Chapter 12: Into the Black

Santa Clarita, California

April 12, 1993

As a limited liability company, KVA Records was not required by law to have a governing board in order to conduct business. Under the terms of the operating agreement that had been drawn up back in the beginning, Celia, Jake, Bill, and Pauline were the official members of the company and each had equal say in the decisions that were made and would share equally in any profit that was enjoyed. They were not a board, as much as Greg (who officially held no power in the company even though it had been his money that had funded Celia’s share) would have liked to have called them that.

“Can we at least call this a board meeting?” he pleaded as the four official members, two spouses who held a considerable interest in what occurred here, and Jill the accountant all sat down at the conference room table in the KVA Studios building.

“Sure, Greg,” Pauline said soothingly. “We can call it a board meeting if you’d like.”

“And use Roberts Rules of Order to conduct it?” he asked hopefully as well.

“Well...”

“No Roberts Rules of Order,” Jake vetoed, shaking his head. “We’re all friends here, right?”

“We are,” Pauline said.

“Then we should just be able to talk like friends, right?” Jake asked.

“You’re no fun,” Greg said with a pout.

Jake chuckled, knowing the actor was not serious. Greg was actually in a decent mood these days. His wife’s album was selling like wildfire and was currently one of the most popular albums in the nation. She was getting tons of airplay and was frequently in the media. All of this attention had brought Greg himself back into the public consciousness as something other than the star of the miserably failed The Northern Jungle flick. A few movie offers had actually trickled in over the past month—invitations to audition for up and coming projects that were not spoofs or slapstick. So far, none of those offers had interested him, but it was nice to be asked.

“All right,” said Jill once everyone was seated and settled in. “How about we get started here?” Jill herself looked pretty much the same as she’d always looked. As a full-blooded Japanese woman, she possessed those magical genes for longevity and agelessness that her race was known for. Though she was exactly the same age as Jake—they had been born on the same day and had always jokingly referred to each other as twins—she looked to be in her early twenties instead of almost thirty-three. Her black hair was cut short, falling well above her shoulders and she had a pair of thick glasses on her face. Her clothing was a conservative pantsuit and arm-covering blouse, both in dark colors. She had a leather briefcase open before her. Though she was not one of KVA’s members, they paid her family’s CPA firm in Heritage, California quite handsomely for Jill to be their full-time accountant and financial manager.

“Let’s do it,” Jake said.

“I’m ready,” agreed Celia, who sat next to Greg and across from Jake and the Nerdlys.

“She really should have a gavel to bang for this part,” Greg said.

“I have a little bit of a hangover today,” Pauline said sourly. “I’d just as soon there be no gaveling, if it’s all the same to you.”

“Prude,” Jake told her.

“I am not,” she countered.

“Then perhaps you’d care to describe the details of your most provocative sexual encounters with Obie?” said Nerdly. He too was in a good mood of late. They had finally finished Obie’s new album and he and Sharon had been released from their semi-indentured servitude.

“In your dreams, Bill,” Pauline told him.

“I believe you might be correct in that assumption, Pauline,” Sharon said. “It is my understanding that Bill has always had a sexual attraction to you and I sometimes suspect that when he awakens in the night with an erection and wants to engage in marital relations with me, that he has, in fact, been dreaming of you.”

“That is not true on every occasion that phenomenon occurs,” Nerdly told his wife.

“All right now...” Pauline started, her face blushing.

“Now wait a minute here,” Celia suddenly spoke up. “Are you saying that you’re okay with him fantasizing about Pauline, Sharon?”

“I am indeed saying that,” Sharon confirmed. “After all, I reap the benefits of it, do I not? Besides...” She looked at Pauline with a shy smile. “ ... Pauline is sexually appealing on several levels. While I’ve never really desired a sexual encounter with a female and do not consider myself bisexual, I do have this underlying attraction for Pauline specifically.”

“No kidding?” Greg asked, his interest perking up considerably.

“I would not lie about something like that,” Sharon said.

“You’re saying you’d get it on with Pauline if the opportunity presented itself?” Jake asked, fascinated by this side track as well.

