Lyor Cohen has a serious money problem.
Vivendi’s Universal Music Group has said it may not indemnify the brash exec for millions of dollars in damages Cohen has been ordered to pay because he was found liable for fraud, The Post has learned.
Since a jury ruled in May that Cohen was personally liable for $56 million in damages in the high-profile case brought by indie label TVT Records, Cohen has been telling associates Universal will indemnify him for the damages.
Most in the industry have considered indemnification for Cohen a foregone conclusion.
But Cohen’s attorney recently told the judge hearing post-trial motions in the case that Cohen may have to pay the bill from his own pocket.
“In fact, although Mr. Cohen believes that he is fully indemnified, UMG has recently informed Mr. Cohen’s counsel that UMG has reserved its rights with respect to indemnification,” Matt Dontzin, Cohen’s lawyer, wrote in a recent letter to the judge.
The total damage award came to $132 million – $56 million for Cohen and $76 million against the company – but the judge could reduce the damages.
Cohen would have a rough time paying the damages by himself: Court documents peg his net worth at between $20 million and $30 million.
TVT’s lawyer is arguing that the damages should not be reduced, if Cohen is going to be indemnified. Universal’s lawyer, meanwhile, contends the issue of who pays the bill is irrelevant to the decision of whether to lower the amount.
In a statement, Universal said: “We do not believe it is appropriate to comment on issues that are pending before the court.”
Dontzin did not return repeated calls for comment.
Cohen, the highly successful head of Universal’s Island Def Jam label, is in negotiations for a contract extension. The large damage award, which shocked the music industry, is likely a part of those discussions.
Some industry observers believe Vivendi would have a hard time convincing shareholders they should cover Cohen’s penalty, since Cohen was found personally liable for fraud.
Insurance that companies typically take out to cover penalties imposed on officers and directors usually don’t cover fraud, experts say.
Public companies don’t normally indemnify execs for “their own fraudulent conduct,” said Howard Meyers, a partner in the law firm Meyers & Heim, and a former Securities and Exchange Commission official.
The court case centered around a planned release by TVT of an album by rap star Ja Rule and his former group, Cash Money Click.
Ja Rule is currently signed to Murder Inc., a subsidiary of Island Def Jam, but got his start with TVT.
TVT alleged that Cohen reneged on a deal to release the album, and sued him and Island Def Jam for fraud.
The case has gotten dicey at times, with TVT claiming that Island Def Jam hired private detectives to dig up dirt on its chief, Steve Gottlieb.
A recent story on Gottlieb in the New York Times was so laden with errors that the paper was forced to publish a 2,100-word correction.