By: Sean Livesey
In November of 2014, Josh Lepchitz published a blog post entitled “Step Into Shaolin and See Where the Wu-Tang Clan Could Be Taking Music.” The post includes a brief yet incisive appraisal of the current state of the music industry from the artists’ perspective, given the advent and climbing popularity of services like Spotify, Pandora and Youtube. Given this context, the post goes on to address a novel approach to music sale taken by the Wu-Tang Clan: the group recorded and produced a 31-track album in secret, creating one single copy to be sold directly to the highest bidder, with sole rights to the art transferring to the buyer at the time of sale. The album is entitled “Once Upon a Time in Shaolin.” Lepchitz’s post concludes with thoughts on Wu-Tang’s contribution to the music industry, not only as artists, but as market innovators, as well.
Sure enough, Once Upon a Time in Shaolin was sold directly to a single wealthy buyer by the name of Martin Shkreli in May of 2015. Shkreli, also referred to as “pharma bro” by the media, is the 32-year old CEO of a pharmaceutical company. He first “entered the public consciousness…when he announced a price spike in [October 2015]…for Daraprim, a 62-year-old medication used by AIDS and cancer patients to fight life-threatening parasitic infections, that upped the price from $13.50 USD to $750 a pill. The public reacted very negatively to what was perceived as price gouging by Shkreli. When Shkreli bought the coveted Wu-Tang album he tweeted ostentatiously about it:
Martin Shkreli’s plans for the album were immediately unclear. Shortly after purchasing the album and attaining sole ownership of its contents, he teased that he might play part of it for the public. He even said that he’d probably never hear it, and that he “just thought it would be funny to keep it from people.” However, while Shkreli obtained title to and possession of the album, his sole ownership is not entirely without limitations. One key provision the under the contract is that the album’s copyright belongs to the album’s creators, Wu-Tang Clan, for the next 88 years. This means Shkreli will not be legally permitted to distribute the music, or make it “commercially available” for 88 years. VICE later caught up with Shkreli at his midtown apartment. When asked if people would ever be able to hear the album, Shkreli replied, “It depends on the world. I could see myself in a place where I break it, and I’ve seriously considered that – just snap it in half and bury the remains of it so no one tries to reconstruct it. I’ve seen a world where I give it away for free. I’ve seen a world where I charge for it or something… If people want to hear it, I’ll put it out. If people don’t want to hear it – they don’t appreciate Wu Tang for what I think it is – that’s fine, too… Who knows…”
Then, in a major turn of events, Martin Shkreli was arrested on December 17, 2015 for securities fraud and the orchestration of what amounts to a complex Ponzi scheme, wherein he used sham consulting operations to make secret payoffs. “’Federal prosecutors accused Shkreli of engaging in a complicated shell game after his defunct hedge fund, MSMB Capital Management, lost millions,’ Bloomberg reports.” Brooklyn U.S. Attorney Robert Capers stated, “His [Shkreli’s] plots were matched only by efforts to conceal the fraud, which led him to operate his companies, which including a publicly traded company, as a Ponzi scheme…”
Shkreli defended his actions after the fact, saying, “In law, you can be prosecuted for not maximizing profits. In fact, I know people who have. And you have to do everything in your power to make as much money as possible in the system we’ve got. That’s business, you can’t hold back.”
Members of the Wu-Tang clan responded to Shkreli’s arrest. “In a statement mailed to Bloomberg Businessweek, RZA [of the Wu-Tang Clan] wrote, ‘The sale of Once Upon a Time in Shaolin was agreed upon in May, well before Martin Shkreli’s [sic] business practices came to light. We decided to give a significant portion of the proceeds to charity.’” Many were quick to speculate as to the fate of the Wu-Tang album, and whether the album would ever reach the public.
Myths began to surround the prospect of the album’s release to public. The most famous of these myths was probably what I’ll call “the Bill Murray caveat.” At least seven major news outlets released headlines referring to a Bill Murray clause in the contract between Shkreli and Wu-Tang. The clause purportedly states that “the seller may legally plan and attempt to execute one (1) heist or caper to steal back Once Upon A Time In Shaolin, which, if successful, would return all ownership rights to the seller. Said heist or caper can only be undertaken by currently active members of the Wu-Tang Clan and/or actor Bill Murray, with no legal repurcussions…” It turns out, however, that the clause was merely a hoax, and this language never actually existed in the written contract.
Hoaxes aside, there appear to be three legitimate legal possibilities that could release the album from Shkreli’s exclusive ownership. The first possibility is asset forfeiture to the U.S. government. As of now, the feds do not have possession of or access to the Wu-Tank album. The FBI is still investigating Shkreli’s case. If, however, the money that paid for the album can be linked with the money stolen from investors, executive power allows the U.S. government to enact asset forfeiture.
Asset forfeiture would only be a possibility if Shkreli is convicted because this is a criminal case. Civil cases, on the other hand, do not require a civil judgment for asset forfeiture to be enacted by the government. In the event of an FBI discovery of such a link and a subsequent criminal conviction, the government could seize the Wu-Tang album and sell it to the public in order to recover some of the funds Shkreli allegedly stole from his investors. The FBI considers asset forfeiture to be the most effective means of recovering property and funds to compensate innocent victims of white-collar crimes.
The charges in the affidavit state, “The United States hereby gives notice to the defendants that, upon their conviction of any of the offenses charged in Counts One through Seven, the government will seek forfeiture, in accordance with Title 18, United States Code, Section 981(a)(1)(C) and Title 28, United States Code, Section 2461(c), of any property, real or personal, which constitutes or is derived from proceeds traceable to any such offenses.”
The second possibility is related to the first in that it, too, would result in a likely sale of the album to the public. However, it could be done in the absence of an FBI seizure of the album. Mounting financial pressure on Shkreli (due to the pending lawsuit and virtually inevitable fines and penalties) could result in such a “forced sale.” One interesting aspect of this scenario is the speculable market price of the album, now that it has received so much extra media exposure because of its link to the notorious high-profile CEO. Shkreli could theoretically sell the album as an investment with a sizeable return.
The third possibility that could release the album from Shkreli’s exclusive ownership is an internet liberation through a formal request under the Freedom of Information Act. While a somewhat unlikely possibility, a popular enough petition to release the album could carry weight in Washington. In the past, such requests have forced revelation of a great deal of information, including things like the White House beer recipe and the FBI’s Twitter slang dictionary.
Will the public ever hear Once Upon a Time in Shaolin any time soon? That will likely be up to Shkreli. In spite of his accusations, he currently retains the right to sell the album, distribute it for free, or destroy it, without legal repercussions. The possibility of a seizure by the FBI seizure of the album, which is dependent on a criminal conviction, could be years away, and the chances of a revelation under the Freedom of Information Act is probably slim. Perhaps Shkreli will even have a change of heart and return the album to its creators, but I wouldn’t hold my breath.
Brooklyn U.S. Attorney Robert Capers stated, “We’re not aware of where he got the funds for the Wu-Tang album.” (http://www.highsnobiety.com/2015/12/18/martin-shkreli-arrested/)
Photo Source: http://blogs-images.forbes.com/zackomalleygreenburg/files/2014/05/Wu-Tang-Box.jpg