“It would depend on the circumstances and the mood at the time, of course,” Sharon said. “And it couldn’t be just me and her together. Bill would have to be there as well.”

“I believe I would consent to such an encounter,” Nerdly said in all seriousness.

They both looked at Pauline, who was no longer blushing, but was smiling in amusement. “Well now,” she said. “Perhaps you should have spoken to me about this a year or so ago, before I hooked up with Obie. Now we’d have to include him in the fun as well.”

Bill was shaking his head. “Sorry,” he said. “I don’t think I could perform adequately if there were another man in the room during the encounter.”

“Are you kidding me right now, Nerdly?” Jake put in. “Remember those nights out on the road before you and Sharon got together? You had no problem whipping out the old John Thomas and plowing through a two by two while we cheered you on.”

“What’s a two by two?” asked Greg, interest clearly in his eyes.

“It’s when you get two groupies and...” Jake started.

“All right then,” Jill suddenly cut in. She seemed quite flustered by the turn the discussion had taken. “How about we talk some business now?”

“Prude,” Pauline accused.

“Yes,” Jill agreed, “and quite comfortable with my prudidity, thank you very much. Shall we move onto good news now?”

“I think the fact that a man’s wife is willing to have a threesome with another chick qualifies as good news,” Jake said.

“Hear, hear,” Greg put in, raising his water glass in salute and earning himself a playful slap on the shoulder by his wife.

“Financial good news,” Jill said, glaring at Jake.

Jake gave a mock sigh. “If you must,” he said.

Jill shook her head a few times in consternation. It was certainly interesting working for this bunch, that was true. And profitable as well. “All right,” she told them. “In a nutshell, here it is. I’ve gone over the numbers from the first quarter of 1993 and KVA Records is officially operating well in the black now.”

A cheer erupted from the table as everyone basked in this announcement.

“We’ve recouped our investment then?” asked Greg.

“That and a considerable amount more,” Jill replied. “Let me pass out copies of the financial statement for you all.” With that, she pulled a sheaf of paperwork from her briefcase. They were three pages each and each set had a staple placed at a precise forty-five degree angle exactly one quarter inch from the upper left corner. “Just like back in school. Take one and pass them down.”

They obeyed, passing the pile around the table until everyone had a sheet before them. Pauline, Greg and Sharon all opened theirs and began to look at it. Jake, Nerdly and Celia just let them sit there.

“Okay then,” Jill said. “Let’s start with the basics here. As of the close of business hours in the Eastern Time Zone on March 31, 1993, the end of the first quarter, Celia’s album, The Struggle, has sold one million, four hundred and ninety-seven thousand, six hundred and twelve copies during said quarter. Jake’s album, Can’t Keep Me Down, has sold one million, one hundred and twelve thousand, sixty-seven copies during the quarter. As you can see in the table there on page 1 of the document, that means that Celia has brought in ... uh...” She looked at Jake, who was raising his hand and waving it. “Yes, Jake?”

“Sorry to interrupt,” Jake said. “Good presentation, really it is, but ... well ... we all have the exact figures here in front of us, right?”

“Uh ... right,” she said.

“For the sake of brevity, could you maybe just round your numbers to the nearest hundred thousand or so during the discussion?”

“Uh ... well ... I suppose,” she said. “If everyone wants that?”

“Is that cool with everyone?” Jake asked the table. Everyone gave some version of a nod. “Everyone is cool with it. Proceed please.”

“Right,” Jill said, thrown off stride a bit. She quickly recovered however. “Anyway, as I was saying. Celia has sold nearly 1.5 million copies. Jake has sold 1.1 million. The wholesale rate we are paid for these copies is six dollars apiece. That means Celia has brought in approximately 9 million dollars in sales and Jake has brought in approximately 6.6 million, for an approximate total of 15.6 million dollars in revenue.”

“Not bad at all,” Jake said approvingly.

“Especially for a has-been, huh?” Celia added with a smile.

Jake held out his hand across the table to her and they engaged in a brief high-five.

“All right,” Jill said. “Before we get too excited here, let’s remember what the definition of ‘revenue’ is. It’s the income received from selling goods or services before the expenses of operation and production are deducted. And the expenses and production of these two albums were considerable.”

