A Blog by Jonathan Low

 

Feb 3, 2017

Michael Jackson Is Worth More Than Ever - And the IRS Wants Its Cut

 "What's in a name...?" JL

Devin Leonard reports in Bloomberg:

The Michael Jackson Trust is worth more than $1 billion. The IRS intends to prove that $702 million of that is owed in penalties and back taxes. An estate tax filing is a snapshot of the person’s assets on the day of expiration, includ(ing) the value of a star’s name and likeness. The IRS claims Jackson’s should have been valued at $434 million. The estate claims it was worth $2,105. “It’s like what they said about Elvis when he died. Good career move”
Seven years after Michael Jackson’s fatal overdose of propofol and lorazepam in 2009, the statute of limitations on gossiping about the deceased is, apparently, over. In one of her rare interviews in the midst of the presidential campaign, future First Lady Melania Trump told the luxury magazine DuJour how Jackson, a friend of Donald’s and onetime Trump Tower resident, mischievously suggested they kiss to make her husband jealous. Then Madonna, on CBS’s Late Late Show, revealed that she’d smooched amorously with him long ago. And the New York Post’s Page Six dropped a chunk from Tommy Hilfiger’s memoir, American Dreamer: My Life in Fashion and Business, about the designer’s visit in the 1990s at Neverland Ranch, the singer’s compound in Santa Barbara County, Calif. After encountering a giraffe and a string of baby elephants outside, Hilfiger found Jackson in his office, with a bandage on his nose, wearing sunglasses and sitting on “an enormous gold-and-burgundy throne.” His two oldest children, Prince and Paris, were there, dressed “like characters from a Broadway show or The Sound of Music—velveteen knickers, dirndl jumper, ruffled blouses, patent leather shoes, each in full makeup.”
Paris, in response to such banter and because she’s now 18, just gave her first full-length interview in a Rolling Stone cover story, setting the record straight: She’d had a wonderful childhood until her father’s death at age 50. After, she struggled with drugs and attempted suicide several times, but she’s now happy, clean, and, the magazine reports, “heir to a mammoth fortune—the Michael Jackson Trust is likely worth more than $1 billion, with disbursements to the kids in stages.”
That number could change if the IRS has anything to do with it. The agency’s lawyers are taking the executors to trial, set to begin sometime this month in U.S. Tax Court in Los Angeles. The IRS intends to prove that $702 million of that inheritance is owed in penalties and back taxes. The crux of the case is the disputed value of Jackson’s name and likeness, which is to say the right to use his visage on everything from coffee cups to baseball caps. An estate tax filing is supposed to be a snapshot of the person’s assets on the day of his expiration, and under California law that includes the value of a star’s name and likeness. The IRS claims Jackson’s should have been valued at $434 million. The estate claims that it was worth a mere $2,105, implying that his image had been rendered all but worthless by stories about skin bleaching, his obsession with plastic surgery, prescription drug abuse, odd parenting choices—such as covering his children’s faces in black veils or Spider-Man masks in public—and allegations that he molested young boys who visited Neverland.
This Is It, the 2009 documentary based on Jackson’s last planned tour, made $290 million globally.
Celebrity estate lawyers are watching closely. It felt like a record year for the deaths of icons in 2016, with the passing of Prince, David Bowie, Leonard Cohen, Merle Haggard, Muhammad Ali, and Debbie Reynolds and her daughter Carrie Fisher. Fisher’s December departure prompted reports that Walt Disney was rushing to make a deal to use her digital likeness in future Star Wars movies. (Disney denied this.) The Jackson case signals that tax examiners see enhanced value in a deceased star’s face and name as technology and social media open up novel paths to profit, such as the ability to conjure up appearances using computer-generated imagery and voice software.
