UNITED ST

www.
(FIRST)

(MlDDLE)

S TAX COURT
EchtIdo

U.S. TAX COUR1

ROBER T R. DITROLlo. CLE8h

(LAST)

2tM.Hi!. -6

Kelley Ann Lynch

(PLEASE TYPE OR PRINT)

M 7: n

20l5 JUL -6 PM 2: f 6

Petitioner(s)

NlTED S TES

v.

TA )( C D

BY

T Docket No.

DEPUT Y CLERK

COMMISSIONER OF INTERNAL REVENUE.

Respondent

PETITION

17085-15

1. Please check the appropriate box(es) to show which IRS NOTICE(s) you dispute
GI Notice of Deficiency

O Notice of Determination
Concerning Collection Action

0 Notice of Determination Concerning Your Request for Relief

From Joint and Several Liability. (If you requested relief from joint and
several liability but the IRS has not made a determination, please see the
Information for Persons Representing Themselves Before the U.S. Tax
Court booklet or the Tax Court's Web site.)
O Notice of Determination Concerning Worker Classification

2. Provide the date(s) the IRS issued the NOTICE(s) checked above and the city and State of the IRS office(s)
issuing the NOTICE(S): August 13, 2001 J
c)#v
3. Provide the year(s) of period(s) for which the NOTIC. (
4. SELECT ONE OF THE FOLLOWING:

was/were issued:

If you want your case conducted under small tax case procedures, check here:
If you want your case conducted under regular tax case procedures, check here:

1999
O
IB

(CHECK
ONE BOX)

NOTE: A decision in a "small tax case" cannot be appealed to a Court of Appeals by the taxpayer
or the IRS. If you do not check either box, the Court will file your case as a regular tax case.
5. Explain why you disagree with the IRS determination in this case (please list each point separately):
notice due to the fact that the $1 million non-refundable prepayment should have
been paid or transferred to Traditional Holdings, LLC and supported by loan documents. Furthermore, the assets
sold by Traditional Holdings, LLC (for which the $1 million prepayment was paid) were owned by Blue Mist
_Touring_C_ompany..Jnc __The stipulated determination was based based upon fraud with respect to IRS Chief Trial

Counsel's office and fraud upon the Tax Court.

SERVED Jul 08 2015

6. State the facts upon which you rely (please list each point separately):
See Declaration of Kelley Lynch and evidence submitted.

You may use additional pages to explain why you disagree with the IRS determination or to state additional
facts. Please do not submit tax forms, receipts, or other types of evidence with this petition.
ENCLOSURES: Please check the appropriate boxes to show that you have enclosed the following items with this
petition:
A copy of the Determination or Notice the IRS issued to you
2 Statement of Taxpayer Identification Number (Form 4) (See PR.IVACY
2 The Request for Place of Trial (Form 5)

OTICE below)

The filing fee

PRI VACY NOTICE: Fonu 4 (Statement ofTaxpayer Identification Number) will nqt be part ofthe Court's public files.
A.il other documents filed with the Court, including this Petition and any IRS Notice that you enclose with this Petition,
will become part of the Court's public files. To protect your privacy, you are strongly encouraged to omit or remove
from this Petition, from any enclosed IRS Notice, and from any other document (other than Form 4) your taxpayer
identification number (e.g., your Social Security number) and certain other confidential information as specified in the
Tax Court's "Notice Regarding Privacy and Public Access to Case Files", available at www.ustaxcourt.gov.
1 March 2015
SIGNA ' RE OF

Ad r ss
754

.TITIONER

ed By Court

DATE

. Van Ness Avenue

MAILING ADDRESS

323

467.3589

(AREA CODE) TELEPHONE NO.

Hollywood, CA 90028
CITY, STATE, 7..IP CODE

StEte of legal residence (if different from the mailing address):

SIGNATURE OF ADDITIONAL PETITIONER (e.g.,SPOUSE) DATE

MAILING ADDRESS

(AREA CODE) TELEPHONE NO.

CITY, STATE, 7..,lP CODE

Sta e of legal residence (if different from the mailing address):

SIGNATURE OF COUNSEL, IF RETAINED BY PETITIONER(S)

NAME OF COUNSEL

TAX COURT BAR NO.

1 March 2015
MAILING ADDRESS, CITY, STATE, ZIP CODE

DATE

(AREA CODE) TELEPHONE NO.

7P2 7667 8554 0100 5182

AUR 70042-2838
-- Letter Number: 3219(SC/CG)
Letter Date:

Depaitment ofthe Treasmy

internal Revenue Service

OGDEN, UT

84201

570axp I

ti ca non Number:

5124
, Tax Form: 10 40

Ilul,,lulllilliniin.InInno.l.ninilllinilllnnilli,1

Tax Year Ended and Deficiency

December _ 31, 1999 :$
429,211 . 00

LEONARD COHEN
419 N LARCHMONT BLVD APT 91
LOS ANGELES CA 90004-3013190

Contact Person: office of Mrs Housley

1-800-829-8310 TOLL FREE
1-801-620-7725 LOCAL FAX
Contact Telephone Number:
Hours to Call:
7:00 AM to 8:00 PM
Last Date to Petition Tax Court:
April 08, 2002

.
IR

Section

Penalties)Additions to Tax
6662(a)

QNS,842.00

Dear Taxpayer:
We have determins
This letter is your N
shows how we figu

EFID N
iency.

If you want to cont

Last Date to Petiti
addressed to you o

ination in
t (90 day
nited States

for a redeterminatiori
ount of you ax
filing a petition from the ax ri. You s
400 Second Street NW., Wshington D.C

sJ in your incom
i d by law. The

sas shwn above.

edtatement

inhany payment, you have until the

ihtter or 150 days if the letter is
ith the United States Tax Court
psiilion form and the rules for
to it the United States Tax Court,
y hf this letter tdthe petition.

The time in Which you haust file petition withe

s or 15qdays as the case rnay be
is fixed by law and the Court cannot consider yout
ptition is filed lat. .As required
by law, separate notices re sent to spouses if thi
Eddressed to both a husband and
wife, and both want to jfitln the Tax Court, both mustsis 1 the petition or each must file a
separate, signed petition
The Tax Court I
. $50,000 or les f
asia petition for
40kSecond Str et
to file a petitiiMvit

ified procedure for small tax cases when the amount i dite is
ax year. You can also get information about this proedh e, as well
o
e, by writing to the Clerk~of the United States Tax Court at
ashington, D.C. 20217. You should write promptly if you intend
ax Court.
.
n

If you decide not to file a petition with the Tax Court, please sign and return the enclosed
waiver form to us. This will permit us to assess the deficiency quickly and will limit the
accumulation of interest. We've enclosed an envelope you can use. If you decide not to sign
and return the waiver and you do not petition the Tax Court, the law requires us to assess and
bill you for the deficiency after 90 days from the date of this letter (150 days if this letter is
addressed to you outside the United States).
4665

LUNt

UU

V3

1U/13/4UU1

OGDEN IRS CENTER

OUR PROPOSED CHANGES TO YOUR 1999 FORM 1040

CDETAILED INFORMATION FOR THESE CHANGES BEGINS ON PAGE 3)

Shown on Return

Reported to IRS
Proposed Change
(or Proposed by IRS)

Our Proposed Changes to Your Income and Deductions

TAXABLE WAGES
RENTS OR ROYALTIES
NONEMPLOYEE COMPENSATION
SELF-EMPLOYMENT TAX DEDUCTION
Schedule A Items e

uctions

SCHEDULE A LIMITAN
ITEMIZED
DEDUCTIONSl0RK$lt
LINE 9)
TOTAL SCHEDU
*DECREASE
Total Incre e
Dur Proposed Chang

1.
2
3.
4.
5.
6.

Taxable In
Tax linet4D
Self-Employment
Alternative Tnini
al ax, line
Net Tax Increase

7.

Accuracy-RelatRd

8.

9.

Interest From? 4
11/14/2001
pr

Proposed Amour

$
$
$
$

0.00
0.00
588,775.00
5,546.00

$
$
$
$

15.00
2,570.00
1,588,775.00
18,978.00

$
$
$
$

15.00
2,570.00
1,000,000.00
13,432.00

9,315.00

38,989.00

29,674.00

109,591.00

7.9,l7.00

$
$

-29,674.00
1,018,827.00

$
$
$
$
$

1,346,325.00
511,179100
37 955.00
0.00
549,134.00

$
$
$
$
$
$

1,018,827.00
403,456.00
26,864.00
-1,109.00

72,872.00

587,925.00

our Tax Computation

39

327,498.00
T407,723.00
'll-,091.00
91,109.00
3 00

line 50
ax,

erialty

72000 To

ou we IRS

( The proposed chang

appl y o
additional amdtsefor ax year
notice.)

Page

85,842 00

doesn' t include any

ay one from a previous IRS

CP2000

(REV. 12/2000)

4665

Department of the Treasury Internal Revenue Service

OGDEN, UT 84201

NOTIL. AUMBER :
CP
01
DATE OF THIS NOTIC :
08/13/200
SOCIAL SECURITY NU BERw
124
TAX FORM: 1040
TA TcAN: 1999
AUR CONTROL NUMBER:
0034-0156
WHERE YOU
Depart

ll..luli.Illli,II...] I il ,,,,,il...liilill lilli,,,Illi,1

WRITE TO US:
i of the Treasury

Inter al Revenue Service

DG
, UT 84201

LEONARD COHEN
419 N LARCHMONT BLVD APT 91
LOS ANGELES CA 90004-3013190

Be sure to include a
copy of page one of
this notice with your
response.

WHERE YOU MAY CALL US:

1-800-829-8310 TOLL FREE
l-801-620-7725 LOCAL FAX

----

WE ARE REQUESTING INFORMATION AB

T YOUR 1999 TAX RETURN

In our review of your 1999 tax return, w found what appear to be differences between
income and/or deduction amounts you rep ted on your tax return and amounts reported
to us by others Cemployers, banks, or ther payers). See the payer information list
___

__

that begins on page 2 of this notice, and other attached page(s), for the

explanation of these differences.

If you agree that the income amoun s the payers reported to us are correct, please
explain why you didn't include th-s information on your original return when you
filed it. If you think you were right not to include the information on your
return, please explain why. If you already included the information on your return,
please explain where.
We need this information from you in a statement with your
signature.
..

If we weren't able t'match ou

to us, the list will hhw
e amots
on your tax return tHt d 't appsMo
you are entitled to tho 541
deductioi

jamounts with what your lenders reported

iiould..match. If you deducted other amounts
tif?Tist, please send us verification that
e hiE have to disallow them.

Please use the enc1 sed envelope to .sehd any supprting documents you want us to
consider.

When you se d the informatiodr iffyou write to us, please include a

copy of page one of t

s notice to helplus'gdhtify,your case (we have provided 2

copies of page one f

your convenience1MA1 oofihlude your area code, telephone

number, and the best time for us to callifgny:ess.ary. Send your information to us
within 30 days from the date of this noti P
ilthih 60 days from the date of this
notice if you live
We will review th

your tax account

utside the United Stt

information you send to us

we will send you a propo

d c^

If we don't hea from you within the time perio

proposed adjus ent based on the information
in an increase to your 1999 tax, we will chsi-g

April 17, 200 , to the date you pay your tax 2

We have encl

ed a copy of this notice for yoy

Thank you fo

your cooperation.

HOME PHONE

UMBER:

WORK PHONE NUMBER :

( .

we propose any changes to

ted tax computation later.

lated above, we will send a

If the adjustment results
erest to your account from

rcords.

,
.

HOURS:

HOURS :

* 6 1 4 4 2 5 1 2 4 1 9 9 9 1 M

CP2501

(REV. 11/206

174

OE

N SERVICE CENTER

_5124
40034-0156

CDP

95

-_

08/13/2001

YOUR EMPLOYERS, BANKS, AND OTHER PAYERS REPORTED THIS INFORMATION:

Please compare your tax records with the following list which shows income amounts
reported to us by your payers. Although we were able to match some of these income
amounts to your 1999 income tax return, we weren't able to match all of them. To
assist you in reviewing your income amounts, the list may include both reported and
unreported amounts from the same payer.
We have already verified any deduction amount(s) that you see on this list. However,
if you deducted additional amounts on your return that don't appear on this list,
please send us verification that you are entitled to those deductions.
001.
PHONOGRAPH RECORD MANUFACTURERS SPE
570 LEXINGTON AVENUE
NEW YORK NY 100226837

ISSUED FORM.,W-2
TO 614-42-5124
TAXABLE WAGES
$
SOCIAL SECURITY WAGES
$
MEDICARE WAGES AND TIPS
$

15
15
15

ISSUED FORM 1099-MISC TO 614-42-5124

ROYALTIES
$

2,099

ISSUED FORM 1099-MISC TO 614-42-5124

ROYALTIES
$

3,254

ISS D FORM 1099-MISC TO 614-42-5124

ROYALT(l 540S

79

ACCOUNT NO.
EIN 13-6180704
002.
RANDOM HOUSE INC
1540 BROADWAY
NEW YORK NY10036
ACCOUNT NO. 1C35150
EIN 13-2558190
003.
RANDOM HOUSE INC
1540 BROADWAY
NEW YORK NY10036
ACCOUNT NO. 8C3485
EIN 13-2558190

004.
DUNVAGEN MUSIC PUBLISHERS INC
1841 BROADWAY
NEW YORK NY 10023. ff
.

ACCOUNT NO.
EIN 13-2891260
005.
SONY MUSIC ENTERTAINMENT INC.
550 MADISDN AVE A P 9TH FL
NEW YORK NY10022

1099-MISC TO 614-42-5124
d EE COMPENSATION
$ 1,000,000

. N

ACCOUNT NO. 056911273

EIN 13-3431958
006.
SONY MUSIC ENTERTAINMENT INC.
550 MADISON AVE A P 9TH FL
NEW YORK NY10022

14-42-5124
ISSUED FORM 1099-MISC
$
NONEMPL~0YEE COMPENSATION .

364,707

ACCOUNT NO. 056903803

EIN 13-3431958

* 6 1 4 4 2 5 1 2 4 1 9 9 9 1
2

CP2501

(REV. 11/2000)

174

FROM : 00000000

PHONE NO. : 00000000000

NOV. 08 2002 12:55PM P43

Departmenter he Treasury

Internal Revenue sm,cw

OGDEN,

UT

AUR Control

84201

Numbne:

Notice Numbert

Motice Data.

70042-2838

CP-2000

04/29/2007

Social Security . Number s

.-5124
Taiz Vote: 1999

Form: 1040

II..I..l..llil .!!,..l...l..l.

....uln,1..!Illndill....llli.I

THIS NOTICE REQUIRES A RESPON5E.

P}ease conehto the reopense
pass et the. end. af ttvic tso tice
and send it in the encidw 042d

envelope .te the address in the

uoper left-harsd earner of h

page .

LEONARD COMEN
RICHAtb A WESTIN
3141 WARNENWOOD WVHD
LEXINGTON

KV

For recorded information,

pleaea cm31

6050Z

1-800-529-4477 (tell free) and

reeuest Tosic .Nuieber 652.
Tp speak.. with erg account

repFedetFt ive irlease caII

1-B00-523-851 TOLL FREE

1 501-620-7725 LOCAL FAX

between 700 AM to 4:00 PM.