“Accountants are such downers,” Jake whispered to Sharon, who giggled a little at his words.

“Be that as it may,” Jill said, “I will now review the expenses of KVA during the quarter. Our primary expense set against that 15.6 million in revenue are the royalties KVA is responsible for paying out. By far, the largest chunk of royalties goes to Blake Family Records and Blake Studios. The label itself pulls in forty percent royalties on each album sold while the studio pulls in an additional three percent, which, when totaled, means that Oren Blake II pulls forty-three percent of that revenue right off the top.”

“I still think that is an outrageous amount,” said Greg.

“When you think of it out of context, perhaps,” said Nerdly. “Keep in mind, however, that when Intemperance and La Diferencia were selling millions of albums for National Records and Aristocrat Records respectively, we, the musicians and composers of the product, were only being compensated at a rate of ten percent of the gross revenue.”

“And that’s the industry standard,” Jake said. “I’ll take what we’re getting as far as percentage goes. We all knew what it would be going in.”

“I suppose,” Greg said.

“In any case, Blake Records and Blake Family Studios are only the most significant royalty payee that KVA is responsible for compensating. Don’t forget about the musicians, however. Mary Kingsley and Cynthia Archer each get one percent of both albums. Ben Ping and Theodore Duncan each get one half of a percent of both albums. Phillip Genkins receives one quarter of a percent of both albums. Laura Best receives one half of a percent of Celia’s album and one eighth of a percent of Jake’s. This all adds up to a grand total of 46.75 percent total royalties being paid out on The Struggle and 46.38 percent royalties being paid out for Can’t Keep Me Down.”

“Which leaves 53.25 and 53.62 percent gross revenue after royalties respectively, correct?” said Nerdly after only the briefest pause to do arithmetic times two in his head.

“Uh ... correct,” Jill said, a little bit impressed by his math skills. She could not do that that fast, after all.

“So, how much total royalties are we paying out for the quarter?” asked Celia.

“If you’ll look on page two of the document,” Jill said, “the total is listed.”

Everyone turned to page two and spent a moment scanning. Jake whistled appreciably when he saw the figure. “Seven million, three hundred and forty-six thousand, four hundred and sixteen dollars and forty-eight cents,” he recited. “Which means we get to keep this amount...” He put his finger on the paper and recited it. “Eight million, two hundred and fifty-three thousand, five hundred and eighty-three dollars and fifty-four cents?”

“That is correct,” Jill said.

“Not bad at all, eh?” Jake said with a nod.

“And that’s just this quarter,” Nerdly said. “Both albums show every sign of selling at least another million or so in the current quarter.”

“Hell to the yeah,” said Jake.

“Please stop saying that,” Pauline requested.

“Sorry,” Jake said. “I’m getting better.”

“Before we get too far ahead of ourselves here,” said Jill, “I should remind you that the royalties are only the primary expense. There are several others.”

“Well ... naturally,” Jake said. “There’s the rent on this office we’re sitting in and your firm’s fees.”

“Right,” Jill said. “Rent on this building cost KVA nine thousand dollars during the first quarter. Fees to the firm of Yamashito, Yamashito, and Yamashito equaled twenty-five thousand dollars plus travel expenses equaling another four thousand six hundred and eighty-three. Utilities and maintenance fees on the building ran one thousand eight hundred and forty-two. City and state fees related to the operation of a business ran six hundred and nineteen. Catering and entertainment expenses were pretty light this quarter since you’re not practicing in here yet: only two hundred and eighteen dollars so far.”

“That all sounds pretty much like chump change when stood up against the royalties we pay out,” said Jake.

“Perhaps,” said Jill. “But chump change needs to be counted to the penny as well as non-chump change. And chump change can add up.”

“I suppose,” Jake said with a shrug. He pointed to a spot on the third page of the sheet. “This appears to be the bottom line, right?”

“That is the total profits for the quarter,” Jill said.

Everyone turned to that figure. It was $8,212,221.54.

“That’s the money we have to play with for the quarter then?” Jake asked.