The man largely responsible for the estate’s current fiscal health is not Michael Jackson, or not exactly. For the balance of the past 37 years, a 66-year-old Los Angeles entertainment attorney named John Branca, a partner at the firm Ziffren Brittenham, has handled the singer’s record deals and tried to shield him from his own worst impulses. After Jackson’s death, Branca and John McClain, a veteran music industry executive and former Jackson confidant who keeps a lower profile (and declined to be interviewed for this story), were appointed executors of the singer’s estate, which gave them responsibility for generating income for the beneficiaries named in his will—his children Prince, Paris, and Blanket, and his mother, Katherine Jackson, whom he designated as their guardian.
“Michael used to say to me, ‘You and I, Branca, we’re going to be examples for the business, we’re going to be the kings,’ ” Branca says. It’s early July, and he’s reclining in the opulently furnished living room of his home in a gated community high in Beverly Hills. He looks like an aging rock star himself, intent on defying the calendar. He’s slim, brown-haired, and dressed fashionably in a black polo shirt, black pants, and expensive-looking black leather sneakers. The twice-divorced Branca is engaged to Jenna Hurt, a 32-year-old model who makes a brief appearance and then withdraws to let her fiancé hold court. The walls are covered with signed portraits of clients extolling his expertise, including Berry Gordy, the former head of Motown Records, the Eagles’ Don Henley, Brian Wilson of the Beach Boys, and, of course, Jackson, who can be seen posing happily with Lisa Marie Presley, his first wife. Branca casually notes that he introduced them.
It all might be too self-congratulatory if Branca himself weren’t so convivial. He grew up in Mount Vernon, N.Y., the nephew of the late Ralph Branca, a three-time All-Star pitcher for the Brooklyn Dodgers. Branca liked sports—he became an avid baseball card collector—but he was more interested in music. His parents divorced, and he eventually moved to Los Angeles to live with his mother, a dancer. As a teenager, Branca was kicked out of the Chadwick School in Palos Verdes Peninsula, Calif., and played keyboards in a band that opened for the Doors on the Sunset Strip in the ’60s.
Branca enrolled in Los Angeles City College to study music, where he got A’s on his harmony papers but felt out of his league when it came to playing with some of his fellow students, among them pianist Les McCann, a future soul-jazz great. “I just looked around and said, ‘This is ridiculous. I don’t belong here,’ ” Branca recalls. So he got a law degree at UCLA in 1975 and found a job working for the late entertainment lawyer David Braun. Braun, whose clients included Bob Dylan, Neil Diamond, and former Beatle George Harrison, was established enough not to bother keeping up. One day the Beach Boys came into the office. “David didn’t even know who they were and didn’t care,” Branca says. “So he sent me to the meeting. I was 27 years old at the time, and all of a sudden, I became the Beach Boys’ lawyer.”
Fortuitously, the Beach Boys’ accountant also did Jackson’s taxes. In 1980 he introduced Braun and Branca to the ascendant pop star, who’d recently turned 21 and was in the process of distancing himself from his domineering father and primary manager, Joseph Jackson. Branca found Jackson pleasantly eccentric. “He had sunglasses on, and he pulled them down and he goes, ‘Do I know you?’ ” Branca recalls. “I go, ‘I don’t think we’ve met, but I look forward to getting to know you.’ And he goes, ‘Are you sure we don’t know each other?’ I said, ‘Michael, I would remember if we had met.’ ” The next day, Branca got a call from the accountant. Jackson was hiring him to be his attorney.
One of the first things Branca did was renegotiate what he describes as Jackson’s “absurd” contract with his label, Epic Records, winning him a royalty rate that only a few artists such as Dylan enjoyed at the time. When Jackson was ready to unveil Thriller, he wanted to spend $1.2 million on the video for the title track. Branca protested—this was a time when music videos typically cost $50,000—but Jackson curtly told him, “I don’t care. Just figure it out.” Branca persuaded Showtime and MTV to pay a total of $600,000 for a movie about the making of the Thriller video and got another company to spend $400,000 on the home video rights. The finished 13-minute film featured a troupe of corpses rising from a conveniently located graveyard to dance with a zombielike Jackson, their knees high and claws up. Jackson, then a Jehovah’s Witness, decided it was blasphemous and should be destroyed. Branca came up with another crafty fix. He told his client that Bela Lugosi, the star of the classic 1931 Dracula, was also religious and had had the movie’s producers include a disclaimer to the theatrical release saying it didn’t represent his personal views. “It was a complete fabrication,” Branca says, laughing. Jackson added the disclaimer, and the hugely popular video helped propel the album’s sales to 100 million copies worldwide. It’s still the best-selling record ever.