You may experience de.lays

during peak hous.
Contact:
office of Hem Nielsen
. -

WE ARE PROPOS3NC CHANGES TO YOUR 1999 TAX RETURN

Thank y

042u
for .veur reoly to our prevdeus noties of 91/08/2002.

We used the

information you sent to us to refigure the amount of ter you previously owed.
The e=,unts we refigured are on page 2.
If

ou AGREE uith Osse Proposed Geneese

042
Check

Ban A en tk

end of this notice.

042
response page et

tk

042

a Sion and dete the tohl agreement statement,

and

* Send u the responsa page in the enclosed

19 possible..

.enckose yes,r payment

in

year cate' t pay the eretirar enount ,

fun.

you

can request an instellnent aareenent by

completing the last as,, o( tAis notice.
If you still disaer. ..ith the prooosed chonoes, you may. still have enowgh time tofile a metition with the U.S. Tax Court. However, the period during which you may
file a petition has not been extended by the issuance of this notice, or our
reconsides-ation o your case.
If you do not file a petition within the allotted

time, an exelmined in the Statutory Notice of Deficiency we sent to you emelier,

ww -il3 conclude that the orooosed channem are correct, and send you a bill. This
bill will includo your tax. any penalties, and additionel interest.

Please respond to ua even if you don't understand our computation or can't pay
the proposed tax due.
Tf you delay your rescense, internet on any amount you ow 042
wall ancess,se.
Interent stops only when you ony the total amount you owe.
If you have any ovestions. olesse write to th. person whose nesse is shonen en the
fxent ==ge of this notice, or you may cell that derson at the tolophone number shoun.

KLOO643

%M : 00000000

PHONE NO. : 00000000000

W 042UtsutM AN5 CENTER

NOU. 08 2002 12:55PM P44

OUR PROPOSED CHANGES TO YOUR 1999 FORM 1840

. (DETAILED INFORMATION FOR THESE CHANGES BEGINS ON PAGE 3)

Shown on Return

Reported to IRS

Prosased Change

0.00
0.00

*
4

15.00
2,570.00

5,587.00

042
15.00
042 2,570.00

042
042

(or Proposed by IRS)

Our Proposed Chances to Your Income and Deductions

TAXABLE WAGES
RENTS. OR ROYALTIEs

SELF-EMPLOYMENT TAX DEDUCTION

042

Sehedule A Itemized Beductions

5,546.00

SCHEDutE A LIMITAT1088 (ITEMIZED

042

9,315.00

9,391.00

TOTAL SCHEDULE A DECREASE

042109,591.00

109,515.00

DEDUCTIONS, lif0RKSHEET, LINE 9)

41.00

76.00

042 , o.-76.00

Total Increase

2,620.00

Dur Propesad Chances To Your Tax computation

1.
2.
3.
4.

Taxable Income, line 39

Tax, line 40
$ 0421f-Employment
Tax, line 50
Alternative minimum tax,

4
.4

5.
6.

042
1 ax, line 56
Het Tax Increase

8.

Peoposed Amount You owe IRS

7.

327,498.00 $
350,118.00 '*
2,620.00
107,723.00 .$
105.761.00 .8
1,03.00
042 II,091.00
042 11,I73.co *
SE.00
4
1,109.00 $
733.00
042 -326.00
119,923.00

Interest From 04/17/2000 To

128,717.00
,

042

143.08

254The
proposed changes apply to his notice only. Et dotn't i'nclud
edtional neounts for tax year 1999 that you may owe from
042
PreYIoMS
notice. )

IIRilliWRBRERS

6. 1 4 4 2 5 1 2 4 1 9 9 9 1
Page

CP2000

(REV. 12/2000)

52

KLOO644

AUR 70042-2838
cf the Treasury

..

. niunal Revenue Servicp

GDEN, U1

Letter Date :

84201

January 8, 2002

7112 7667 8554 Ol0

182
Taxpayer Identification Number:

Tax Form: 1040

linininfilli,iln,l.ninin.n.,1,ninilli.nlllinullil.1

Tax Year Ended and Deficiency

December 31, 1999 $

429,211.00
Contact Person:
office of Mrs Housley
1-800-829-8310 TOLL FREE
l-801-620-7725 LOCAL FAX

LEONARD COHEN
419 N LARCHMONT BLVD APT 91
LOS ANGELES CA 90004-3013190

Hours to Call:

7:00 AM to 8:00 I M

Dear Taxpayer
Enclosed is A NOT

.E

DEFICIENCY

asc qn

Page

DECLARATION OF KELLEY LYNCH

I, KELLEY LYNCH, declare:

1.

I am a citizen of the United States who currently resides in Los Angeles, California. I am

over the age of 18 years. I have personal knowledge of the facts contained in this declaration and if
called upon to testify I could and would testify competently as to the truth of the facts stated herein.
2.

This Motion relates to fraud upon the court with respect to Tax Court Docket No. 7024-02.

The original matter related to a $1 million prepayment against a 2001 deal Traditional Holdings,
LLC entered into with Sony Music. This prepayment was made to Leonard Cohen personally and
the funds were never transferred to Traditional Holdings, LLC. This information was concealed

from IRS and Tax Court in 2002.

3.

The intellectual property owned by these entities was originally created by Leonard Cohen

and other songwriters. Leonard Cohen was my former business partner. I also worked as Cohen's
personal manager for approximately 17 years. Our relationship ended in the fall of 2004 when
Cohen understood I was reporting his tax fraud to Internal Revenue Service. On April 15, 2005,
and at other times, I did report what I was ultimately advised was criminal tax fraud to Internal
Revenue Service and other tax authorities.
4.

In order to understand this situation, it is essential to have an understanding of the use of

these entities and their respective ownership interests in intellectual property. In or around 1994,
singer-songwriter Leonard Cohen became interested in purstiing intellectual property deals.
Two deals were ultimately closed and a third pursued. In 1996, Sony/ATV purchased the stock of

Stranger Music, Inc. and, in 2001, Sony Music purchased the stock of Traditional Holdinks, LLC.
5.

After the 1996 Sony/ATV deal closed, Leonard Cohen decided to pursue either a bond

securitization deal or new stock sale. All intellectual property, including with respect to Cohen's first
eleven books, was assigned to Blue Mist Touring Company, Inc. Sony began their due diligence
with this entity. However, at some point, Cohen's representatives became concerned about issues
related to collapsible corporations. Cohen and his representatives decided to pursue the 2001 deal
using a new entity, Traditional Holdings, LLC and an annuity. Leonard Cohen and his
representatives failed to transfer and/or assign Blue Mist Touring Company's intellectual property to

Traditional Holdings, LLC and therefore it still owns the intellectual property that was sold by
Traditional Holdings, LLC.
6.

I have an ownership interest in Blue Mist Touring Company, Inc. (15%) and Traditional

Holdings, LLC (99.5%). However, due to a Los Angeles Superior Court Case (BC338322),.that I
was not served, my ownership interests in these entities were wrongfully converted to Leonard
Cohen via default judgment. I am attempting to have the judgment vacated.

7.

The Complaint in that matter was used by Leonard Cohen to apply for and receive

fraudulent tax refunds, file his 2005 tax return, amend his 2003 and 2004 returns, and possibly with
respect to carry-backs related to his 2001 and 2002 returns. The Complaint and Default Judgment
were also used to defend Leonard Cohen with IRS in connection with complaints to IRS that Cohen

committed criminal tax fraud. The Complaint is essentially his defense.

8.

I am the Tax Matters Partner with respect to the 2001, 2002, and 2003 tax returns filed on

behalf of Traditional Holdings, LLC and would like to waive any and all statutes of limitation with
respect to those tax periods. When the IRS deficiency notice was sent to Leonard Cohen on January
8, 2002, I was the Tax Matters Partner and the matter before Tax Court should have involved me.

The January 8, 2002 Deficiency Notice was sent to Leonard Cohen personally; initially handled by
his personal corporate and tax lawyer, Richard Westin; and ultimately.resolved for Leonard Cohen
by Hochman, Rettig. When I attempted to speak with Hochman, Rettig about Traditional Holdings,

LLC and the $1 million prepayment, Steve Blang advised me that Richard Westin cotacted-him arid
insisted that Ldid not have attorney/client privilege 3vih Cohen and his lawyers. They were
instructed not to discuss this matter with me. I was therefore excluded from discussing this matter,
obtaining or comrejing relevant arid material information, and unable to address the fact that the $1
inillion prepayment should have been transferred to Traditional Holdings, LLC and ultimately paid
to Blue Mist Touring Company, Inc At this juncture, Leonard Gohen continues to claim that
Traditional Holdings, LLC's assets are his personal assets. It is my personal belief that,.as of the
2002 IRS.inquiry, this situatiori may have ben 0401anned
by Cohen and his iepresentatives.
9.

I am challenging the Tax Court's stipulated decision in Leonard Cohen v. Commissioner

(Docket No. 7024-02). The arguments used in connection with that case were based on a pattern of
deceit and dishonesty directed at the Tax Court and IRS Chief Trial CounsePs Office. That conduct
interfered with the ability to impartially adjudicate this dispute.
10.

The $1 million non-refundable prepayment should have ultimately been paid to Traditional

Holdings, LLC - not Leonard Cohe. This was not a refundable deposit and I am the individual
that contacted Sony and transmitted Cohen's demands with respect to this deal. At the time of the
initial Tax Court matter, the assets were owned by Blue Mist Touring Company, Inc. Leonard
Cohen personally understood that the 1998 and 1999 assignments of intellectual property to Blue
Mist Touring Company, Inc. were irrevocable. When this matter was adjudicated, the 2001 Sony

deal with Traditional Holdings, LLC had already closed. That information, as well as the
information regarding asset ownership, was concealed from the Tax Court and IRS Chief Trial
Counsel's office. The deficiency notice should have been issued to Traditibnal Holdings, LLC.
Therefore, I - as the Tax Matters Partner - should have received the notice. Leonard Cohen's

Petition was filed with Tax Court on April 5, 2002. A stipulated decision was entered on April 1,
2003.
3

11.

On October 8, 2002, David Holtz, IRS Chief Trial Counsel's Office Los Angeles, wrote

Richard Westin, Leonard Cohen's personal tax and corporate lawyer. Essentially, Internal Revenue
Service received an "inadvertent" Sony 1099 related to Leonard Cohen in the sum of $1 million.

That 1099 should have been issued to Traditional Holdings, LLC as the Sony deal closed in 2001.
However, the 1099 addressed income that Lepnard Cohen personally received as a prepayment
against the 2001 Traditional Holdings, LLC deal. The income was not transferred to Traditional
Holdings, LLC. The income was not ultimately paid to Blue Mist Touring Company, Inc., the
owner of the assets. The 2001 stock sale involved the sale of intellectual property and recording
contracts. Leonard Cohen elected to handle the non-refundable prepayment on his personal tax
return as a loan for tax purposes in 1999.

12.

I am the individual who Stuart Bondell of Sony called with respect to the

prepayment with respect to the Traditional Holdings, LLC deal. Leonard Cohen's representatives,

myself included, had been involved with intense negotiations with respect to this sale and a potential

bond securitization deal with CAK. Gohen ultimately decided not to pursue the CAK bond
securitization deal because Sony took the position that they would not pay royalties to a third party;
were concerned about Cohen setting a precedent with other artists; and expressed grave concern
about being without the advantage of providing Cohen with advances - the currency of the music
industry - which, among other things, permitted Sony to encourage artists to submit their

contractually obligated albums.

13.

At the beginning of November 1999, Stuart Bondell of Sony phoned and informed me

that Sony was willing to pursue an intellectual property deal with Leonard Cohen. The terms of the

deal, and the intellectual property they would actually buy, was not yet fully negotiated, but Sony
offered Leonard Cohen $8 million for the deal. I then phoned Leonard Cohen, transmitted the
details of my conversation to him, and he advised me to phone Stuart Bondell back with the

following message: I have a good deal on the table with CAK that is about to close. If Sony pays
me a non-refundable, substantial prepayment or down payment on this deal, I will forfeit the CAK
deal and enter into negotiations solely with Sony. I conveyed this message and Cohen's terms to
Stuart Bondell who advised me that they were acceptable to Sony. CAK nevertheless was interested
in pursuing some type of deal with Cohen and presented at least one more formal offer.
14.

On November 5, 1999, Sony wired $1 million to Leonard Cohen's personal account

Paul Gilbert's letter confirmed that the amount was a partial prepayment against of the proposed $8
million buy-out of futureroyalty interests.
15.

Sony would eventually issue the "inadvertent" $1 million 1099 to Leonard Cohen and

this ultimately led to the January 8, 2002 IRS deficiency notice. The two "inadvertent" Sony 1099s,
in the amounts of $1 million and $7 million, respectively, were eventually corrected by Sony who
replaced them with $0 1099s. This caused tremendous hysteria and paranoia on the part of Leonard
Cohen and his representatives.
16.

Cohen had also borrowed heavily from Traditional Holdings, LLC accounts. Those

accounts were maintained and invested by Cohen's financial and investment adviser, Neal
Greenberg. In January and June 2004, Greenberg wrote Cohen rather alarming letters about his
level of spending and addressed "IRS warnings." The warning letters related to Leonard Cohen's
dangerous level of borrowing from Traditional Holdings, LLC.

17.

In October 2004, Leonard Cohen heard I was reporting his tax fraud to IRS, and we parted

ways. In September/October 2004, my accountant and lawyers reviewed the Traditional Holdings,
LLC federal tax returns and advised me as follows: Cohen and his representatives failed to report
the income from the Sony sale on the 2001 return; extinguished my promissory note from the 2002
return (using a separate tax ID); and extinguished the annuity obligation from the 2003 return -

moving the asset to the capital account. All of this was done without my knowledge or permission.

19.

Other litigation matters related to these matters are ongoing.

20.

I have created a blog - taxpetition.wordpress.com - for the sole purpose of this Tax Court

Petition and Motion addressing fraud upon the court with respect to the April 1, 2003 stipulated
decision. I have uploaded evidence to that site which can be accessed using.the following login
information: odzerchenma (must be lower case); password: tsimar2012. The evidece referred to
below is on this private blog. The most relevant fraud upon the court relates to the following three

facts: 1) Traditional Holdings, LLC entered into an agreement with Sony and that deal closed on or
around April 18, 2001; 2) Leonard Cohen personally received the $1 million prepayment and failed

to transfer that amount to Traditional Holdings, LLC (or account to Blue Mist Touring Company,
Inc.); and, 3) the prepayment was a non-refundable payment against the $8 million price Sony agreed
to pay with respect to this transaction. See taxpetition.wordpress.com evidence made a part hereof.
See also Exhibits A and B attached hereto and made a part hereof.
I declare under the penalty of perjury under the laws of the State of California that the foregoing is
true and correct.

This declaration is executed on this 1st day of March 2015 in Los Angeles, California.