“Correct,” Jill said. “In addition, we have six hundred and forty-three thousand, three hundred and eight from the previous quarter still sitting in our account, along with the one hundred and eighteen thousand, one hundred and eleven left over from the original investment money. That gives KVA a total of eight million, nine hundred and seventy-three thousand, six hundred and forty dollars and forty-six cents as of the close of the first quarter of 1993. Now, the question is what would you all like to do with it?”

“Party our asses off!” Jake said enthusiastically.

“Well ... yes, I’m sure you will want to do that,” Jill said. “But aside from that, how should we distribute this profit?”

“We divide it up equally,” said Greg. “That’s what is spelled out in our operating agreement, is it not?”

“Yes, that is an option,” Jill said. “I was never suggesting that we divide up any distributions in anything other than an equal manner. What I want to know is how much do you want to distribute?”

“We don’t want to distribute it all?” asked Greg. “After all, there will be a similar amount coming in next quarter, right?”

“In all likelihood,” Jill agreed. “But it would be my suggestion that you leave a considerable amount in the LLC’s accounts to secure further operations. Jake and Celia both plan to put out another record, right?”

“I do,” Jake agreed.

“So do I,” said Celia.

“It seems likely then that production of two further albums will cost at least as much as it took to produce the two you already have, if not more. The figure of what these two albums cost is on page two of the document.”

They all turned there and saw that the composition, production, manufacturing, and distribution of The Struggle and Can’t Keep Me Down cost KVA Records a grand total of four million, eight hundred and twenty-six thousand, four hundred and eighteen dollars and ninety-three cents. And that figure would continue to go up as they paid for more manufacturing and distribution as the CDs sold. Promotion costs, of course, were accounted differently as they were covered by the royalties being paid to Obie.

“I don’t think further CDs will cost quite that much,” Pauline said.

“No?” Jill asked.

“No,” Pauline said. “A lot of that expense was first time start up expense that will not need to be repeated. In addition, now that KVA has put out two best-selling albums, we’ll be able to negotiate from a position of strength on our next efforts. We should be able to negotiate a royalty rate of around twenty-five to thirty percent with National if we agree to sign with them for the next round.”

“We sign with them?” asked Jake. “What about Obie?”

“Obie was a great help getting the deal we have now because we were an unknown risk,” Pauline said. “He was able to use his influence and reputation to get us that forty percent we now enjoy and he is profiting from the deal quite well. I doubt, however, that he would be able to offer us a lower rate than what the major labels would offer now that we’re hot commodity.”

Jake looked at his sister sharply. “You would just dump Obie, just like that?”

“I would let him attempt to match or beat whatever the best offer was,” she said. “But if he did not or could not ... hell yes I would dump him. This is business. Our personal relationship has nothing to do with it. I’m sure Obie understands that as well.”

Damn, that’s cold, Jake thought, but did not say.

“What are you saying then, Pauline?” Greg asked. “Do you think we’d be able to get two more albums recorded and mastered for three million?”

“I think that sounds like a reasonable figure,” Pauline said.

“Then you think we should leave three million in the KVA accounts and distribute the rest?” asked Celia.

“I’ll vote for that,” Nerdly said. “That would allow us to recoup our original investment and our secondary investment and still have a reasonably significant capital gain for the quarter.”

“Sounds cool to me,” Jake said with a shrug. “After all, we’ll have another eight or nine mil coming in this quarter.”

“What about taxes?” Greg asked.

“You have to pay them,” Jake said. “I’ve found, in my experience, that Uncle Sam and Aunt California absolutely insist upon that.”

Greg rolled his eyes. “Of course we have to pay taxes,” he said. “I pay enough to have my own F-14 fighter. What I mean, is does the LLC have to pay taxes on that three million we’re leaving in the account?”

“You all have to pay taxes on that,” Jill said.

“Even though it’s for reinvestment in the company?” asked Pauline.

