Verboten founders face accusations of fraud and mismanagement
Verboten has become famous over the last several years for curating stellar techno and house lineups at their Brooklyn venue and StageONE parties. The event producers-turned-nightclub owners take their name from a German word that roughly translates to “forbidden by law,” a notion that provides a perfect thematic backdrop to the surreptitious debaucheries which enliven the techno underground.
Verboten’s most recent headlines, however, reflect their namesake in a less glamorous fashion. According to THUMP, Verboten investor Brian Edward McGuiness and thirteen more undisclosed investors have decided to take legal action against the club’s founding partners, Jen Schiffer and John Perez. THUMP reports:
“In a letter dated January 7, 2016—addressed to ‘Friends of Verboten,’ and sent to an undisclosed group of investors and employees—a man named Brian Edward McGuinness states that he and 13 other investors have agreed to take legal action against Schiffer and Perez. According to McGuinness, the conflict began when Schiffer and Perez failed to provide investors with information about the club’s finances and operations, raising suspicion as to how their investments were being spent.
‘Many of the investors have been forced to organize over the last several months due to what was initially simply a lack of transparency into the operations and financial performance of the business by the operating partners,’ explains McGuinness in the letter.”
McGuiness continues, “As we dug into this…we began to perceive financial irregularities regarding the club and have been able to verify that significant mismanagement and outright fraud have occurred (and continue to occur) by at least one of the club’s operating partners who is responsible for the day-to-day operations of the club.”
McGuinness states that the investors are pursuing legal action in hopes of removing Schiffer and Perez from their positions in order to “put in place partially new management, infuse the business with fresh financial capital and create a more positive work culture.”
Darrin Morda, another investor who previously took legal action against Verboten in October 2014, wrote a separate letter on January 13th, which elaborates upon the allegations outlined in McGuiness’ letter. THUMP summarized Morda’s accusations against the club:
“[The allegations] include, according to Morda’s letter, ‘[Concealing] revenues equaling hundreds of thousands of dollars […] by rerouting deposits from Resident Advisor away from the club and into other accounts they own’; withdrawing nearly $400,000 to fund events at other venues and making fraudulent entries in Verboten’s ledger to make it appear as though these expenditures were related to the club’s operations; charging the club for personal expenses, including their apartment rent and vacations; failing to pay State Sales Taxes; and failing to pay withholding taxes for foreign DJs, among others.
Morda filed his previous suit against Verboten with business partner, Tom Beaulieu, both of whom held positions in the organization prior to their termination in September 2014. Morda believes that he and Beaulieu were let go for asking too many questions about the club’s fiscal activities. Jen Schiffer provided THUMP with a different story, claiming that Morda and Beaulieu were not fired, but rather “couldn’t perform and walked off.” Schiffer further characterized the pair as “two disgruntled employees causing a brouhaha in public to tip their case, help themselves, and hurt [her].”
In her interview, Schiffer, who is “not at liberty to discuss an ongoing labor dispute,” vehemently denied all of the allegations levied against her and Perez. THUMP concludes their Verboten feature with Schiffer’s side of the story:
“‘Not only are [these accusations] untrue, they also contain intentionally misleading information—it’s both libel and slander,’ she said. Schiffer added that Morda and the other investors had violated their confidentiality agreement by speaking to the press, and suggested that they have ulterior motives. ‘It’s their intention to hurt the company, DJs, and the scene as a whole,’ Schiffer said.
Schiffer stressed that Verboten is a family-run operation with a long ties to New York City’s music community, and that bad press would significantly hurt their revenue.
‘I have a tenured history of employing and supporting people,” [Schiffer] said. “I run a small family business and have been here for a decade. I spent my whole life dreaming of building a nightclub. I’m not saying we never had a bad night or bad employee, [but] I’ve never been more proud of anything in my life.'”
Dancing Astronaut will continue to post updates on this investigation as they arise.