I lley Ly cl

EXHIBIT A
March 6, 2002 - Draft
See KL notes [bold] to Richard Westin
and Cohen comnments. Faxed to RW.
Dear Leonard,

I have now reviewed all the documents that were forwarded me in order to prepare the Traditional
Holdings return. I would like to point out that I did not notice any sloppy record keeping and all the
documents were delivered to me in a timely manner.
I would like to review the structure of TH at this time because it is ornate you may need further
clarification. I will start at the beginning. TH came about as the result of Neal and myself being
approached by Kelley at your request to search for a tax structure that would benefit you with
respect to the Sony royalty buyout. At that time, you were looking at ordinary income that would
have been taxed at the rate of 47%. Traditional Holdings purchased your royalty buy-out properties
using a private annuity. A private annuity is a contract under which a person sells property in
exchange for deferred payments that end when the seller dies. The deferred payments are payments
to you (which I will address later in this letter) and it is these deferred payments that allow the tax to
be deferred. The payments cease upon your death. Private annuities have been around for decades
and are not controversial.
In the year 2011, you will begin receiving about $38,000 a month for the remainder of your life. You
will then pay taxes yearly on this amount at whatever the tax rate is on ordinary income.
You have therefore saved tremendously in taxes because you avoided the ordinary income tax of
approximately $3.5 million in the year of the sale and will pay taxes as you receive your deferred
payments. In the interim, your money is invested and if well managed it is also growing.
All monies you take from TH until 2011 need to be documented as loans. This is why some
confusion arose for Kelley in the year 2001 with respect to your personal tax return payment. Neal
made the decision that the funds should come from TH and Kelley then contacted me in order to
determine what paperwork, if any, was required. I had to prepare a note that was to be placed in the
file with a copy of the return. It is important to have these "loans" documented by notes.
RW will prepare all loan documents. He is also handling matters related to the Sony 1099.
RW and KC will discuss who will prepare the LCI and BMT returns.
To reiterate, TH obtained the properties with a private annuity in order to defer taxes. Kelley had to

be brought in, and agreed to do so in order to help you, because you need a third party's
involvement so that this transaction is not viewed as your selling something to yourself. The third

party should not be a relative of yours therefore Kelley was selected. We had Kelley sign a
promissory note in the amount of $245,000 to TH which shows that she invested in TH. She
is to receive $24,000 a year for the first 17 years, then $31,250 a year, which allows her to repay the
note; and, $20,000 a year which allows her to pay taxes on the amount she has received.
It complicates things for Kelley and possibly eats into her lifetime gift tax exemption that would
benefit her children.

RW - advised that the promissory note payments total $44,000/year. Addressed in

corporate books and management agreement. Cohen, RW, and NG have discussed the
profits to be allotted to me and this will be addressed in writing. Indemnity Agreement
should be placed in corporate file.
It is possible that estate taxes will change in the future and Kelley will not suffer any penalties. To
summari7.e, Kelley was brought into this situation in order to help you accomplish a beneficial tax
structure.

Leonard asked if I would be responsible for payments on the promissory note in the event

he died. Westin said no.

At this time, Kelley needs to begin repaying the note to TH. She must pay $24,000 debt service on
the note this year so that the entity remains legitimate. The way we anticipated handling this was to
allocate $240,000/year of TH profits to Kelley each year which allows her to pay the taxes on the
income that has created for Kelley.

RW will advise KL how taxes will be handled on thos $240,000/year allocation. He will
prepare all necessary tax documents.
Unfortunately, because Kelley did not make the $24,000 payment in 2001 (she was not aware that
she had to do so), this may create hardship for her with respect to taxes. In order to resolve this

situation, I propose that Kelley be allocated the sum of $

for the years 2001

and 2002. Out of this amount, Kelley will pay the note (by writing a check to TH) and pay the taxes
she incurs by receiving these monies from TH, which we will call a fee for the sake of simplicity.
It is often the case that once a structure has been established and taken out of the realm of theory, it
takes time for all parties to understand what its function is and how it operates. I have basically
raised three points here: (1) that a private annuity has been established in order to defer taxes; (2)
you will eventually begin receiving monthly payments and until that time, all withdrawals from TH
need to be documented as loans; (3) Kelley's participation was essential and requires a yearly
payment to her which allows her to repay the note and the taxes she incurs because of the payment.
On a separate note, I am giving some thought to your gift tax situation. I understand that you are
giving Adam approximately $42,000 a year in support. This cancels out the possibility of gift him

$11,000 a year (which is now the yearly gift amount) with respect to the property you have
purchased. I also understand that Anjani Thomas has been given sums possibly in excess of $11,000
permitted yearly gift and need to rethink how the loan to her for the house should be handled.
LC asked RW to address gifts to Lorca - including mortage payment he makes on the
Melrose property. Chudd's firm advised that Cohen should have a lease with Lorca $55/sq. foot. Cohen decided against this.
I would like to take some time and review the larger picture of your gifts with Kelley - this would
include your voluntary monthly gift to the children's mother which comes to $45,600 per year.
Kelley has advised me that you would like to know if there is some way for you to give gifts to your
children in a manner that does not create a gift tax. This is something Reeve Chudd and I need to

think through.
Since my involvement in your tax planning, several entities have been created: two charitable
remainder trusts (which I understand Neal will address with you separately), and Traditional
Holdings. These three entities - the two charitable remainder trusts and TH are really the essence of
your tax and estate planning.
Last year was a very complex year but going forward everything should be quite smooth and
uncomplicated.

Richard
Cohen asked Westin if I could be compensated with 15% of LCI (as was the case with
BMT). Westin advised that I should have been.
Westin advised us that TH bypasses Cohen's estate. The only entity assigned to Cohen's
revocable family trust (probate) is LCI.
Followed up with Greenberg on memo he is preparing re. charitable remainder trusts. He
will speak directly to RW re. Cohen's withdrawals from those accounts.

EXHIBIT B
MISCELLANEOUS DOCUMENTS
1977 Tax Memorandum
Sony Music letter to Kelley Lynch dated November 5, 1999
Richard Westin letter to Ken Cleveland, CPA re. Leonard Cohen 1999 Return 1040
Grubman, Indursky & Schindler memorandum to Leonard Cohen & Traditional Holdings,
.LLC summarizing the 2001 transaction
Leonard Cohen Declaration dated August 30, 2000 - CAK Bond Securitization Deal
Litigation
Richard Westin letter to Kelley Lynch dated September 16, 2000

Kelley Lynch email to Leonard Cohen & Richard Westin dated February 11, 2002
Hochman, Rettig letter to David Jojola dated January 17, 2003

10

ELMER Fox, WEsTHEIMsta & Co.

CrarsFtEo Pusuc ACCOUP4TPdTS

Bill Dubey

Date:

Agust.22, 1977

Ken Fratto

Subject:Tax Planning for Leonard Cohen

Basis for Taxatios

. Leonard Cohan has ties with several jurisdictions which could serve
as a basis for taxing income earned by him. These juridictions are Canada,
Greece and the United States. I would like to'set out the basis for taxation
in each of these countries. Canada taxes the world-wide income of its residents.
Canada defines residents as those individuals physically residing in Canada.
Greece also taxes the world-wide income of its residents; however, the Greek
law defines residents as those individuals who have.an actual.duelling place
in Greece ag who are domiciled in Greece.
he U.S., .on the other hand,
taxes both citizens and residents on their world-wide income.
Le U.S.,
definition of residents is much broader and more encompassing than that of
Canada or Greece. Any individual who resides in the U.S., for other than on a
temocrarv basis.E any individual who considers himself a domiciliary of the U.S.,
whether or not physically present in the U.S., is considered to be a resident
of the U.S. All three countries tax income from a source within their respaetive jurisdiction paid to non-residents; there are, however, several exceptions
established by treaty.
Because of the facts in Leonard Cohen's case, a closer examination
of what is considered U.S., source income and how it is taxed is necessary.
Any compensation paid by a U.S., corporation is considered to be ES. source
income. If that compensation is paid in conametion with the performance of
personal services in the U.S..by a non-resident alien then such income is
considered to be effectively connected with a U.S., trade or business and is
ta:<ed at the graduated income tax rates which apply to citizens and residents
(IRC Sec.871 (b) (1)),.

If the non-resident alien does not perform personal services within

the U.S.., then such compensation paid will. be taxable at a flat 307, rate
(REG. 1,864-3 and IRC Sect.871 (a) (1)).

. ..

KLO3581

To:

Blii Dubey

August 22, 1977

Page 2

Recon=nendations

Leonard Cohen, while remaining a Canadian citizen, should continue

to reside outside of Canada. He should, however, from ti=e to. time accomplish'
acts which establish Canada as his domicile--the place he truly considers
his home. Such actions, of course, must not include actually staying in
Canada for other than temporary, short-term trips. Because Canada only tax
individuals who are residents, contined citizenship and domicile-will not
subject him to Canadian taxes and will aid him in preventing taxation by the
U.S., or Greece on world-wide income.
/'

. Because the U.S., taxes non-resident aliens on U~.S.,source income,

and because compensation paid from a U.S., corporation is:considered U.S.,
source income,only royalties and performance income from services performed
in the U.S., should be funnelled into the U.S., -corporations. Royalties
and performance ineone from.sources outside the U.S., will not be taxed by
the U.S., as long as leonard Cohen remains a non-resident'alien and as long
as such income is not funnelled through the U.S. corporation.
. ,_,.

L_

Leonard Cohen a stays in the U.S., should be continued under a

non-resident visa (H-1 qualifies as such) and should be temporary in nature.
Temporary residents , even of long duration, merely for the purpose of
transacting business or engaging in employment is not sufficient to establish
residency. Hutchins v. Commissioner; BTCM December 17, 178 (m). It should
be noted, however, that residing in the U.S.,for one year sets up a presumption .
of residency. Even though such presumption may be rebutted by proper evidence
Leonard Cohen's stays should be monitored and should not extend to a year.
<

Income from royalties and perfonaance income outside the U.S.,

should be funnelled through a corporation incorpoYated in a "tax. haven" country.
This will prevent taxation by the U.S., and will most likely limit withhold.ing
by other countries where royalties and performance income are earned.

As far as Greece is concerned, so long as Leonard Cohen's domicile

can be established as being elsewhere, there is no basis for taxing any
income other that from Greek sources. The fact that Leonard Cohen maintains
a house in Greece and will, from time to time, stay in Greece will not in
and of themselves cause 'taxation. His trip to and ties to Greece should be
reviewed periodically to prevent any presumption of domicile.

(Dictated but not read)

!1s

KLO3662

11/05/9e_FRI 14:08 FAI

ny Music internetlost

yse vocswen Awm

.., . New vyle toe22.2211
r212103&B00G

(Onginal via mail)

(Copy via facsimile)
November S. 1999

Kelley Lynch
419 North Larchmoett B vd.
Suite 91

Los Angeles, CA 90004

Re: Leonard Cohen Royalty Buyout

Dear Kelley.
This is to inform you that we have transferred $1 million to Leonards account pursuant to the

instructiobs received from you.

This arr.ount is deemed a partial prepayment against the proposed $8 m!h n buyo

f eonar

future royalty interests in his master recordmgs anc compoSimons u

Sony Music and Sony/ATV
If this buyout is not concluded. this amount represents a general advance recopable from any and

all monies payable to Leonard under those agreements

Sincerely

Paul Gilbert

Vce President,
Business Administration
ec: S. B ondeU. S. Francis. G. McBowman. P. LopMM- Ma f8d*)

KLO1289
ggp_g

gflgd

009-1

83NIOS AXSWONI IM190&mal-!

W6Ura

t0-p2-D0

00000000000

APR. 25 2002 12;21PM P3

Propssor RichardA. Westin, Esq.

*

3N1 Warrenwood Wynd

glon, KY #502
859-335-1938
(Fax) 268-6017
April 25, 2002

Ken Cleveland, CPA

RE: L Cohen, 1999 Return 1040

Dear Ken.
I have attached acopy of the 1999 90-day letter's page listing alleged under-reportings.
h is extremely urgent that you inform me of which items wem included in.the 1999 retum. ] need
to file an amended petition at once.
Ifand to the extent any item was not included and you can te]] me why now, please do so. Otherwise
1.plan to say that the item(s) was (were) issued in error, and I will await your explanatior,.
Please reply by fax or e-mail [rwest0@uky.edul Fax number is on the letterhead. If the fax line is
busy, please call to clear it.

This is urgent.

With best regards,

Richard A. Wes

cc: Kelley Lynch

KLO1926

FROM : 00000000

00000000000

FFR. 25 2002 12:20Pr P1

Summary of 1099 Situation of Leonard Cohen

From R Westin

April 25, 2002

of $

11 on

There is no
recoupment

2
09 omes

2001
LC sells TH in

2002
LC receives

Other comments
On April 24,

Cleveland dat
not known.

Best fo

f
rrn o
closing
statement I have .

$556,408.49 for
services, but it
includes many
elements, not yet

that SF has the

recoupment
ngures that Sony
agrees to. SF to

is from

sorted out

return.April 28

Cleveland does
not mention it

Grubman.

Transmittal

letter sent late

ests not a

Cleveland does

. not report $1
million on 1999
reR3m

Fall 2001

Cleveland
receives 90 day

I on 1099
then $0

letter from 1RS

demandi4
payment with

corrected I 099

4i 1 SI
nullion and

or
purchase price
that what is in
Grubman April

I 8, 2001 letter?

about $370,000
of other matters

KLO1927

FROM : 00000000

1999

PHONE NO. : 00000000000

2000

Gilbert sends
letter in late

Sony recoups
against royalty.
March accepting It does not
that it is a loan,
report the
so late that
recoupment, and
Westin files Tax LC does not pay
Court petition to tax on it. If it is
protect LC from used to pay a
deficiency and
debt, then legally
per se duty to
it is income to
pay IRS and
LC. The 2001
seek refund
recoupment is
stated as a credit
in the closing of
. the sale next
year, so LC did
get value. I think

ffR. 25 2002 12: 20PM P2

2001

2002

Other conunents

it may be
possible to

$556.408.95 is
for studio album
and pipeline
royalties and
services

Hohz at 1RS
Tax Court

amend the
Petition to add
the $370,000

Litigation
Division wants
interest on the
$1 million as if it
were income in
1999, which is
extonionary.
However, LC is

exposed to
inputation of
incorne on the
loan under IRC
7872 which
would also
create tax

this is 2001

liability. Moving

mcome

income to 2001
decreases the
claim to interest,
but accelerates
incorne taxable

to LC. This is a
negotiation
point.

KLO1928

MOTION FOR LEAVE TO FILE

A MOTION TO VACATE STIPULATED DECISION
Leonard Cohen vs. IRS Commissioner
Docket No. 7024-02

BACKGROUND
By notice of deficiency, Internal Revenue Service determined that Leonard Cohen was liable for an
income tax deficiency for 1999. On January 8, 2002, Leonard Cohen received a Notice of

Deficiency in the amount of $587,925.00. After receiving the notice of deficiency, Leonard Cohen
and his tax lawyer, Richard Westin, filed a Petition with the Tax Court which argued that the $1
million Leonard Cohen personally received in 1999 was a loan. This is blatantly false.
On October 24, 2002, a Notice of Trial alerted Leonard Cohen that a trial was scheduled for March

24, 2003 at Los Angeles, California.