“It’s part of the profit made by the LLC,” Jill explained. “Do you remember the reason we set you up as an LLC in the first place? It was to protect your personal finances from liability and set up distribution of the income from the investment. Taxes are still very much part of the picture, however. A limited liability company utilizes pass-through taxation. That means that the company itself is not taxed, but the members in it are taxed on the profits and must account for those earnings on their personal tax returns. You will be responsible at the end of the year for all of the profits you earn as members of this venture whether you leave some of it in the KVA account or not. Once you start spending that three million in the account on the next albums, you’ll be able to deduct those expenses against the profits that were made from that investment. Does that make sense?”

Everyone nodded, even Jake. “That makes sense,” he said.

Jill smiled and looked at her most lucrative client directly. “That means you should not spend all the money you pull in, Jake,” she told him. “I would hold off on buying any new houses, any new airplanes, any new land, until you’ve taken care of your personal tax liabilities.”

Jake smiled at her. “I will take your words under consideration,” he told her.

She shook her head a little. She knew what he meant when he said something like that.

“All right then,” Pauline said. “Are we all in agreement here? Distribute all but three million dollars among the four members?”

Greg mumbled a little, but they were all in agreement.

And so, the quarterly meeting of KVA Records’ members—if not their board of directors—came to a close.

“Good meeting,” Jake said. “Does anyone want to go out and grab a little lunch? It’s getting to be that time.”

“I’m in,” Pauline said.

“Sharon and I are actually going on a date to the tar pits,” said Nerdly. “They’re having a presentation in the museum at one o’clock regarding the microfossils and mollusks that were trapped in the tar.”

“They’re going to have displays of the fossils that are not usually shared with the public!” Sharon said excitedly.

“If anyone would like to go with us, you’re more than welcome,” Nerdly added.

“Uh ... well ... yeah,” said Jake. “As fascinating as that sounds, I think I’ll take a pass and just go do some lunch.” He turned to Celia and Greg. “How about you two? We can hit that new place over on Alvarado?”

“Have we heard any reviews on the quality of the establishment yet?” asked Greg.

“We have not,” said Jake. “They’ve only been open a few weeks.”

“Well...” Greg started.

“We’d love to go,” said Celia, overruling him. “I’m starving.”

Greg sighed. “I guess we’re in,” he said.

“Didn’t you have breakfast, Celia?” asked Pauline.

“If you can call it that,” she said sourly. “I ate half a grapefruit and half a cup of cottage cheese.”

“That does not sound particularly appealing,” Jake said.

“Are you on a diet?” asked Sharon.

“Kind of,” Celia said with a shrug. “I haven’t been able to get my runs in as much as I like to lately and ... well ... I put on a few pounds.”

“You did?” asked Jake, looking her up and down. “Where did you put them?”

She smiled. “It was just a few, but it means I’m moving in the wrong direction. My trainer suggested this grapefruit and cottage cheese diet for breakfast and a low carbohydrate diet for the rest of my meals.”

“That’s what you’re eating every morning now?” Pauline asked.

“Yeah, kind of boring, huh? I’ve been doing it for about two weeks now. I used to like grapefruit and cottage cheese.” She shook her head. “Not anymore.”

“Did you talk to your doctor about this diet before you started it?” Pauline asked.

“No,” she said. “Why would I do that?”

“Well, I’ve heard that grapefruit juice sometimes interacts with certain medications and makes them inactive.”

“I’m not taking any medications,” Celia said. “Except my birth control, of course.”

“Birth control is one of those medications I heard can be inactivated by grapefruit juice,” Pauline told her.

“Really?” Celia asked, her eyebrows going up with a bit of alarm.

“That’s what I heard,” Pauline said.

“I believe that is a myth,” said Sharon.

“A myth?” asked Pauline.

“It is my understanding that certain antibiotics and other medications can be degraded in effectiveness by the consumption of grapefruit juice, but that standard progesterone-based birth control pills are not one of them. It can lead to increased side effects from the pills, but should not cause ineffectiveness as long as the dosing schedule is followed.”

“Well ... that’s a relief,” Celia said. “Kind of, anyway. I was hoping for an excuse to stop eating the grapefruit.”

“I am not a doctor, however,” Sharon said. “I would still check with yours regarding your diet.”

“I’ll do that,” Celia promised.

However, by the time they made it to the restaurant and sat down for lunch, she’d forgotten all about the conversation.

