6: He's one of the top scholars in the business, and
Speaker 6: he looked at Live Nation's confidential records and he wrote
Speaker 6: about how the corporation actually works in the blinktiffs then
Speaker 6: submitted that report to the court, and the judge unfortunately
Speaker 6: ordered it sealed so that no one could read it, saying, oh,
Speaker 6: it's got confidential information or whatnot, and that should have
Speaker 6: been that except and here's where the stupidity of a
Speaker 6: monopolist comes in. Live Nation or someone's on Live Nation's
Speaker 6: legal team or Dan Wall's team or someone like that,
Speaker 6: they screwed up and they accidentally uploaded the report to
Speaker 6: a public court site pacer where Pascrell got his hands on.
Speaker 3: He just downloaded. Then he sent it out at.
Speaker 6: A press release and that's how we have the documents. Okay,
Speaker 6: so what's the case all about? That shows how Live
Speaker 6: Nation really works. Well, it starts with a concert. In
Speaker 6: twenty eleven, the head of the New Jersey State Fairs,
Speaker 6: names Al Dorso, hired a company called Juice Entertainment run
Speaker 6: by two experienced concert promoters to put on a concert.
Speaker 6: Now Live Nation. They told Live Nation, do you want
Speaker 6: to do this? Live Nation wasn't interested. But as soon
Speaker 6: as I got win that Jeuwice Entertainment was doing it
Speaker 6: and started to book acts, Live Nation demanded to co
Speaker 6: produce the show and end Doorso, who was running the
Speaker 6: state Fair, was just like, hey, you guys, work it out,
Speaker 6: and he later put it.
Speaker 3: You know, Live Nation.
Speaker 6: They were the eight hundred pound gorilla I said, go
Speaker 6: see if you can work out a deal.
Speaker 3: That's what he was saying to Juice.
Speaker 6: Now Juice and Live Nation couldn't work out a deal,
Speaker 6: and then Live Nation managed to get Juice fired. How well,
Speaker 6: the smaller firm sued Live Nation, claiming the giant coerce
Speaker 6: performers into not signing with Jews to appear at the
Speaker 6: fair and threaten to withhold its ticketing services to the
Speaker 6: venue the state owned Metalands Sports Complex if it were
Speaker 6: not allowed to be a partner.
Speaker 3: That's from public reporting.
Speaker 6: In other words, Live Nation used dominance in other lines
Speaker 6: of business artists, promotion, and ticketing software to thwart arrival,
Speaker 6: which exactly why the Obama staffers like Gene Kimmelman should
Speaker 6: have blocked the merger in the first place. But this
Speaker 6: situation leaves a question why didn't Jews consent to let
Speaker 6: Live Nation co produce the event? I mean, half the
Speaker 6: profit is still better than no profit, right. Well, the
Speaker 6: reason is, according to Jews, that Live Nation offered a
Speaker 6: deal that would have saddled the firman and artists with
Speaker 6: the costs, while Live Nation itself took the profits. In
Speaker 6: this purported arrangement, Live Nation and juice would have split
Speaker 6: the cost of putting on the event, like renting the venue,
Speaker 6: the sound stage, and so forth. They would have also
Speaker 6: shared profits from ticket sales with artists and with each other.
Speaker 6: And that sounds good so far. The problem is what
Speaker 6: came next in the accounting. Here's the expert report. Live
Speaker 6: Nation negotiated third party expenses like rental costs with the
Speaker 6: venues directly with vendors in exchange for exclusive financial gains
Speaker 6: not disclosed to their artists or their agents, managers or
Speaker 6: independent co promoters in the form of rebates. So, in
Speaker 6: other words, Live Nation had secret side deals with vendors
Speaker 6: to inflate costs by overpaying those vendors and venues, which
Speaker 6: meant that any profit from the event would evaporate.
Speaker 3: It would look like a loss.
Speaker 6: Co promoters and artists who share in profits would lose out,
Speaker 6: but and would be told that the show just wasn't profitable.
Speaker 6: But the thing is those vendors those venues who had
Speaker 6: gotten extra money by being paid inflated costs, would in
Speaker 6: turn remit that money back to Live Nation in the
Speaker 6: form of secret rebates. In other words, JEUS would pay
Speaker 6: the inflated costs that would get furtively funneled back to
Speaker 6: Live Nation along with all the profits from the show. Now,
Speaker 6: Live Nation didn't disclose any of this revenue diversion with
Speaker 6: the artists to whom it had a legal obligation to
Speaker 6: with whom it had contracts, which is why Jus's lawyer
Speaker 6: said that the corporation quote essentially defrauds everyone involved. Now,
Speaker 6: these kinds of secret kickbacks ensured what Jesus's lawyer called
Speaker 6: the quote financial ruin end quote of co promoters. Now,
Speaker 6: of course Live Nation claimed it was losing money or
Speaker 6: not making very much money on any particular event, and
Speaker 6: it wasn't. But that's because the profit was coming in
Speaker 6: through rebates, which, according to this expert, Barnett went onto
Speaker 6: a line in the accounting statement called quote contribution margin
Speaker 6: end quote. So Jus's experts found so interestingly, Barnett even
Speaker 6: found that Live Nation kept two sets of books, so
Speaker 6: in one case they posted an entry of ninety thousand
Speaker 6: dollars rent for settlement, but only seventy five thousand dollars
Speaker 6: internally for the same item.