In November 1999, Leonard Cohen personally requested and received a non-refundable prepayment

against a 2001 stock deal with Sony Music. While the Sony transmittal letter, related to the $1
million prepayment, indicates that the payment was not a loan, Leonard Cohen and his
representatives decided to handle this payment as a loan on Cohen's 1999 return. Leonard Cohen

personally approved that matter. At some point in 2001, Sony issued a 1099 with respect to this $1
million which ultimately caused IRS to issue a deficiency notice. Evidently, Sony also recouped
against certain prepayment amounts and Cohen evidently did not pay taxes on what was essentially a
recoupment to Leonard Cohen's personal account debt to Sony. The $1 million prepayment and the
recoupment amount (approximately $500,000) were deducted from the gross amount paid at the

closing of the 2001 Traditional Holdings, LLC stock sale with Sony. These amounts should have
been paid to Traditional Holdings, LLC and ultimately transferred to Blue Mist Touring Company,
Inc., the owner of the intellectual property assets. Amounts for additional delivery requirements

should have been paid in full to Traditional Holdings, LLC and transferred to Blue Mist Touring
Company, Inc.

In 2002, Sony also issued a $7 million 1099 to Leonard Cohen personally. Both of these 1099s ($1
million and $7 million) were referred to as "inadvertent" and later corrected to $0. David Holtz, IRS

Chief Trial Counsel's office, argued that the Tax Court Litigation Division wanted interest on the $1
million as it was income in 1999. I do not believe that IRS ever addressed the inadvertent $7 million
099.
Traditional Holdings, LLC - not Leonard Cohen personally - entered into an intellectual property
deal with Sony. Leonard Cohen and Richard Westin understood that the assets had to be properly
formally removed from Blue Mist Touring Company, Inc. and formally assigned to Traditional

Holdings, LLC. It was the understanding of all parties, Lynch included, that as of the date the
Annuity Agreement was signed and Traditional Holdings, LLC formed, the assets would be formally
removed from Blue Mist Touring Company, Inc.'and formally assigned to Traditional Holdings,
LLC. Cohen and Westin failed to ensure that these steps were taken.

In March of 1999, Leonard Cohen and Richard Westin cancelled Leonard Cohen's sole ownership
interest of the total outstanding shares (500 shares) in Blue Mist Touring Company, Inc. and issued
Lynch seventy-five shares of Blue Mist, which represented a 15% equity interest. The corporate
minutes for the stock issuance, drafted by Westin with language dictated by Leonard Cohen, indicate
that Lynch's 75 shares were issued "as compensation for her services to the Corporation, with great
gratitude for her efforts." It is important to note that Lynch's services were not to Leonard Cohen
personally. The following property was irrevocably assigned to Blue Mist Touring Company, Inc:
Leonard Cohen's interests in the writer's royalties, artist royalties, master recordings of 1979, 1988,
and 1993 live albums and other intellectual property. These assignments were executed by Leonard
Cohen as Assignor and President of Blue Mist Touring Company, Inc. The assignments were
executed by Cohen on December 29, 1999 and with respect to the master tapes of 1979, 1988, and
1993 live performances on December 28, 1998. The first eleven books Cohen published were also
assigned to Blue Mist Touring Company, Inc.

Leonard Cohen's Complaint, filed with LA Superior Court (Case No. BC338322) on August 15,
2005, unequivocally states that: "When the Blue Mist Transaction was abandoned, Westin did not
properly rescind the assignment agreements before engaging in subsequent asset [failed] transfers
and transactions involving the same musical properties. Westin failed to properly 'unwind' the steps
taken toward completion of the Blue Mist Transaction. As a result of Westin's failure, Lynch has
asserted claims as to ownership of 15% of Cohen's remaining intellectual property assets." Lynch
was not a participant in this lawsuit; Cohen failed to serve her (and refused to do so); and she has
not "asserted claims as to ownership" but rather owns 15% of Blue Mist Touring Company, Inc.
and the intellectual property assets irrevocably assigned. These assets are not Cohen's personal
intellectual property assets but rather assets owned by a corporation.
Inconceivably, Cohen's Complaint (which is an entirely fabricated and fraudulent narrative) states:

"Sony purchased Cohen's Artist Royalties from THLLC for $8 million. Cohen netted, after
tpansactions costs and taxes, approximately $4.7 million. Cohen's professional advisers, Greenberg
and Westin, in promoting the sale, never disclosed to Cohen that nearly 33% of the sale proceeds
would be spent on taxes and transaction costs, which, on information and belief as subject to final
audit included ... $500,000 for federal income taxes and penalties due on Sony's $1 million advance
paid on the sale in 1999." First of all, none of these transaction fees were personal expenses and
related to Cohen's personal representatives, litigation settlement in unrelated matters, and other
items that were not corporate expenditures. Beyond that, IRS issued a Notice of proposed changes

to Cohen's 1999 tax return on April 29, 2002. Based upon Leonard Cohen and Richard Westin's
assurances that the form 1999 in the amount of $1,000,000 was erroneous, the IRS Ogden Service
Center accepted these explanations and proposed a change to Cohen's personal 1999 liability in the
amount of $937. Cohen paid the outstanding sum of $937. The settlement with IRS, according to
Hochman Rettig's January 17, 2003 letter included "a concession from the Internal Revenue Service
in the above-referenced case in consideration for a copy of an amended 2001 return whereby Mr.
Cohen reports all income that was previously treated as a deposit [loan] and not reported."
Therefore, it is impossible to imagine why the Complaint in the Los Angeles Superior Court case
indicates that there were "$500,000 for federal income taxes and penalties due on Sony's $1 million
advance paid on the sale in 1999." Leonard Cohen personally received the $1 million in 1999 and it

was not transferred to Traditional Holdings, LLC in 1999, 2000, 2001, 2002, 2003, and/or 2004.
Lynch has no idea what occurred after they parted ways but believes she is entitled to that
information. That would include with respect to any "mistake" that Cohen and Westin "rectified"
with respect to her ownership interest in Traditional Holdings, LLC.

The Traditional Holdings deal closed in or around April 2001. The IRS Notice of Deficiency was
issued on January 8, 2002.

Grubman, Indursky & Schindler's April 18, 2001 letter to Leonard Cohen and Traditional Holdings,
LLC summarizes the transaction. Paragraph A(1) refers to a $1 million advance to Leonard Cohen

which should not be confused with the $1 million prepayment on the deal itself. That particular
advance related specifically to Cohen's advance against the delivery of his 2001 studio album "Ten
New Songs" and was paid to Leonard Cohen in 2004 According to the terms of this transaction,
Leonard Cohen was also personally obligated to deliver two live albums and two additional studio
albums.
By the time IRS Chief Trial Counsel's office negotiated with Leonard Cohen's representatives, the
deal had long since closed and the entity itself, not Leonard Cohen, should ultimately have received
the $1 million prepayment. This information was concealed from Tax Court. Additionally, the

assets Traditional Holdings, LLC sold belonged to another entity, Blue Mist Touring Company, Inc.
A stipulated decision was entered on April 1, 2003. This decision was the product of both fraud
upon the court and fraudulent information transmitted to Internal Revenue Service in connection

with the $1 million prepayment and the 2001 Traditional Holdings/Sony transaction.
LEGAL ARGUMENT
Kelley Lynch seeks to vacate a stipulated decision of this Court entered on April 1, 2003. She
contends that the stipulated decision was entered as a result of fraud upon the Court. Although

Lynch was not the Petitioner in the original matter, she has a 99.5% interest in Traditional Holdings,
LLC; was designated Tax Matters partner with respect to the 2001, 2002, and 2003 federal tax
returns; and is seeking leave to file a motion to vacate the stipulated decision entered on April 1,
2003. Lynch has also recently learned, through testimony provided in an LA Superior Court case,
that Leonard Cohen was now "rectified" a "mistake" with respect to her ownership interest in

Traditional Holdings, LLC although he, and his representatives, refuse to provide her with any
additional information about that rather sinister issue.

Because Lynch was unaware of the facts of this Tax Court Matter, and excluded from receiving
most information based on the fact that she did not share attorney/client privilege with Leonard
Cohen or his legal representatives, she did not file a notice of appeal or timely motion to vacate or
revise that decision. It therefore became final.
Lynch was the Tax Matters Partner with respect to the 2001, 2002, and 2003 tax returns filed on
behalf of Traditional Holdings, LL. When the IRS deficiency notice was sent to Leonard Cohen on
January 8, 2002, she was the Tax Matters Partner and the matter before Tax Court should have
involved her. The TMP is "the central figure of partnership proceedings" and "serves as the focal
point for service of all notices, documents and orders of the partnership." Computer Programs
Lambda, Ltd. ("Lambda I"), 89 TC 198, 205, Dec. 44,072 (1987). The presence of a tax matters
partner during litigation is essential to the operation of the statutory procedures of sections 6221 et
seq., and to the fair, efficient, and consistent disposition of partnership proceedings. The tax matters
partner must keep each partner informed of all judicial proceedings relating to the adjustment of
partnership items at the partnership level. Sec. 6223 (g). H.e or she must furnish to all partners

information not only on the filing of the petition for judicial review, but also on the progress of the
litigation, settlement negotiations and offers, trial preparation, discovery, motions, and trial, and also
on the filing of any appeal from our decision. The tax matters partner serves as the focal point for
service of all notices, documents, and orders on the partnership during litigation. The Tax Matters
Partner's initiative during the proceeding as well as the execution of their statutory duties have a
substantial effect upon the rights of all partners in the partnership. Computer Programs Lombda, Ltd. v.
Commissioner. Without a tax matters partner, the Court could not assure that all partners interested in
the outcome of any partnership proceeding and who are (or should have been) parties to litigation
will receive sufficient information concerning the litigation to allow them to protect their interests.
Moreover, the absence of a tax matters partner prevents the orderly and efficient resolution of the
controversy before Tax Court.
Rule 162 provides that a party seeking to vacate a decision must file an appropriate motion within 30
days after the decision is entered, unless the Court allows otherwise. Because Kelley Lynch did not
file a motion to vacate within the 30-day period, she is requesting leave from the Tax Court to file
that motion at this time.

The disposition of a motion for leave to file a motion to vacate or revise a decision lies within the

sound discretion of the Court. See Heim v. Commissioner, 872 F.2d 245, 246 (8th Cir. 1989), affg.
T.C. Memo. 1987-1; see also Toscano v. Commissioner, 441 F.2d 930, 938 (9th Cir. 1991) (Byrne, J.,
dissenting), vacating 52 T.C. 295 (1969); Commissioner v. Estate of Long, 304 F.2d 136, 144 (9th
Cir. 1962). Lynch is challenging the decision based on fraud upon the court and jurisdiction of the
Court with respect to Leonard Cohen as the income belonged to Traditional Holdings, LLC and was
essentially embezzled from that entity. Leonard Cohen, who entered in an Annuity Agreement with
Traditional Holdings, LLC in December 2000, personally understood that his loans/expenditures
must be repaid to Traditional Holdings, LLC within 3 years at 6% interest. He steadfastly refuses to
address his loans/expenditures which now total approximately $6.7 million with interest.
Once a decision of this Court becomes final, Tax Court may vacate the decision in certain narrowlycircumscribed situations. See Helvering v. N. Coal Co., 293 U.S. 191 (1934); Drobny v.

Commissioner, 113 F.3d 670, 677 (7th Cir. 1997), affg. T.C. Memo. 1995-209; Curtis v.
Commissioner, T.C. Memo. 1996-371. The Courts of Appeals have consistently held that the Tax
Court lacks the authority to vacate or revise an otherwise final decision on grounds such as newlydiscovered evidence or excusable neglect. Abatti v. Commissioner, 859 F.2d 115, 117-118 (9th Cir.

988), affg. 86 T.C. 1319 (1986). The Courts of Appeals have generally allowed an exception to the
usual rule of finality of Section 7481 for fraud on the Court. Id. at 118. In addition, the Courts of
Appeals, and in particular the Court of Appeals for the Ninth Circuit, the court to which this case is
appealable, has held that the Tax Court may vacate a final decision if that decision is shown to be
void, or a legal nuHity, for lack of jurisdiction over the subject matter. Billingsley v. Commissioner,

868 F.2d 1081 (9th Cir. 1989); see also Roberts v. Commissioner, 175 F.3d 889, 892 n.3 (11th Cir.
:999).
As a general rule, the Court lacks jurisdiction to vacate a decision once it becomes final. Abatti v.

Commissioner, 859 F.2d 115, 117-118 (9th Cir. 1988), affg. 86 T.C. 1319 (1986); Cinema '84 v.
Commissioner, 122 T.C. 264, 270 (2004). An exception to this general rule applies where a decision

was obtained by fraud on the Court. Drobny v. Commissioner, 113 F.3d 670, 677 (7th Cir. 1997),
affg. T.C. Memo. 1995-209; Abatti v. Commissioner, supra at 118. The Court of Appeals for the
Ninth Circuit, whose opinions are controlling in this case, defines fraud on the Court as "'an

unconscionable plan or scheme which is designed to improperly influence the court in its decision.'"

Abatti v. Commissioner, supra at 118 (quoting Toscano v. Commissioner, 441 F.2d 930, 934 (9th
Cir. 1971), vacating 52 T.C. 295 (1969)).
To prove fraud on the Court, an individual has the burden of establishing by clear and convincing
evidence that "an intentional plan of deception designed to improperly influence the Court in its
decision has had such an effect on the Court." Abatti v. Commissioner, 86 T.C. at 1325. See Drobny

v. Commissioner, supra at 677-678; Pulitzer v. Commissioner, T.C. Memo. 1987-408. The burden of
proof cannot be met by broad assertions, and the moving party must come forward with "'specific
facts which will pretty plainly impugn the official record."' Drobny v. Commissioner, supra at 677

(quoting Kenner v. Commissioner, 387 F.2d 689, 691 (7th Cir. 1968)).
Lynch has submitted specific and credible evidence, in the form of her declaration and evidence,
which support her allegations that this stipulated decision was the result of fraud on the court.
Lynch requests an order granting leave to file a motion to vacate the stipulated decision.
In response to the deficiency notice, Leonard Cohen and his representatives attempted to argue that
the $1 million prepayment was a loan to Leonard Cohen from Sony Music. That was not the case.
It was indeed an unconscionable scheme calculated to interfere with this Court's ability to impartially
adjudicate a matter. The scheme was not only directed at the Tax Court but also against the Internal
Revenue Service. That scheme is ongoing. Lynch's declaration and evidence substantiate an
intentional plan of deception designed to influence the Court in rendering its decision. Lynch was
never a party to the case or resulting decision.
Fraud upon the court consists of a pattern of deceit and dishonesty directed at the court, so as to
interfere with its ability to impartially adjudicate a dispute. Kenner v. Commissioner, 387 F.2d 689,
691 (7th Cir. 1968). It occurs where it can be clearly and convincingly demonstrated that a party has
set in motion an unconscionable scheme calculated to interfere with the judicial system's ability to

impartially adjudicate a matter. Aoude v. Mobile Oil Corp., 892 F.2d 1115, 1118 (1st Cir. 1989). It
is a special species of fraud regarded not only as harmful to adverse parties, but to the judicial

process itself. Kenner, 387 F.2d at 691.