Culpepper Studios was a small recording studio owned by National Records and located in West Hollywood, just outside the Los Angeles city limits. It was a non-descript building of only two floors. Inside of it were three fully equipped studios. These studios were not, however, involved in the making of popular music that would be burned onto CDs or transferred onto magnetic tape for distribution. Culpepper’s main reason for being was to record secondary projects such as background music for television shows, music for radio commercials and other forms of audio advertisement, and, the studio’s most lucrative source of income these days: on-hold music that was sold to telecommunications firms.

Laura Best had been assigned to work full-time in Culpepper Studios for the past six weeks now, ever since Bobby Z’s album had been mastered and Bobby himself had gone out on tour to promote it. There had been a brief period of discussion when it seemed that Z might actually ask Laura to be his primary saxophonist out on the road—a prospect she had been both terrified and deliriously excited about—but then Z’s lover and usual sax player Dexter Price had come to his senses and made up with the man. Off they’d gone to tour the country and tune each other’s instruments (as Jake would have said), and off she’d gone to blow her horn in an out of the way studio for forty dollars an hour, plus benefits (the health plan was actually pretty good, much better than that offered by the LAUSD).

It was not the most exciting and respectable musical assignment of her life, but it paid the bills (not that there were that many bills to pay, of course, since Jake paid for her housing, her food, and had bought her a car) and she could quite honestly say that she was a professional musician—she would, in fact, have to list that as her occupation on next year’s tax forms.

She walked out the door of the studio at 4:30 PM and headed to her green Cabriolet, her saxophone cases—one for the alto sax, one for the soprano—in hand. She was dressed in a pair of jeans and a sleeveless white blouse. Her red hair was tied back in a ponytail that she planned to release the moment she sat down. She had just spent the day working on a semi-jazzy piece that she had rather enjoyed contributing to but which she knew was only going to be heard by people waiting on hold when they called an insurance company or a cable TV provider. Such was life.

Her mood was not the best it had ever been. She enjoyed the life she had with Jake, and she loved him to death, but she was now quite in the midst of the bad side of being a notorious celebrity’s girlfriend.

The public knew about her now and the entertainment media were quite interested in learning all there was to know about Jake Kingsley’s current girlfriend, especially since he had a best-selling album that was getting a ton of airplay of late. The problem was the media did not want to know anything good about her. They only wanted to present the bad. And if there was no bad to present, they were perfectly okay with spreading innuendo or even outright lies.

Her first indication that they were interested in her came from Pauline about two months before. Pauline had called her at Jake’s home in the early evening to inform her that a reporter from the American Watcher publication was planning to run a story and photos about her relationship with Jake and wanted to know if she cared to be interviewed on the subject or otherwise comment.

“What?” she’d asked, appalled that that sleazy rag even knew of her existence. “How do they know about me and Jake?”

“Well...” Pauline confessed, “I’m afraid that might be my fault to some degree.”

“Your fault? What do you mean?”

“I accidently let slip that Jake was seeing someone a week or so back,” she said. “It was at the end of a long day and they were hitting me with enquiries about whether Jake and Celia were getting it on, and ... I’m sorry ... I spoke without thinking it through and said that Jake had a girlfriend.”

“And you told them my name?” Laura asked, her voice climbing a bit higher than was her norm.

“No no,” Pauline said. “Of course not. I told them that Jake and his lady friend would prefer to keep their relationship private. I gave them no hint about who you were.”

“Then how do they know about me?” she demanded.

“I’m guessing they staked out Jake’s house until they caught a glimpse of you leaving it or entering it,” she said. “Once they knew he was seeing someone, they would’ve pulled out all the stops to track and identify you.”

“They staked out our house?” she nearly screamed.

“Yeah, most likely,” she said. “The reporter I talked to says they have pictures of both you and Jake and he made a point to mention that he knows what Jake looks like now. From what he tells me, they have shots of you going in and out of the studio and shopping in the grocery store.”

“They’ve been following me around?”

“It’s what they do, Laura,” Pauline said. “Welcome to the celebrity life.”

“But ... but ... how do they know who I am? You said they know my name?”

“They probably ran the license number on your car to initially ID you.”