Puffy had better hope the verdict goes his way. NEWSWEEK has learned that a conviction could trigger events that eventually cost Combs’s his Bad Boy Entertainment company, the record label on which his business empire is founded. Combs’s 50-50 partner in Bad Boy is Bertelsmann, the German media giant that owns the BMG music empire (Arista and RCA, among other labels). According to people familiar with deal, the terms of the joint venture include provisions specifically addressing the disposition of Bad Boy in the event of a Combs conviction. If the rapper is found guilty of a felony (not a lesser offense) and sentenced to at least six months in jail, ownership of Bad Boy could revert fully to Bertelsmann, those sources say.
Music industry execs say that most business contracts contain provisions defining “material breaches” of the pact. And criminality is generally understood to constitute such a breach. What is unusual in the Combs-Bertelsmann agreement, however, is its specificity, notably the requirement that he must be sentenced to a six-month jail term on a felony conviction before the trigger kicks in.
Neither Bertelsmann, BMG nor Arista, which has day-to-day responsibility for the partnership, would comment. And Combs and his advisers weren’t immediately available. Nor is it entirely clear how Bertelsmann would proceed if Combs is convicted and sentenced to jail time; presumably, the company could decline to act on the trigger.
Combs’s business attorney recently told NEWSWEEK that BMG has been strongly supportive of Combs during the rap star’s travails. Combs and his partner haven’t discussed any business contingencies in the face of the criminal trial, the attorney said.
Instead, it’s been business as usual at Bad Boy. Since the December 1999 club-shooting incident that sparked the criminal case, Combs has spearheaded an impressive rebound of the label, breaking four new hit acts. Meanwhile, Antonio Reid, one of Combs’s longtime friends and a fervent backer of his music business, took over the helm of Arista last summer. It would be an excruciating decision on his part to be involved in any effort to wrest control of Bad Boy away from Combs.
Still, if Bertelsmann were to seek to end its ties to Puffy, it’s unclear how much-if anything BMG would have to pay for Combs’s half interest. At its height several years ago, Bad Boy had sales approaching $200 million. Bad Boy’s asset include its catalog, master recordings, artists under contract and Puffy himself.
Combs first partnered with BMG in 1995, according to an Arista spokeswoman, and quickly emerged as one of music’s most successful, if controversial, forces. Early on, he had such acts as Notorious B.I.G., Mase and Craig Mack. Today, the Bad Boy roster includes such hit acts as Faith Evans, 112, Total, Carl Thomas, Black Robb and Shyne, who’s also a defendant in the criminal case. A symbol of wunderkind entrepreneurship, especially for African-Americans, Combs became a poster child in the 1990s for youthful success. Now, that poster child’s future-and financial success-are in the hands of the 12 jurors deliberating in Manhattan.