The leading case on fraud upon the court is .Hagel-Atlas v. Hartford-Empire, in which the U.S.
Supreme Court held that a judgment based on fraud upon the court can, and should, be vacated,

regardless of its age. Hazel-Atlas Glass Co. v. Hartford-Empire, 322 U.S. 238, 250 (1944). The facts
of Hazel-Atlas revealed an extensive fraudulent scheme directed not only against the adverse party,
but also against both the trial and appellate courts. The U.S. Supreme Court referred to this
particular species of fraud as not only "an injury to a single litigant. It is a wrong against the
institutions set up to protect and safeguard the public, institutions in which fraud cannot
complacently be tolerated consistent with the good order of society."
After a decision has been entered by the Tax Court, either in a tried or settled case, it should not be
disturbed after the decision becomes final, unless it is shown that such decision was produced by
fraud upon the court. Fraud upon the court has been defined as embracing only that species of fraud
which does, or attempts to, defile the court itself or is a fraud perpetuated by officers of the court so
that the judicial machinery cannot perform in the usual manner its impartial task of adjudging
cases. See 7 J. Moore & J. Lucas, Moore's Federal Practice, P. 60.33 at 60-360 (2d ed. 1990).

Kenner vs. C.I.R. conchided that a decision obtained by fraud on the Tax Court can be set aside by it
at ariy time because it is not a decision at all- a view strongly supported, as applied to the Court of

Appeals, by the Supreme Court in Hazel-Atlas Glass Co. v. I-lartford Empire Co., 1944, 322 U.S.
238, 64 S.Ct. 997, 88 L.Ed. 1250.
The stipulated decision is also a void judgment due to the fact that, at the time of the decision, Tax

Court failed to obtain jurisdiction over Traditional Holdings, LLC or Lynch as a partner with a
99.5% ownership interest. When a party legitimately challenges the jurisdiction of this Court, the
Court should freely exercise that discretion, notwithstanding the time of the challenge and even if
the decision under attack is otherwise final. See Brannon's of Shawnee, Inc. v. Commissioner, 69

T.C. 999, 1002 (1978). The Court has jurisdiction to vacate a decision that is void, Abeles v.
Commissioner, 90 T.C. 103, 105-106 (1988), which means that the Court also has jurisdiction to
grant a motion for leave to file a motion to vacate a void decision, Adkins v. Commissioner, T.C.

Memo. 2005-260.
When the deficiency was assessed to Leonard Cohen personally, and Cohen petitioned the Tax
Court for redetermination, he carried the fraud into the Tax Court. Thus he was continuing to
defraud the Commissioner, while essentially embezzling the $1 million prepayment from both

Traditional Holdings, LLC and Blue Mist Touring Company, Inc., and committing fraud upon the
Tax Court. Kelley Lynch therefore requests leave to file a motion to vacate decision out of time.
Lynch has demonstrated that Leonard Cohen engaged in conduct that was intended to deceive and
rnislead the Court and that conduct affected the outcome of the case. Lynch's declaration, and the
videnced used to support that declaration, explain how the conduct induced, caused, or had a
material effect upon the decision.

Dated: 1 March 2015

Kelley Lync

GRUBMAN INDORSHY 8e SCHINDLER, P.C.

I

ATTORNEYS AT LAW

ALLEN J. GRUBMAN
.

ARTHURLINDUBSEY

CA.RNEGIE HALL TOWER

FAULD.SGBlNDLER

DONALDR. FRIEDMAN
JONATHAN A.EERL3CH
HOWARD L WATTENBERG
DONALD L KAPLAN

R]CBARD J. GBA BEL

LAWRENCESHIRE

152 WEST 572u STREET

NEW YoRE, N.Y. 10019- 3301
TELEPHONE: (212) 554-0400
TELEFA'X: (Elm 554-0444

MICHAEL K. GOLDSMITB"
KAREN J. GOTTLIEB

JOSEPE D. PENACB]O
GARY R. ELINE
BHUGE G. GROSSBEEG
MICHELL1GOROVE'

THEODORE J. STACHTIAR]S
DEBRA A.WHYTE
TODD S. BRECHER**

PETER E. G RANT
SONYA W. GUARDO

DAVID R. TORAYA

JESS B. DRA BR I N

MATTHEV GREENBERO
IRA B. SEL SKY
KENNETH R. NE]SELA S
J OSEPH M. BRENNER

.WRITER'S DIRECT NUMBER

(2 12) 554-0409

LARETH.SCBATZ

GIL A. KARSON
OF COUNSEL

ATTORNEY CLIENT
maN CAurORm out
COMMUNICATION: ^ 442'/., 442 "" 442
PRIVILEGED AND
CONFIDENTIAL

JONATHAN F. HORN
ERIC GATOFF

TBEODORE P. HARRIS

STUARTFRIED

Via Regular Mail

April 18, 2001
Mr. Leonard Cohen

Traditional Holdings, LLC

c/o Stranger Management
419 Larchmont Boulevard
Suite 91
Los Angeles, California 90004
Re: Agreement between Sony Music International, Leonard Cohen and Traditional

Holdings LLC
Gentlemen:
We are close to completing the negotiation of the agreement on behalf of Leonard

Cohen (hereinafter referred to in this letter as "you") and Traditional Holdings, LLC
("Holdings") with Sony Music International ("Sony"). (The agreement is sometunes rererred
to in this letter as the "Agreement".)
Before you and Holdings enter into the Agreement, however, we want to provide you
and Holdings with the following general summary of the Agreement and discussion of certam
important provisions contained therein. Please note, this summary does not address all of the
provisions set forth in the Agreement. Accordingly, this summary is not a substitute for the
careful review and understanding of the Agreement itself prior to execution.
As a separate matter, we also want to advise you and Holdings that this firm is.not a
financial or tax advisor and has no_t provided any tax-related advice to you or Holdings in
connection with this transaction. In addition, we have had no role in the formation of Holdings
(and have not reviewed or been provided with copies of any of its formation documents) or in
structuring the legal arrangement between you and Holdings. While we have prepared certam
documents required to implement the tax and financial advice of your other advisors, we have
done so at their request and direction. We have also assisted your tax and financial advisors by
201164.1
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KLO1713

GauBnN INDURSn & SCHmMZR, P.C.

a sed y
R c ard

lanations of the relevant entertainment industry and intellectual property issues

transaction. With respect to the tax-related issues presented by the Agreement,

stin It s ur unders

a yo

e eg*oth

ce eg

ng

matters.
A.

Sale of Rights: New Albums

i)
Purchase Price - $8 million, less the unrecouped balance in your royalty account
through December 31, 2000 (approximately $501,
43)
p
oya ies os and
December 31, 2000 through closmg (approximate y
"2001
anticipated mastering and remixmg costs pai by ony
Studio Album"), the "Field Commander Cohen album an
000 m

Io

gs u n

g eem n ,

$e

di

bu ,

t Ho

gs

'88-'93" album, and (c) upon delivery

and
rdin costs paid by Sony for the
$1 000,000 to Leonard (less the unrecouped balance
reco
g
2001 Studio Album and the Live Albums, plus the pipeline).
ii)

Bonus - $250,000 bonus if the 2001 Studio Album achieve 1 5 nulli

worldwide net sales through normal retail channels (a

ati
limi within which the album
Sony's so-called "CRISIS system. Note t a
W he 2001 Studio
must meet the threshold. Therefore, you
You must remember to monitor the
Album ey_er reaches the necessary number o um .
sales of this album.
iii)
Royalty Rights Transferred - All of your
Ho ngs' right to recei an
royalties or other payments (such as mas erluch
u f ected by the Agreement) at any time
(other than music publi hing paymr the exploitation of: (a) any of your catalogue of master

under any agreement w

ony " ve" cordin s "outtakes" and other recordings m
recordings (includmg all so-called li
re
,and (b) any master recordings embodied
Sony's possession which have never been r easalbum or the "Field Commander Cohen" album
on the 2001 Studio Album, the Live
"
he bu out applies to all uses of the Royalty
(collectively, the "Royalty Buyout Recordings )
(includin videos movies and television
Buyout Recordings m any medmm or configurd
time 4either ou nor Holdings will
and all new technologies) throughout the wor
ny
.
receive any further royalties or other payments

xcept asa t es and other income they would

respect of the Royalty Buyout Reco mgs even exceede $8 minion purchase price. The
have otherwise generated for you a
t of the Royalty Buyout Recordings (aside
only royalties you will contmue to receive m espec 1suant to statute, are specifically payable
from publishing mcome), will be royalties d to thoPeu a able to the owner of the particular
to the performer on a recording (as oppose
P y
. . .fi t )
recording). (The amount of these statutory royalties is currently msigm can . .

iv)
Decembe 3

New Albums Delive d - You ar

quired to 1 e (a)2 1 S d
bum
2 1) a (c) the "Field Commander Cohen" album (previously delivered)

2You and Sony will mutually select the recordings on this album. The album will
contain no more than 12 recordings unless you agree to mclude more.
041701

KLO1714

GRUB]ti.AN }RDURsxy & SCHmDLER, P.C.

(collectively, the "New Albums").

v)
Future Albums- Sony still has 2 remaining options (for 1 album each) under the
existing 1972 recording agreement (the "1972 Recording Agreement"). The terms of the 1972
Recording Agreement are unaffected as to either of the option albums (eg, you will receive
the advances and royalties provided for under the 1972 Recording Agreement in connection
with these albums).
vi)
Parties Responsible For Delivery - You are the party responsible for delivering
each of the New Albums. You are also the party selling the royalty entitlement to the 2001
Studio Album. Prior to the transaction with Sony, you had sold your royalty entitlement for
your catalogue and for the Live Albums to Holdings, and, accordingly, under the Agreement,
Holdings is the party selling those rights to Sony. (The Agreement also provides that if the
transfer to Holdings is ineffective for any reason, that you will be deemed to have sold the
royalty entitlement for your catalogue and the Live Albums to Sony.)

B.

Producers and Future Costs

i)

Producers - Sony has agreed to pay all producer royalties on the Royalty Buyout

Recordings (with respect to the producers of the New Albums, Sony will pay producer

royalties of up to 4% retail, which, we understand, is the rate you have agreed to pay the
producers of those albums). You are still responsible for completmg the producer agreements

for the Live Albums. You agree to cooperate with Sony to determine the producer obligations
for the outtakes and other previously unreleased recordmgs m Sony s possession (but Sony is

solely responsible for paying the producers of those recordings).

ii)
Future Costs - Any costs Sony incurs in connection with the exploitation of the
Royalty Buyout Recordings (including the cost of making any videos, etc.) will be paid by
Sony and will be nonrecoupable (that is, the costs cannot be recouped from royalties.payable to

you for any future albums you deliver under the 1972 Recording Agreement).
C.

Previously Unreleased Recordings

i)
Recordings In Sony's Possession - Under the existing language in your 1967
recording agree111ent and the 1972 Recording Agreement (collectively, the "Recordmg
Agreement"), Sony owns all recordings which are "made under" the Recordmg Agreement.
Sony has insisted that this language be modified, with retroactive effect from 1967, to provide
that Sony also owns any recordings made during the term o_f the Recording Agreement which.
(i) were previously (or are hereafter) delivered to Sony or (ii) are currently m (or which
hereafter come into) Sony's possession. This means that Sony will now own, and can exploit
(subject to the restrictions set forth below), all of the live recordings and outtakes which have
been stored with Sony over the years (regardless of whether those recordings were merely
stored with Sony for archival purposes or for safekeeping). These recordings are also
considered part of the Royalty Buyout Recordings (and, accordingly, Sony will not pay you or
Holdings any royalties or other sums [other than publishmg momes) m connection with Sony s

exploitation of these recordings.) Kelley has advised us that there are a sigmficant number of
these recordings in Sony's possession. For your information, we argued strenuously to Sony
that under a fair interpretation of the old language in the Recordmg Agreement, Sony did not

own the live recordings as those recordings were not "made under" the Recordmg Agreement
(we also argued that Sony did not own the outtakes, although we believe Sony probably had a

strong argument that it did own those recordings). Sony argued that under their mterpretation
20116u

04170.1

KLO1715

enunxu Iwnnsr & scurstu, r.c.

of the "made under" language, they have always owned these recordings. Please keep in
mind that this change also applies prospectively and that Sony wdl now own all recordings
ou give to them in the future (regardless of the reason you are giving the recordings to
hem). Sony will, however, have to pay you royalties if they exploit any such future

recordings (other than those on the 2001 Studio Album and the "Live '88-'93 album).
You
should
not "Live
give any
futurealbum)
recordings
to you
Sonyhave
(other
thanunderstandmg
those on the 2001
Stu no
Album
and the
'88-'93"
unless
a clear
of the
business terms which will govern Sony's exploitation of those recordings.
ii)

Restrictions on Sony's Exploitation Rights_ - Under the existing Recording

Agreement there are no restrictions on Sony's ability to exploit outtakes and previouslyunreleased recordings owned by Sony. When Sony insisted on owmng the outtakes and
unreleased live recordings in its possession, we negotiated the followmg restrictions on ony s
ability to exploit these recordings:
(a)
Previously-Unreleased Live Recordings - During your lifetime, Sony
will not exploit previously-unreleased live recordings without your consent. There are no
restrictions on Sony's exploitation rights after your death.
(b)
Outtakes and Other Previously-Unreleased Recordings - Sony can
) h r rd ng q l t must be o arable to the quality of other master
recordings of the
same must
era; meaningfully consult with
. you during your lifetime,.
2) Sony
3) Sony can use up to 2 of such recordings on each re-release of existing
) Sony can use a "reasonable" number of outtakes on a "boxed set";
5) during your lifetime, Sony cannot otherwise exploit these recordings without
your consent. There are no restrictions on Sony's exploitation rights after your death.
unrele

")
Unreleased Recordings Not Delivered to Sony - With respect to previouslyd recordings which are in your possession (and future recordings made durmg the

term of the Recording Agreement which you do not give to Sony), Sony does not own es
recordings; however, they have insisted that you agree that you w I not exp it these

n the cor ing Agreemen , e only rig y

d to exploit these recordings was
guag
(which meant that there was very little you could
for non-phonograph record purposes
,, .s ve broad and includes both
effectively do because the definition of a "phonograph reco
i
ry
sound recordings and audiovisual recordings intended for home use [e&, home vi
could also have argued that you had the right to exploit these recordings through
n o
(be
di ital distribut on rights were not expressly include
yo
r c

fo
s expl t th
ecord nps
r ary a
e
e
t of e e
ings so th y o n
o precis y w ch recordings are covered by this provision.

Under the existing definition in the Recording Agreement, a "phonograph record"

does
however,
includehave
any form
known
whichtransnussions
may hereafterare
become
known". Sony would
relied of
onreproduction
this language"now
to argue
thatordigital
phonograph records.
2ensu
041701

KLO1716

GRUBMAN I.NDURSHY & ScHI.NDLER, P.C.