Speaker 3: They routinely put in profit and loss.
Speaker 6: Statements large losses while admitting that events actually made money.
Speaker 6: So that's just one event, all right, as one a
Speaker 6: state fair in New Jersey. How much was this contribution
Speaker 6: margin across all of Live Nation. I don't precisely know,
Speaker 6: and you can throw other things into that accounting line,
Speaker 6: but there are hints of amounts. So in the third
Speaker 6: quarter of twenty twenty one, which is the last time
Speaker 6: they used the term contribution margin that I can find,
Speaker 6: it was seven hundred and forty seven million dollars, probably
Speaker 6: in the billions today. And that's where CEO Michael Rappino's
Speaker 6: nine figure payday is probably coming from. Live Nation is
Speaker 6: generating a great deal of revenue which somehow shows low margins.
Speaker 6: Lots of events where they're not making money, somehow the cash.
Speaker 3: Is coming in.
Speaker 6: Now, that's just a price hike, right, It's a way
Speaker 6: of distracting more revenue, but it's also hidden. And hiding
Speaker 6: the price hikes is important because monopolization, which is about
Speaker 6: controlling a market and then extracting by your pricing power,
Speaker 6: is harder to prove if you show low margins, if
Speaker 6: you show that you're not charging very much. Their anti
Speaker 6: trust lawyer Dan Wall can just write, poor little Live Nation,
Speaker 6: our business is terrible. Yeah, and we all know that
Speaker 6: you build by the hour, Dan on your lovely silk sheets.
Speaker 6: Now let's take a step back and recognize what we're
Speaker 6: really looking at.
Speaker 3: It's not just an extractive scheme. This is about power.
Speaker 6: Power over our culture, power over an entire industry. Basically,
Speaker 6: Live Nation can present venues or other people in the business,
Speaker 6: anyone in the business pretty much with a choice. If
Speaker 6: you cooperate quietly, you'll get extra hidden revenue, and that
Speaker 6: means cooperating with knowing dishonesty in the business. If not well,
Speaker 6: Live Nation will maybe work with your rival, or may
Speaker 6: just buy into the market to compete with you directly.
Speaker 6: May not let artists come to your shows at any
Speaker 6: point too. I mean, it's not just the blunt instrument.
Speaker 6: At any point, Live Nation can dial up or down
Speaker 6: rebates to reward or punish. And that's increasingly true as
Speaker 6: Live Nation buys more and more corporations in and around
Speaker 6: the live event space, with each one presenting additional options
Speaker 6: for fees and rebates and what is essentially financial engineering. Okay,
Speaker 6: is this report true? I mean, why, like you know,
Speaker 6: Live Nation would say, oh, they got it totally wrong.
Speaker 6: They didn't disprove it because I don't think they can.
Speaker 6: But you know, the question is reasonable. Is the report true?
Speaker 3: We don't know.
Speaker 6: It's the expert is well respected and he looked at
Speaker 6: Live Nation's financial data, and it is easy to believe
Speaker 6: the worst about Live Nation Ticketmaster. They have a really
Speaker 6: bad reputation in the industry and then among consumers. But
Speaker 6: the reason I think it's true, and I'm not sure,
Speaker 6: but the reason I buy it is because this particular
Speaker 6: story is consistent with the behavior of a lot of firms,
Speaker 6: many dominant middleman firms in our economy, from pharmacy benefit
Speaker 6: managers to Amazon, and their relationship with third party sellers,
Speaker 6: how they mediate between third party sellers and consumers, to
Speaker 6: big banks who securitized mortgages in the financial crisis, to
Speaker 6: the advertising technology industry and so on and so forth.
Speaker 6: Now they don't, most of them don't use two sets
Speaker 6: of books. That's kind of like, you know, that's a
Speaker 6: little bit, you know above the I'm not saying everyone's
Speaker 6: a criminal conspiracy. Two sets of books kind of a
Speaker 6: red flag, But in general, it's a business model. Middlemen
Speaker 6: who have market power, they use fees and kickbacks, often
Speaker 6: hidden through a complex maze of subsidiaries or overlapping lines
Speaker 6: of business to extract in ways that are really hard
Speaker 6: to see. It's in a face, it's immoral, and more importantly,
Speaker 6: it creates a climate of fear. The problem is it's
Speaker 6: also just the way that we do business today. Fortunately,
Speaker 6: Live Nation is under investigation and there are a bunch
Speaker 6: of companies that are under investigation. But this lesson if
Speaker 6: this is true, and I think it is. But if
Speaker 6: it's true, this is why Live Nation needs to be
Speaker 6: broken up, and more broadly, why we need to get
Speaker 6: rid of these this way of doing business, these secret
Speaker 6: kickbacks and rebates throughout the whole economy. Thanks for watching
Speaker 6: this big breakdown on the Breaking Points channel. If you'd
Speaker 6: like to know more about how big business and our
Speaker 6: economy really works, go to the link in the description
Speaker 6: below and sign up for my market power focused newsletter.
Speaker 3: Big Thanks and have a good one.