Allen Klein discusses The Beatles’ purchase of NEMS

On Saturday 1 February 1969, at Apple’s headquarters at 3 Savile Row, London, a meeting was held in which Allen Klein outlined his assessment of The Beatles’ finances.

Also present was John Eastman, soon to be Paul McCartney’s father-in-law, whom had advised The Beatles to buy Brian Epstein’s former company NEMS for £1 million.

The following is taken from Allen Klein’s affidavit, read out in the High Court, London in early 1971, during the hearing of McCartney’s lawsuit to dissolve The Beatles’ partnership:

The purpose of the meeting on 1st February was, as I have indicated, primarily to discuss the proposed acquisition of NEMS. John Eastman was proposing this on two grounds: first, that it was a good deal in any case, because the company was available for £1 million and in itself was worth £1 million, and that the money in the Company could be used to pay for the purchase. (I did not know at that time that there was anything unlawful in such an arrangement, but I did know that in order to have £1 million to spend you have to earn a considerably larger sum before tax, and if the advance of £1 million from EMI to fund the purchase was going to have to be paid back out of royalty income, I explained that earnings of at least £2 million would be required.) The second ground on which Eastman recommended the purchase was that NEMS owned a block of 237,000 shares in Northern Songs Limited (“Northern Songs”). Northern Songs was a Public Company quoted on The Stock Exchange, London. Its principal assets were rights, derived from Maclen (Music) Limited. (“maclen”), in the compostitions of Mr Lennon and the Plaintiff, including future compositions until February 1973.

At this meeting (1st February 1969) the Plaintiff introduced the subject of Northern Songs and said that he wanted The Beatles to own it. I suggested that it was something that we could look at later. As regards the large holding of NEMS in Northern Songs, I said that at that time I did not feel that the existence of the holding was a sufficient reason to pay £1 million out of a company (Apple) when we did not know what its financial position was. It was agreed that the idea of buying the share capital of NEMS and the possible acquisition of Northern Songs should be shelved until the financial position of The Beatles’ companies had been ascertained and it was also agreed by all four Beatles that I should be persuaded to look into the financial position of those companies.

At this stage John Eastman launched an attack on my personal integrity, producing a copy of the Cameo-Parkway Proxy Statement mentioned above and clippings from newspapers. He alleged that I had a bad reputation in general and raised questions about Cameo-Parkway in particular. I pointed out that the Cameo-Parkway Proxy Statement made, in accordance with the stringent requirements of United States law and practice with respect to securities transactions, a full and complete disclosure of the “warts” of Cameo-Parkway’s career and was there for all to see. I also invited him to make specific charges or criticisms which would enable me to answer them, but he did not do so. In any case I think that my answers must have satisfied The Beatles. I suggested that the position of John Eastman should be that of legal adviser to The Beatles and all their companies. He rejected this on the ground that he did more than an English lawyer normally does. the meeting broke up and another meeting was arranged for the following Monday 3rd February 1969, again at Saville Row.