D)

Renewal And Termination of Transfer Rights

U.S. copyright law, broadly speaking, gives artists certain opportunities to recapture,

without cost, the right to exploit their works from third parties to whom the

ve

eviously assigned or transferred those rights. These recapture rights,

c
ate ories "renewal rights" and "termination of transfer rights", are mtended to protect artists
from improvident business deals made early in their careers before the artists are awar of the
value of their work. It is generally believed that the recapture rights only pl in e
that if an artist has granted another party the right to exploit his work m
. .
countries the artist can only recapture the right to exploit his work m the U.S.). Sony is
concerne i that you or your children (or the other successors hsted in the copyright statute)
exercise these renewal rights or termination of transfer rights with respect to all or a portion o
talo e and that Sony will not be receive the full benefit of its bargam. The speci ic
re of th recapture rights, and the protections Sony is requiring from you, your children
and your other statutory successors are described more fully below:
i)

Pre-1972 Master Recordines:

15, are
1972
Cohen", "Songs
F
a Recordings
Room" andreleased
"Songs before
of LoveFebruary
and Hate")
not("Songs
subject of
to Leonard
Federal copyright
protection
(t e "Early Recordings"). Accordingly, there are no renewal rights or termmation of transfer
rights for the Early Recordings, and under the terms of the 1967 recordmg agreement, ony
currently owns all rights in the Early Recordings in perpetuity.
ii)

1972-1977 Master Recordines:

(a) Renewal Rights

(1)
Master recordings which were released between February 15, 1972 and
December 31 1977 (which we understand includes the master recordings on the albums, New
Skin for the ld Ceremony" "Death of a Ladies Man", "Leonard Cohen: L ve Songs an

any previously-unreleased recordings on "The Best of Leonard Cohen ) (

("Middle Recordings") are subject to Federal copyright protection under

ective y,

ght Act (the "Current Act") for: (A) an nutial term of twenty-eight (2 ) y

release, and (B) a renewal term of an additional sixty-seven (67) years, for a total term
at the
of copyright protection of mnety-five (95 ) years Under the terms of the. Current
. the Act,
Middle
end of the initial 28 year term you would be entitled to renew the cop r ght
Recordings in your name, and thereby terminate Sony s right to exp
the U S However under the existing terms of the 1972 Recordmg Agreement, you ve
t
28
s
f
e en
1
6 ye s
you o not
ha e an renewal rights in the Middle Recordings because you have already assigned these
rights to Sony under the 1972 Recording Agreement.
(2)
If however, you are deceased at the time that the renewal right for any
of the Middle Recordings would have otherwise vested in you, under the Current Act, the
renewal rights in those particular Middle Recordings would instead vest in your statuto
( our wife [if you have one) and children, or, if none o em

e e executor of your estate) instead of in Sony. The rights of your statutory succes ors
are not affected by the fact that you have previously assigned your renewal rights m
2on6a
041801

KLO1717

mm hvnsn & Scnvenxa,r.c.

Recordings to Sony. To protect against the possibility of your successors exercising their
renewal nghts (and their termination of transfer rights as discussed below), Sony is now
requirmg that your children and the executor of your estate each sign an agreement (a "Rights
Transfer Agreement"or "RTA"), and that you add a codicil to your will, which states that your
successors are obhgated to automatically transfer to Sony any interest in any Royalty Buyout
Recordings (includmg the Middle Recordings) which vests in them at any time. To be clear, if
you did not undertake this buyout transaction, and you were not alive at the time the renewal
nghts in any of the Middle Recordings vested (LL, 28 years after the respective initial release
of each of the Middle Recordings [that is, between now and 12/31/05]), the right to exploit the
Particular Middle Recordings concerned in the U.S. for the next 67 years would otherwise
have vested in your children (and not Sony).

.
.
(3)
Under the Agreement, if any new potential statutory successors come
mto existence (q&, you change your executor, or you get married and/or have more children)
you and Holdmgs are required to immediately cause that person to execute an RTA3. Sony is

particularly concerned about the possibility of you marrying or having future children and has
msisted on including significant financial penalties if you or Holdings do not obtain an RTA
from your new wife within 20 days of your marriage, and from your new child within 90 days
of the child's birth. The penalties range from $2 million down to $500,000, depending on
when the event occurs. The money is paid to Sony but is returned to you on a pro rata basis
(i&, 25% of the rnoney for each of the four albums on which the Middle Recording are

contained) with interest if either: (A) you are alive on the date on which the renewal rights for

the particular album have vested in you (and are, therefore, automatically assigned to Sony) or
(B) Sony obtains (without having to make any payments to your wife or child) the necessary
RTA at any time (but no later than 20 days after your death).

(b) Termination of Transfer Right

(1)
Under the Current Act, in addition to the renewal rights discussed above, you
or if your are deceased at the relevant time, your statutory successors (iA, your wife, children
and, if any of your children are deceased, their children [i.A, your grandchildren), or, if none
of them are alive at that time, the executor of your estate) are granted the right to terminate
Sony s U.S. exploitation nghts for the Middle Recordings. This "termination of transfer right"
can be exercised during a five (5) year window beginning fifty-six (56) years after the initial
release of the Middle Recordings (LL, beginning in 2028). Under the Current Act, the list of
potential statutory successors who are entitled to exercise the termination of transfer rights is
slightly different from the list of statutory successors entitled to exercise renewal rights. The
mam difference m your case, is that the termination of transfer rights may eventually vest in
your grandchildren whereas, so long as you have a will at the time of your death, the renewal
nghts will never vest in your grandchildrend. In order to protect against the possibility of your

Please note that if a minor child (such as a grandchild or a future born child) is
required to sign a RTA, it is likely that it will be necessary to have a guardian appointed for
the child for that purpose and to have the RTA approved by a court.

4Under the Current Act, the statutory successors entitled to exercise renewal rights
would be your wife and children and, if they are deceased at the time the renewal rights vest

your executor. Under the terms of the codicil to your will which you are required to execute
in connection
with the Agreement, your executor is obligated to exercise the renewal rights for
the
benefit of Sony.
m

KLO1718

GRUBMAN h 523URSXY
8C SCHDG

,M

grandchildren exercising their termination of transfer rights, Sony is also insisting that if any

of your children pass-away and leave surviving children (tl, your grandchildren), that you (or
our estate, if you are deceased) or Holdings obtain an RTA from those grandchildren withm

90 days of the death of their parent (11, your child). In addition, the Agreement also contams

an express waiver by you of your termination of transfer rights m respect of the Royalty

Buyout Recordings.
(2)
The waivers contained in the RTA's (both those signed by your grandchildren
and by your other statutory successors) are intended to apply to both the renewal rights and the
termination of transfer rights (because under the RTA's, your successors agree to transfer
rights they ever acquire in the Royalty Buyout Recordings [whether by operation of renewa
rights or termination of transfer rights] to Sony). Notwithstanding the language contame m
the RTA's (or your waiver of your termination of transfer nghts under the Agreetnent), u er

the terms of the Current Act neither you nor your statutory successors are able to waive your

(or their) termination of transfer rights. The Current Act provides that a termmation may be
effected "notwithstanding any agreement to the contrary" Accordingly, we beheve it is
unlikely that the waivers of termination of transfer rights which Sony has msisted upon, are
enforceable5 Because we believe the RTA's are probably unenforceable insofar as the waiver
of termination of transfer rights is concerned, we argued, ultimately unsuccessfully, that it was
unnecessary for you to obtain RTA's from your grandchildren
ause, as d cussed a ve
the only recapture rights which can possibly vest in your gran
termination of transfer rights). Accordingly, although you, your estate
g
obligated to obtain RTA's from your grandchildren upon the death f the r aren
your
children) we do not know what type of damages, if any, Sony wou
str ng ar men tha since h ngh are no aiv ble the R A ou d not hav
and, therefore, Sony had not been damaged by the failure to obtam the RTA.

iii)

effective

Post-1977 Master Recordings:

Under the Current Act, for master recordings created on or after Januar 1, 1978 (
master recordings on "Recent Songs", "Various Positions", "I'm Your Man , The Future ,
"Cohen Live" "More Best of", the New Albums and any future album dehvered to Sony
{collectively, the "Late Recordings"]), there is a single term of copyright which lasts for
life of the author and for 70 years after the author's death. There are no renewa rights r e
Late Recordings, however, a termination of transfer right with respect to the . . exp
rights ma_y exist for the Late Recordings. If the termination of transfer nght exists, it can

3The waivers will likely still be enforceable for purposes of the renewal rights.
'Please also note that, under the Agreement, if you should die before 2006, your
executor is obligated to keep your estate open until January 1, 2006 (this provision was ad e
by Son to ensure that, if your children should predecease you, that your executor wou
exercis any renewal rights which might vest in him for Sony's benefit - all of the renewal
rights will vest by January 1, 2006). If you should die after January 1, 2006, there is no
obligation under the Agreement for your executor to keep your estate open for any particu ar
period of time. Accordingly, it is unclear whether Sony would have any clann m the event ou
were
obligated
to obtain
an RTASony
fromwould,
a grandchild
at astdl
tunehave
aftera claim
you had
died and
your es r
had been
probated
and closed.
however,
against
Holdmgs
failure to obtain the RTA.
2onw
om

KLO1719

GRUBMAN 1.NDUnsxr & ScumnLER, r.c.

exercised, at the earliest, during a five (5) year window beginning at the end of the 2012.

Sony is also expecting you and your successors to waive these termination of transfer rights.
The waivers would be contained in the RTA's discussed above. Under the Current Act, these
termination of transfer rights, like the termination of transfer rights discussed above for the

Middle Recordings, are also not waivable. There is a serious question, however, as to whether
you actually have any termination of transfer rights with respect to the Late Recordings.
Under the Current Act these rights only apply to "transfers" which are "executed" by the
author on or after January 1, 1978. In your case, the Recording Agreement under which you
transferred (and will continue to transfer) your rights in the Late Recordmgs to Sony, was
executed in 1972. Therefore, in our view, there is a good possibility - perhaps even a

probability - that the termination of transfer provisions are no.t applicable to the Late
Recordings.

iv)

Work Made For Hire -

(a) Re-Characterizing Recordings as "Works Made For Hire" - Under the existing
Recording Agreement, you grant to Sony the ownership in all master recordings made under the
Recording Agreement. Sony is insisting that the existing Recording Agreement be modified to
also include an acknowledgment by you that all such recordings are "works made for hire for
Sonyt The "author" of a "work made for hire" is deemed to be the employer or commissiomng
party, rather than the natural individual(s) who created the work. Accordingly, if the masters are
"works made for hire", then neither you nor your successors will have any renewal rights or
termination of transfer rights because: (1) Sony, as the author of the masters would be entitled to
exercise the renewal right in its own name, and (2) the termination of transfer rights would
simply not be applicable because those rights can only be exercised by "natural" authors. Sony
has insisted that the "work made for hire" designation apply to all master recordmgs under the
Recording Agreement (and not just the Royalty Buyout Masters). Accordingly, any masters you
deliver to Sony in the future will also be characterized as "works made for hire .
(b) Effectiveness of Re-Characterization - Certain works are considered "works
made for hire" under copyright law. Under the Current Act, a work is a "work made for hire
only if: (i) it is created by an employee within the scope of his/her employment; or (ii) 11 is
specially commissioned for, or as, one of the categories of works enumerated m the Current Act
and the parties expressly agree in a written agreement that it is to be considered a work made
for hire".' Although there is not a significant amount of relevant case law and the issue remams
unsettled, in our view (based on our experience, a plain reading of the statute and our
preliminary research) sound recordings such as those made by you for Sony are probably.not
"works made for hire", regardless of the language in the Agreement, since the recordmgs were
neither made by an employee within the scope of his employment nor do they fall within one of
the specifically enumerated categories of such works. It should also be noted that if Sony was

7The "work made for hire" acknowledgment is now a standard provision contained in
all modern recording agreements and is required by all of the record compames.
8These categories are, works specially ordered or commissioned for use: as a
contribution to a collective work, as part of a motion picture or other audiovisual work, as a
translation, as a supplementary work, as a compilation, as an mstructional text, as a test, as

answer material for a test, or as an atlas.

9The earlier version of the Copyright Act had a similar, although less precise definition.

KLO1720

GRUBMAN 1NDURSKY & SCHDVDLER, P.c.

confident that the Royalty Buyout Recordings are works made for hire, they would not have
insisted on all of the other provisions in the Agreement (ig, the RTA's, etc..) which are mtended
to prevent you and your successors from exercising your (and their) renewal rights and
termination of transfer rights.

E)

Website

i)
Sony is granted the exclusive right to host the "Official Leonard Cohen
Website" at Leonardcohen.com until the earlier of: (a) the end of the term of the Recording
Agreement, or (b) 5 years after you deliver an album to Sony (the "Exclusive LC.COM
Period"). If you deliver additional recordings to Sony after the end of the Exclusive LC.COM
Period, then the Exclusive LC.COM Period will be reinstated until the earher of (a) the end of

the term of the Recording Agreement, or (b) 5 years after you deliver those additional

recordings. After the exclusive LC.COM Period, the domam name "Leonardcohen.com
reverts to you and Sony can maintain a site under another name (selected by Sony). In order to
ensure that Sony has an appropriate domain name available for their use after the Exclusive
LC.COM Period, the Agreement provides that you cannot do anything which would prevent
Sony from: (A) selecting any of the following as their new domain name: 1eonardcohen.net ,
"leonardcobenmusic.com" or "leonardcohenonline.com", or (B) having a reasonable selection
of domain names which include your name in them. The costs incurred by Sony m connection
with its website are nonrecoupable. You receive 40% of the net revenues directly attributable
to Sony's website (such as, from advertisements, etc.). Sony will not.place advertisements on
its website for products or services related to: firearms, x-rated or NC-17 rated entertainment,
tobacco, alcohol, political or religious endorsements or personal hygiene, without your
consent. You also have the right to approve the overall presentation and editorial direction of
the Sony site.
ii)
You can maintain other websites undef any domain name(s) (other than the
domain name Sony is then using) for any purpose. The only restriction on your Internet
activities is that during the Exclusive LC.COM Period, you cannot refer to any website (other
than Sony's "Leonardcohen.com" website) as the "official" Leonard Cohen website or the
"official" I.eonard Cohen music-related website. You can, however, refer to other sites as
"official" sites so long as they relate to an activity other than your career as a recording artist
(so for example, you can have the "Official Leonard Cohen Concert Tour Website", or the
"Official Leonard Cohen Fan Club Website", etc..). Any sites mamtamed by you must contain
an "above-the-fold" link (iA, a link that is visible when the homepage appears without the
user having to scroll up or down or side-to-side) on its homepage to the Sony site.
iii)
Sony would like you to use reasonable efforts to promote the Sony site in
connection with the release of each of your albums, provided, your failure to do so is no_t a
breach of the Agreement.

F)

Indemnity

You and Holdings individually and collectively indemnify Sony for any claims made
against Sony arising out of a breach of any representation or warranty contained m the
Agreement or otherwise arising out of your or Holdings's acts or omissions. Sony has also.
insisted that you and Holdings indemnify them in the event you or Holdings ever becomes
insolvent, and as a result thereof, any of your or Holdings' creditors attempt to undo or modify
the transfer to Holdings or the transfer by Holdings to Sony of your royalty entitlement or the
other assets transferred under the Agreement (a creditor might attempt to do tius if they felt the

KLO1721

GnunxAN Ixpussxy & ScInNDLER, P.C.

assets had been sold to Sony for too little money, but it would be difficult for a creditor to
prevail on such a claim).
G)

Guarantee

You are required to guarantee the performance by Holdings of all of its obligations
under the Agreement. This includes the indemnification obligations set forth immediately
above. Accordingly (by way of example of your potential exposure under this guarantee), if

Holdings becomes insolvent at some time in the future, and a creditor of Holdings attempts to

undo the transaction with Sony, you would be required to indemnify Sony for any losses it may
incur in the event Holdings did not honor its own indemnity obligation. Holdmgs also has
other obligations under the Agreement, such as obtaining RTA's from your successors if you
fail to do so (or, in the case of your grandchildren, you are deceased). It is, therefore,

important to ensure, to the extent possible, that the people who control Holdings are not likely

to cause it to become insolvent and will cause Holdings to comply with its obligations under
the Agreement. It would also be appropriate for you to have an indemmty from Holdmgs to
cover any payments you are required to make on behalf of Holdings under this guarantee. Our
firm has not been involved in the formation of Holdings and we are not privy to the legal

arrangements between you and Holdings. We do not know if you currently control
Holdings and we do not know about any plans you may have to transfer your mterest m
Holdings. However, we feel it is important for you to understand that you will be
responsible for guaranteeing Holdings' performance regardless of whether you control
Holdings. It is our understanding that Richard Westin has been handhng these matters
for you. We have advised Richard of this issue and we recommend that you consult with
him before signing the Agreement.

