CRIMINAL CAPITALI$M
Story by Ben Goggin •
The rapper Ye has been vocal about his personal financial struggles and debts. In 2016, before he became a billionaire, he said he was $53 million in debt, and in the last month, he’s claimed that four of his personal accounts have been frozen over claims of tax debt.
Now, government records reviewed by NBC News show that at least one of his businesses may also have six-figure debt issues.
The records, a series of state tax lien notices from the last two years, show the state of California claiming that Yeezy Apparel, a company managed and reportedly owned by Ye, owes over $600,000 in unpaid tax debt. Three separate notice letters were sent in July 2021, in February and in September. A lien is a claim made on a person or entity’s assets in response to an alleged debt.
The alleged debts add to a growing portrait of chaos surrounding Ye and his businesses, which has been described by former associates and Ye himself in recent weeks. Forbes recently removed Ye, formerly known as Kanye West, from its billionaires list, citing his terminated business deals.
Four tax law experts said the amount owed by Yeezy Apparel is significant and could be a sign of deeper issues at the company.
“Multiple California tax liens, adding up to $600,000, that’s certainly a sign of either extreme incompetence or extreme cash problems,” said USC Gould School of Law Professor Edward McCaffery, who specializes in tax law. “That is kind of an Amber Alert for the financial health of the enterprise.”
According to the state of California’s government website, a lien may be imposed if a company or taxpayer doesn’t respond to their letters about taxes owed, pay in full or set a payment plan.
Yeezy Apparel has been operating in California since 2017, according to public California business records, and was recorded as being active and in “good” standing in an annual filing in January. Yeezy is Ye’s core fashion and lifestyle brand, known for its tumultuous collaborations with Adidas and Gap, both of which have been terminated over his antisemitic remarks. Yeezy Apparel is one of five active Yeezy limited liability corporations in California managed by Ye. In 2019, Forbes reported in a profile of Ye that he owned 100 percent of Yeezy. A year later, Yeezy took over $2.3 million in Paycheck Protection Program loans.
Lynn LoPucki, a professor of law at the University of Florida who specializes in secured transactions and bankruptcy research, said the liens also raise questions about California’s debt collection policies.
“The state is subject to some criticism for just sitting on this when there is a going business there from which they could collect,” he said.
Representatives for Ye and for Yeezy did not respond to a request for comment.
An NBC News investigation uncovered accounts from former colleagues who said Ye would use antisemitic language in the workplace and praise Hitler. The report unearthed a settlement agreement and payment between Ye and a former colleague that came after allegations of such comments.
On Monday, Ye painted his own picture of the financial chaos that he says he’s living with, telling the far-right podcast host Tim Pool that four of his bank accounts had been frozen on a $75 million hold, and that he was told by his accountants that morning that he owes $50 million in taxes.
The Internal Revenue Service said, “Federal law prohibits the IRS from commenting on or confirming anything related to private taxpayer matters.”
While the amount said to be owed by Yeezy Apparel is just a fraction of the multimillion-dollar figures cited by Ye himself, the liens fit into a pattern found among his other businesses.
NBC News found 17 government-imposed liens in California against three of Ye’s businesses and a charity created in his name dating back as far back as 2012. Four of the liens were labeled active with no indication of them having been terminated or paid.
“Tax lien indicates that the state maintains that a debt is owing to the state,” LoPucki said. The majority of the liens reviewed by NBC News were issued by the California Employment Development Department.
A representative for the department said it could not comment on taxpayer information.
Four experts who reviewed the liens agreed that they most likely pertained to payroll taxes, given that the department oversees payroll taxes and unemployment in the state.
“Those would be things like unemployment insurance and state disability insurance taxes, things like that,” said Kirk Stark, the Barrall Family Professor of Tax Law and Policy at UCLA School of Law.
It’s not clear what chain of events led to the liens being filed, but the four experts agreed that a lien being imposed indicates that there were most likely previous communications between the state and Yeezy Apparel that would allow the company to resolve or challenge the debts before a lien was imposed.
“They’ve gotten pretty serious before a lien is imposed usually. This is not the first step of a tax enforcement agency,” said David Gamage, a professor of law specializing in taxes at Indiana University Bloomington.
“Consistently ignoring communications from the EDD would eventually be a basis for the department to just say, ‘OK, well then you know, we’re going to file this lien, and you know, set this in motion,’” Stark said, using an abbreviation for the Employment Development Department.
Of the liens listed as active with no indication of termination, the earliest is from the tax year 2020.
The experts who spoke with NBC News said the liens could be indicative of several larger business concerns.
“If you’re screwing up on this, you’ve got bigger problems and there’s probably other things you’re not paying,” said McCaffery. “But on the other hand, it could be consistent with just kind of a bare-bones operation that’s a little sloppy.”
It’s not clear what the future of the Yeezy brand and its associated companies looks like following the termination of the Adidas deal.
According to Forbes, which reportedly saw internal Yeezy documentation in the process of assessing Ye’s billionaire status, the Yeezy brand was “functionally tied” to Adidas during the period of their contract.
After the termination of the deal, Adidas said on an earnings call that it would continue to sell Yeezy designs under different branding.
“Let me be clear, we own all the IP, we own all the designs, we own all the versions and new colorways,” Harm Ohlmeyer, chief financial officer of Adidas, said.
Zak Kurtz, co-founder and CEO of the law firm Sneaker & Streetwear Legal Services, said the paths forward for Yeezy as a viable business are limited given Adidas’ ownership of much of Yeezy’s intellectual property.
“What he can use is what he has, you know, his trademarks, and any new designs or any new stuff that he comes up with,” Kurtz said. “And I think that’s really where the brand has to go — in my opinion, they’d have to create new stuff.”
Kenneth Anand, co-author of the sneaker legal and business book “Sneaker Law,” added that the company could pursue another partnership with a major brand.
“It could align with a new licensee, perhaps one that can offer the same type of products and services that the Gap and/or Adidas did, although it seems unlikely that any companies would be willing to take a risk on a volatile brand and designer such as Ye,” Anand, who has also worked as the head of business development and general counsel for Yeezy, wrote in a text message.
Anand said he could only comment on the company from the perspective of an industry expert, and noted that consumers had begun to turn on Ye.
“Ye’s recent statements have clearly hurt the Yeezy brand,” Anand wrote. “Consumers are openly declaring that they will no longer support and wear Yeezy, even if they have spent a considerable amount of money on the brand’s products.”
This article was originally published on NBCNews.com
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