H)

Mechanical Royalties

For the Live Albums, Sony has agreed to increase the mechanical royalty rate to the
100% of the minimum statutory rate (under the existing Recording Agreement, they are only
required to pay 75% of the minimum statutory rate).
I)

Audit Settlement

The Agreement contains an audit settlement for all agreements between you and Sony
(other than your publishing agreement) for all accounting periods through December, 2000.
In addition, you and Holdings acknowledge that you will not receive any further royalty
statements (or payments, other than publishing monies), and will not have any future audit
rights, in respect of the Royalty Buyout Recordings.
J)

Miscellaneous

i)
As a result of the tax structure, Sony has requested that you and Holdings make
a series of representations as to your and Holdings' solvency and ability to pay your debts.
These representation include statements that: (a) your (and Holdings') assets exceed your (and
Holdings') liabilities, (b) you (and Holdings) will be able to meet your (and Holdmgs')
liabilities as they come due (c) neither you nor Holdings are, or intend to be, engaged in a
business transaction for which you (or Holdings) have unreasonably small capital, and (d)
neither you nor Holdings is involved in any litigation or any dispute which could lead to
litigation.

KLO1722

GRUBMAN IKDURSET & SciaxDLEn, P.c.

ii)

Sony has insisted that you be responsible for complying with (and the cost of

.complying with) all union requirements applicable to the recording of the Live Albums. Given
that these albums were recorded at live concerts, we do not know if there are any umon
obligations associated with releasing these recordings on records.
iii)
Sony has.agreed that they will not license any master, recording for use in
advertisements in connection with alcohol, tobacco, firearnis,.feminine hygiene products or
political or religious endorsements, without your prior written consent.

iv)
Sony is expecting that you will cooperate with them (at Son's non-recoupable
expense) in connection with the promotion of the New Albums. Sony also expects that you
will tour in support of the 2001 Studio Album in at least 5 major markets m the U.S. and 8
major foreign markets. Sony is also expecting that you will consult with them on your tour
itinerary. Your failure to do any of the foregoing is nLt a breach of the Agreement.
Please do not hesitate to call us if you should have any questions at all regarding any of
the above matters.
Best regards.
Very Truly Yours,

Donald R.. Friedman

Stuart J. Fried

KLO1723

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

_-_______..______________________________X

00 Civ. 1068 (DAB)

UCC LENDING CORP. and C.A.K.

UNIVERSAL CREDIT CORPORATION, :

Plaintiffs,

:
DECLARATION OF LEONARD COHEN

-agamst-

LEONARD COHEN,
Defendant.

------------------------------X
1, Leonard Cohen, being duly sworn, do depose and state as follows:
L

1 am the defendant in this action. I submit this affidavit in support of my

opposition to the plaintiffs' motion for an order of attachment. The averments set forth herein

are based upon my personal knowledge of the events recited, except where stated upon my
understanding, in which event I believe the same, in good faith, to be true.
2.

I have been a resident of the state of California for nearly ten years. I have owned

a home in California for more than 25 years.

3.

I am a poet and a composer of musical compositions, which I perform both at live

concerts and on recordings. During the course of my career, which has spanned nearly 40 years,
I have authored hundreds of compositions and recorded in excess of a dozen albums. Certain of
my compositions appear on my own albums, and, as well, many of my compositions have been

recorded by hundreds of other artists. I receive what I view to be substantial royalties, on a

regular basis, from sales of rny albums and uses ofmy compositions.

KLO3877

4.

In early 1999, certain of my representatives engaged in discussions with plaintiffs

concerning the possibility of their making a loan to an entity that I was to establish for that

purpose. The contemplated loan was to be secured by a security interest in my rights in, among
other things, my compositions (the "Rights") and the royalty income generated therefrom.
5.

Following further discussions between the parties, on or about May 10, 1999,

UCC Lending Corp. ("UCC") and I signed a document entitled "Proposed Royalty Income Loan
for Leonard Cohen - Summary of Tenns and Conditions" (the "Term Sheet"). A copy of the
Term Sheet is attached hereto as Exhibit A.

6.

Following the execution of the Term Sheet, I paid plaintiffs $75,000, which, as I

understood it, was to be applied against out-of-pocket expenses incurred by UCC in connection
with processing and evaluating my loan application.
7.

My representatives subsequently engaged in discussions with plaintiffs in an

effort to agree upon a mutually acceptable amount of the loan. On June 24, 1999, my
transactional counsel advised.plaintiffs, in writing, as follows:
As we discussed earlier today, due to the significant change in
expectations conceming the possible loan amount, our client
Leonard Cohen and his manager Kelley Lynch have decided to
terminate the previous engagement letter with C.A.K. Universal
Credit Corporation and to pursue another opportunity.

A copy of my counsel's June 24,-1999 letter is attached hereto as Exhibit B.

8.

To the best of my knowledge, plaintiffs never took issue with or otherwise

challenged the termination of their engagement or my intent to explore a possible transaction

with another party.

9.

My representatives subsequently discussed with Sony Music ("Sony") the

possibility of Sony's acquisition of the Rights. During this period of time, my representatives

KLO3878

also communicated with plaintiffs in respect of a possible loan transaction. Ultimately,plaintiffs

offered to advance $5.8 million as part of a proposed loan transaction.

10.

It is my understanding that in November of 1999, my representatives informed

plaintiffs that I was seriously considering selling the Rights to Sony, if acceptable financial and

related terms could be reached. In response, on or about November 8, 1999, plaintiffs wrote to
my personal manager and advised her that "In light of the recent events regarding Sony and their
potential offer to purchase Leonard Cohen's assets, we offer an alternative to the proposed Loan
structure." A copy of plaintiffs' November 8, 1999 letter is attached hereto as Exhibit C.

I 1.

I later learned that, without prior notice to me or my representatives, on or about

November 11, 1999, plaintiffs sent a so-called "commitment lettef' to me, in care of my

manager's office. During the entirety of the parties' relationship in this matter, plaintiffs
consistently had communicated with my transactional counsel. In this instance, however,

plaintiffs didnot, as ] understand it, send this supposed "commitment letter" to my attomey or
even provide a copy of the letter to him. A copy of plaintiffs' November 11, 1999 letter is
attached hereto as Exhibit D.
12.

This supposed "commitment letter" requested that ] confirm my agreement

thereto by signing the letter and returning a fully executed copy to plaintiffs by 5:00 pm on
November 19, 1999. I refused to sign the "commitment letter."

13.

.It is my understanding that, in mid-November of 1999, my representatives

discussed with plaintiffs the possibility that ] might still enter into a loan transaction with
plaintiffs. It is my further understanding that, on or about November 16, 1999, plaintiffs sent

revised drafts of loan documents to my counsel.

3
. sE.03

0/00 WED 14:16 FAI

' 442
N8 ,2 :32
213saS47

Ispoe

14.

I uhirnately decidg

adwsed plaintiffs. Plaintiffs

.

not to proceed with the foa . and rny repreeentatives so

TWonded by making deand for payrnnt ofa S290 000

Origination Fee and fo rel

r inbursement ofexpeases (a.additio to th
$75 000 d

042

cPosi in an amount of nearly 375,000. As I do

ax diove I am bble for those

amounts, I refused to accede to plaintiffs' demands.

15.
I have not reached an agreement with Sony (or any other party) regarding a sale
or other transaction involving the Rights. While
di
MY s succ: mth Sony con:inue, it is
certainly not clear at this juncture whether we ukirnately will roch an accord regarding such a
sale.

I declare under penal

of p

1&

Dated: August 30, 2000

Leonard C.Nen

KLO3880
cm 3e 2000 15 25

Professor Ricitard A. Westin, Esq.

3141 Warrenwood IVynd

Lexington, KY 40502
859-335-1938

(Fax)268-8017
September 16. 2000
KeVey Lynch
Stranger Management

419 North Larchmont. Suite 9

Los Angeles 90004
Re: Files
Dear Kelley,
J went through the books. Here are mv obsenations:

1. Blue Mist Binder

At the back are the two stock certificates. Keep them in a safe place. Do not send them out for
review. Thev are too valuable and do not need to be reviewed by the other side.

1 inserted the three years' of tax retums at the back of the binder. I am glad to see they exist.
I placed the original stock 500 share certificate for.Leonard Cohen Productions after the particular
set of Minutes and wrote "VOID/ CANCELED" over'the certificate of Leonard Cohen Productions
stock

I discarded some tri vial correspondence with the ]RS. It wou!d only confuse things to include it. The
subject was the correct taxpayer ID number. i placed the IRS's unrice of the new ID nornber in the
reme area as the tax retums.

I inserted in chronological order the letter rium the State of California acknowledging that Blue Mist
has a designated agent in California,
i discarde d me extra copies orthe lener frem Dela wsre certifying to llje name change (the cenificate
of Amendm 523).
I put the evidence of payment ofa CT bill m a separate envelope. If you have a tax !e for Blue Mist,
U vgjenerecohen-legditycheck wpd

KLO1418

or some kind of miscellaneous file for the entity, put the envelope there. It is very minor piece of
paper. I did the same for some Blue Mist-related correspordence from me. It should go into a

correspondence or miscellaneous file.

I removed Directors' minutes from the Blue Mist binder .and put them in the Leonard Cohen
Productions binder.
1 put a copy of a letter from you to Jeff Newman in the same nvelope. I would put it in a
miscellaneous or correspondence file for Blue Mist. They are all duplicates, but they show what
Newman got, in case it ever matters.

1 threw away the minor bills from CT. They have been.paid per your notation and will nly create
confusion.
1 put some pages on the front of the binder with an explanation that the first page needs to be
rewritten because of my folly. Also, there was an additional page that you map not have included;
1 added it to the four pages attached to the front. This additional page is a list of properties, and is

referred to in the Assignment, so it needs to be included.

1 cooked up some minutes to adopt the new By-Laws. I tabbed.the page in.blue. Please.sign it. It is
fairly important.
1.made entries in the stock transfer ledger to reflect the cancellation of LC's 500 shares, his receipt

of 425 shares and K1 s receipt for services of 75 shares.

The big problem is the SONY.assignments. 1 found a cover letter ofmine.and various enclosures
te the letter. I think they are the right items. I attached them to the top of the Blue Mist binder.

2. Leonard Cohen Productions Binder

1 placed the original crtificate of incorporation at the front of the binder, where it belongs.
I discarded the extra ecpy af the certificate.
1 left duplicates in the front relating to the certificate of incorporation in the binder at the front.
I put a copy of the documents relating to the name change at the front of the binder.

1 eliminated the piece of paper naming the brown file "BLUE MIST TOURING. INC." and left the
original cover printing that reads 'LEONARD COH EN PRODUCTIONS, INC., Now it makes sense
that there are two binders.
DF,wp\letters\cohen-legalitycheck.wpd

. KLO1449

I changed the order of a number of entries to make thern flow chronologically. Except for the.trivial

fact that tax returns (showing no income) should have been file,.I think the volume is in adequate
order to pass muster in a "due diligence"ingtniry. The lack ofreturns is unlikely to upset anyone. The
corporation was inert, but it has clearly been brought back to life.

3. LC lnvestments, LLC
I want to hang onto this folder. There are sorne problems that need to be straightend out.

Sincerely,

D:\wpiletters\cohen-legalitycheck.wpd

KLO.1420

Subj:
Date:

No Subject
2/11/02 7:43:37 AM Pacific Standard Time

From:

Tsimar

To:

BALDY MONK, rwest0(dtuky.edu

Dear Leonard,
I am going to go through Ken's letter point by point to give my point of view to the various matters he raises.

1. With respect to the record keeping and the deal. This is rubbish. There were lawyers involved, tax advisers, and so
on an so forth. These records were impeccable and were provided to Ken but not only myself but also Burt Gofdstein's

office (who handled the appraisal of the stock), and others. Every detail of this deal and it's record keeping was
overseen by your attorneys and accountants.

On one occasion i had a very casual conversation with Ken re. the way in which Jen Brown had handled records. I
had a very difficult time finding anything and nothing was particularly documented, paid bills were not kept, copies of
draft requests, etc. were no where to be found - he was aware of this and that was a very long time ago. He has
never brought up anything about record keeping since he first began doing work on your behalf.
2. The issue with respect to the S1 million advance from Sony is not something that I would advise Ken should be
treated as a deposit instead of income. The reason for this is that I am not a tax adviser, nor am I an accountant, and I
had never before heard that monies paid as a deposit, which needed to be paid back were the deal to not go through.
were treated as loans for tax purposes.
Furthermore, Ken fails to mention that he has had discussions with Richard Westin and Greg McBowman on this
matter.
Sometime in October, I forwarded Ken a notice received from the IRS which I fully expected him to handle with the
IRS. On October 24, I forwarded Ken a letter from.Sony that he had requested. I heard nothing further and assumed
that he was working this out with the IRS because these things can take months to resolve.
.spproximately two weeks ago, I received another notice from the IRS with respect to this matter which i forwarded to
Ken and asked him to please call me Monday. I have heard nothing bacit
I would like to point out that I am incapable of resolving anything with the IRS and I assume, as has always been the

case in the past with all accountants, that when I forward something to them they are dealing with it. When Ken did
not call me back to discuss it, I put it aside thinking that he was following through with the IRS and would then get

back to me.
For Ken to then write and say that he doesn't know if this has been paid is ludicrous. He never instructed me or

anyone else to pay this bill. In addition, at least half of these monies have been recouped by Sony and therefore
would have been handled on your 1999 and 2000 tax returns.
I think Ken needs to explain what he has been doing with the IRS since October as I have heard absolutely nothing.

3. With respect to Ken's point (2), I have an early letter on file from Ken stating that "I will file extension for the trust

and the individuals until October 15. 199. However, since this is the first year we have done the returns, I would like to
have the information by September 15 in order to have plenty of time to prepare the returns and ask any questions that
may arise. You are correct, the corporate returns are due by September 15. I would appreciate this information by
August 15."

-i

i have always assumed that these were the dates that Ken needed information by. This year, my own information on
my own retums was sent in very late however there were certain details such as "What was the $55 to AA" for and we
had to look that up. Or, "what is the mileage on Leonard's car?" The major records were in fact given to Ken. All of
the corporate and trust information was supplied to Ken in August.
I had asked Ken if he could let me know what amounts would be due in advance (knowing that monies would have to
,e requested from your investments). He could not give me any numbers. Therefore when the returns were
.nessengered to me on the 15th (which is always the date i receive them), i did not know what to do.
I called Ken and he was not in the office and I left this message: "I have Leonard's personal tax return however he

KLOO596

..

i then called Neil and Richard to determine where the funds should come from. It ws agreed that they would come
out of Tradi+ional Holdings, but due to the structure of Traditional Holdings, paperwork would need to be prepared from
Richard. I spoke to Richard about this paperwork and he said he would prepare. Sometime in mid-November I
received the paperwork and put it aside with the retum, awaiting Ken's advice. I never heard from him and I am sorry
' say that the return was not sent in.
I asked Richard about this yesterday when I was preparing to go through the letter with you as I do not understand if
further extensions can be filed, and what if any additional penalties apply. Richard has said we should send the return
in now, that he will redo and update the paperwork first, and the IRS will notify us of any penalties. I will reimburse

you for all penalties owed to the IRS from October 15th through the date of the filing as I should have more
aggressively followed up with Ken on this matter and I fully accept responsibility for this.
4) The 1099 issued by Sony was in error. That is why I faxed it to Ken. I advised Stu Bondell of this and after you

received Ken's letter, I had Stu confirm to you that it was being resolved.

Ken was involved in the sale of your royalties to Sony and had many conversations with Richard Westin, Greg
McBowman, the Grubman firrn, and so on. For him to see this 1099 and not realize that it was issued in error is
alarming. Again, as seems to be the case in hindsight, Ken did not bother to call me and therefore assumed that you
had $7 million of income that I had not advised him of and were sitting on a huge tax bill and huge penalties and
interest. From my point of view, it was unprofessional and alarming for him to not follow through to determine if this
very serious 1099 was real or not before sending off a letter that really points out to me that Ken is not doing his job as
an accountant very well. I am not an accountant and it is not my job to handle many of the things that Ken is blaming
on your management team. That would extend to notifying Sony that the 1099 had been issued in enor after l caught
the mistake.
5) Ken's bills. Now that you have many entities that need returns filed, the bills for accounting services need to be
paid by the entity for which the work was done. When I received Ken's bills, I sent a fax to Tim at Greenberg &
Associates asking that he arrange to have them paid out of the various entities. I then assumed, because I heard
nothing back (including from Ken) that they had been paid. Only recently (and not every month as Ken asserts -- once)
did I receive notice that these invoices were not paid. I called Tim and he apologized and said it had slipped through
the cracks. He then called me back and said that because the checks would not be issued.to your name or to your
account, they would require your signature. I just recently received this paperwork and it does require your signature
plained this to Ken and he was fine with it. Today I will issue a check to Ken for all the entities and have Tim re-do
me paperwork so that you are reimbursed for paying bills on behalf of the various trusts.
I would like to say something else. In the past when i have worked with your accountants, they would send me faxes
or call me to tell me when estimated taxes were due; they would send me faxes or caH me to tell me how they had

handled an IRS notice or a particular issue. Even with respect to the refinancing of the properties, I have been calling
Ken since the beginning of October. Also, on Adam's.tax bill, I had asked that he set up a payment schedule with.the
IRS and I have still heard nothing back. Ken does not return calls and he does not follow up. I personally feel that this
letter was a blessing in disguise because what it says to me, and Richard can correct me if l'm wrong in my
assumptions, is that Ken has dropped the ball on many recent issues, is trying to shift accounting and tax
responsibilities onto me, and apparently has amnesia about all conversations with Greg, Richard, Stuart Fried, and so
on with respect to the royalty sale, the handling of the deposit, and so forth.
Again, I take full responsibility for any and all penalties that you will receive due to the late filing of your return. I am
not going to take the blame however for tax and accounting issues and out and out lies -- ie., conversations about
record keeping, bills being faxed monthly, asking me for documents for two years and so on and so forth. I have taken
all steps necessary to convey all information, notices, 1099s, and so forth to Ken Cleveland. Your records are properly
maintained.
Ken Cleveland wrote this letter to you because, as I have said, he freaked out when he thought you had received
"income" of $7 million. It seems to me that he then decided to look to see what he had not resolved, put them all in
the letter and blamed them on me. All three of the main issues are issues I was awaiting Ken's response to: the IRS
issue with the deposit what to do with your retum; and a phone call with respect to the incorrect 1099. I also find it
offensive that Ken, on a personal note, mentions that he still has not been paid, lies that he has sent statements
through every month, and fails to mention that he and I recently discussed this and that he was fully aware of the fact
that Tim had let this slip through the cracks.
elley

KLOO597

Subj:
Date.
.From:
To:

Re: No Subject
2/11/02 9:57:47 AM Pacific Standard Time
rwest0@uky.edu
Tsimar@aol.com, BALDYMONK@aol.com

'ent from the Internet (Details)

Dear Leonard and Kelley,

I agree with Kelley on the points she has made. Someone sophisticated in
tax procedure would have realized earlier that there was a problem. Ken
assumed a level of knowledge (if not an ability to read minds) on the part
of Kelley that was unreasonable and his lack of communication is
remarkable. In my view, the steps to take now are:
1. File the returns and pay the taxes ASAP to minimize penalties (letting
the IRS compute the penalties, which it wiH do) and
2. Get a new accountant.
Ihcidentally, up to now I have liked Ken. There is nothing personal in my
suggestion.
Best regards,

Richard

At 10:43 AM 2/11/02 -0500, Tsimar@aol.com wrote:

Dear Leonard,
>l am going to go through Ken's letter point by point to give my point of view
o the various matters he raises.

>1. With respect to the record keeping and the deal. This is rubbish. There
>were lawyers involved, tax advisers, and so on an so forth. These records

>were impeccable and were provided to Ken but not only myself but also Burt
>Goldstein's office (who handled the appraisal of the stock), and others.
>Every detail of this deal and it's record keeping was overseen by your

>attorneys and accountants.

>On one occasion I had a very casual conversation with Ken re. the way in
>which Jen Brown had handled records. I had a very difficult time finding
>anything and nothing was particularly documented, paid bills were not kept,
>copies of draft requests, etc. were no where to be found -- he was aware of
>this and that was a very long time ago. He has never brought up anything
>about record keeping since he first began doing work on your behalf.
>2. The issue with respect to the $1 million advance from Sony is not
>something that I would advise Ken should be treated as a deposit instead of
>income. The reason for this is that I am not a tax adviser, nor am i an

>accountant, and I had never before heard that monies paid as a deposit, which
>needed to be paid back were the deal to not go through, were treated as loans

>for tax purposes.

>Furthermore, Ken fails to mention that he has had discussions with Richard
>Westin and Greg McBowman on this matter.

>Sometime in October, 1 forwarded Ken a notice received from the IRS which I
fully expected him to handle with thelRS. On October 24, 1 forwarded Ken a
Aetter from Sony that he had requested. I heard nothing further and assumed
>that he was working this out with the IRS because these things can take
>months to resolve.

KLO1876

>conversations with Richard Westin, Greg McBowman, the Grubman firm, and so
>bn. For him to see this 1099 and not realize that it was issued in error is
>alartning. Again, as seems to be the case in hindsight, Ken did not bother to

>call me and therefore assumed that you had $7 million of income that I had
>not advised him of and were sitting on a huge tax bill and huge penalties and
winterest. From my point of view, it was unprofessional and alarming for him
to not follow through to determine if this very serious 1099 was real or not

>before sending off a letter that really points out to me that Ken is not
>doing his job as an accountant very well. I am not an accountant and it is
>not my job to handle many of the things that Ken is blaming on your

>management team. That would extend to notifying Sony that the 1099 had been

>issued in error after I caught the mistake.

>S) Ken's bills. Now that you have many entities that need retums filed.
>the bills for accounting services need to be paid by the entity for which the
>work was done. When I received Ken's bills, I sent a fax to Tim at Greenberg
>& Associates asking that he arrange to have them paid out of the various

>entities. I then assumed, because I heard nothing back (including from Ken)
>that they had been paid. Only recently (and not every month as Ken asserts
>- once) did I receive notice that these invoices were not paid. I called

>Tim and he apologized and said it had slipped through the cracks. H en
>called me back and said that because the checks would not be
ed to your
>name or to your account, they would require your signature. ust recently
>received this paperwork and it does require your signature: I explained this
>to Ken and he was fine with it. Today I will issue a check to Ken for all
>the entities and have Tim re-do the paperwork so that you are reimbursed for
>paying bills on behalf of the.various trusts.

>l would like to say something else. In the past when I have worked with your
>accountants, they would send me faxes or call me to tell me when estimated
>taxes were due; they would send me faxes or caH me to tell me how they had
>handled an IRS notice or a particular issue. Even with respect to the
>refinancing of the properties, I have been calling Ken since the beginning of
Jctober. Also, on Adam's tax bill, I had asked that he set up a payment

-schedule with the IRS and I have still heard nothing back. Ken does not
>return calls and he does not follow up. I personally feel that this letter
>was a blessing in disguise because what it says to me, and Richard can
>correct me if I'm wrong in my assumptions, is that Ken has dropped the ball
>on many recent issues, is trying to shift accounting and tax responsibilities
>onto me, and apparently has amnesia about all conversations with Greg
>Richard, Stuart Fried, and so on with respect to the royalty sale, the
>handling of the deposit, and so forth.
>Again, I take full responsibility for any and all penalties that you will

>receive due to the late filing of your retum. I am not going to take the
>blame however for tax and accounting issues and out and out lies - ie.,
>conversations about record keeping, bills being faxed monthly, asking me for
>documents for two years and so on and so forth. I have taken all steps

>necessary to convey an information, notices, 1099s, and so forth to Ken

>Cleveland. Your records are properly maintained.

>Ken Cleveland wrote this letter to you because, as I have said, he freaked
>out when he thought you had received "income" of 57 million. It seems to me
>that he then decided to look to see what he had not resolved, put them all in
>the letter and blamed them on me. All three of the main issues are issues I
>was awaiting Ken's response to: the IRS issue with the deposit; what to do
>with your return; and a phone cali with respect to the incorrect 1099. I
>also find it offensive that Ken, on a personal note, mentions that he still
>has not been paid, lies that he has sent statements through every month, and
>fails to mention that he and I recently discussed this and that he was fully
aware of the fact that Tim had let this slip through the cracks.
>Kelley

KLO1878

LAW OFFICES

HOCHMAN, SALKIN, RETTIG, TOSCHER & PEREZ P.C

9 I SO WILSHIRE BOULEVARD
SulTE 300

(310)28l-3292

BEVERLY HILLS, CALIFoRNIA 90212-3414

FACS IM LE
blanc@Taxlitigator.com

January 17, 2003

David R. Jojola, Esq.

Internal Revenue Service

Office of Chief Counsel
Small Business/Self-Employed Division Counsel
3018 Federal Building
300 North Los Angeles Street
Los Angeles, California 90012
RE:

Cohen v. Commissioner
-Docket Number: 7024-02

Dear Mr. Jojola:

Pursuant to your request, the following represents the factual and legal analysis of the above-

referenced matter.

Leonard Cohen, through his representatives, began negotiations in 1999 with Sony Music
International ("SMI") for a buyout of his SMI master recordings catalog. In an effort to
secure that SM1 was serious about the buyout and to secure future performance, Mr. Cohen
demanded a deposit of $1,000,000. Ultimately, SMI agreed to this request and on
November 5, 1999, wired Mr. Cohen $1,000,000. Accompanying the wire transfer was a
letter dated November 5, 1999 which is attached hereto as Exhibit A. The letter from Paul

Gilbert of SMI provides:

"This amount is deemed a partial prepayment against the
proposed $8 million buyout ofLeonard's future royalty interests
in his master recordings and compositions under all of his
agreements with Sony Music and Sony/ATV."
The factual basis for treatment as a deposit is further supported by Mr. Gilbert's letter dated

April 1, 2002 (attached hereto as Exhibit B) which provides:

". . . this letter is to confirm that the $1,000,000 paid to you by
Sony Music Entertainment, Inc. ("SMEI") in November of 1999
was a deposit towards a possible royalty buyout . . ."

0 O
KLOO630

David R. Jojola, Esq.

Internal .Revenue Service

Office of Chief Counsel

Small Business/Self-Employed Division Counsel
January 17, 2003
Page 2

The legal authority is derived from the Supreme Court decision in Commissioner v
Indianapolis Power & Light Co., 493 U.S. 203, 110 S. Ct. 589 (1990). The Court created a
distinction between the taxation of advance payments and the taxation of refundable
deposits, although the Court confirmed that advance payments are generally taxable and
defined "advance payment" as a non-refundable payment.

The Court, however, held that deposits are not taxable. The Court defined "deposits" as
refundable payments that are made to secure the payor's performance of its legal obligations
under the contract. Please note that the Court also found that a deposit is not taxable even
if the payor elects to apply the deposit against amounts owed to the payee. Thus, ifthe payor
fulfills its obligations under the contract, the deposit is refunded. That is the exact scenario
presented in this rnatter.
This analysis is also consistent with the United States Tax Court's longstanding treatment
of real estate lease deposits where the Court has distinguished between a sum designated as
a prepayment of rent (taxable upon receipt) and a sum deposited to secure the tenant's
performance of a lease agreement. J & E Enterprises, Inc. v. Commissioner, 26 TCM 944

(1967).

Moreover, as you are aware, as a matter of policy, the Ogden Service Center has previously
resolved this matter with the Taxpayer. The Service Center issued a Notice dated August 13
2001 (attached hereto as Exhibit C), whereby the Service requested explanations from the
Taxpayer with respect to certain discrepancies including the 1999 SMI Form 1099 in the
amount of $1,000,000. After receiving the Notice, Richard Westin, on behalf of Mr. Cohen,
contacted the Service Center and explained the situation that the Form 1099 in the amount
of $1,000,000 from SMI was erroneous. The Service Center requested a letter from SMI

confirming that the Form 1099 was issued in error. Based upon Mr. Cohen's submission (see
Exhibit B), the Ogden Service Center issued a Notice dated April 29, 2002 accepting SMI
and Leonard Cohen's explanation and proposed a change to the 1999 liability in the amount
of $937 (in'cluding interest). A copy of this Notice is attached hereto as Exhibit D. Finally.
on May 2, 2002, Mr. Cohen consented to the 1999 assessment and paid the outstandin

balance in the amount of $937. A copy of the consent and transmittal to the Ogden Service
Center is attached hereto as Exhibit E.
To that end, as we discussed, the settlement will include a concession from the Internal
Revenue Service in the above-referenced case in consideration for a copy of an amended
2001 return whereby Mr. Cohen reports all income that was previously treated as a deposit

and not reported. I have spok.en with Mr. Cohen's representatives and have been informed

KLOO631

David R. Jojola, Esq.

Internal Revenue Service

Office of Chief Counsel

Small Business/Self-Employed Division Counsel
January 17, 2003
Page 3
1

that a 2001 amended return will be prepared and filed. I will provide you with a copy as soon
as it becomes available.

In the meantime, if you have any questions regarding this matter, please do not hesitate to

call the undersigned.

Sincerel

E EN D. BLANC
SDB/je
Enclosures
cc:
Charles P.. Rettig, Esq.
bec: Mr. Leonard Cohen (c/o.Ms. Kelley Lynch)
Professor Richard A. Westin, Esq.
2 1 3208. I

KLOO632

17085-15