In 1984, Branca learned that the Australian corporate raider Robert Holmes à Court was shopping a company called ATV Music, which held the rights to more than 200 Beatles songs, including Yesterday, Revolution, The Long and Winding Road, and Hey Jude. An excited Jackson told Branca to spend whatever it took to acquire ATV. “It’s my catalogue!” he wrote in a note. But Jackson and Branca’s $47.5 million offer was beaten by Marty Bandier and Charles Koppelman, two New Yorkers who promised $50 million.
Bandier remembers flying to London on the Concorde with Koppelman to meet with Holmes à Court. “We thought it was a closing,” he says. He noticed Branca on the same plane but didn’t think anything of it. When they arrived, Holmes à Court said he’d accepted Jackson’s lower bid. Branca had offered to let the seller’s daughter, named Penny, keep the rights to the Beatles classic Penny Lane. He’d also agreed to have Jackson appear for an hour at an event in Perth put on by Holmes à Court’s favorite charity. “It was depressing,” Bandier recalls. Branca sold off the rights to the catalog’s cinematic background music for $6 million, which brought the effective price down to $41.5 million. In the end, Jackson, who borrowed $30 million to cover his costs, put only $11.5 million in cash on what would become his life raft when he was drowning. Jackson gave Branca a Rolls-Royce for his efforts.
Three years later, Branca helped Jackson buy Neverland, listed at $60 million, for $17.5 million. Jackson was so pleased that he rewarded his attorney with another Rolls-Royce. Around the same time, Jackson was best man at Branca’s wedding to his first wife. He brought along his beloved chimp, Bubbles, in a matching tuxedo. “I’ve got fun pictures of Bubbles with my ex-wife and people at the wedding,” Branca says nostalgically. Little Richard, it should be noted, performed the service. As things got rocky for Jackson, so did his relationship with Branca. Various people competed for the performer’s ear, and Branca was fired, then rehired in 1993 when the star was in the throes of the first molestation accusations, which were settled in a civil suit for what was widely reported to have been $20 million. Branca, now back in charge, thwarted other advisers who were pushing for Jackson to sell half of ATV to Sony for $75 million to cover his costs. By 1995 he’d negotiated a deal for Jackson to merge ATV with Sony’s music publishing company in exchange for $115 million and a yearly stipend that started at $10 million.
That year, Jackson prepared the first of his wills, naming Branca and McClain as his executors. It was updated twice, as he had children, but the document essentially stayed the same.
It was getting harder for Branca to protect Jackson, though. He was abusing prescription drugs and acting strangely. He spent $30 million, a record sum, to record Invincible, his splendid final studio album, released in 2001. Jackson blamed Sony when it sold a mere 8 million copies, a hit for any other artist. In July 2002, Jackson, looking pale and Kabuki-like, held a series of press conferences in New York in which he described himself as a victim of a racist music industry with a history of ripping off black artists like himself. He made headlines that year when he dangled infant Blanket over the railing of a hotel room in Germany so his fans could get a look.
Immortal tour: Cirque du Soleil’s roadshow (2011-14) is the eighth-top-grossing tour of all time, with $360 million in sales.
Jackson overrode Branca’s attempts to control how British television producer Martin Bashir used interviews in the show Living With Michael Jackson, which aired in 2003. In it, Jackson admitted he sometimes shared his bedroom with the youngsters who visited Neverland, including a young cancer survivor who sat beside him on camera, and blithely insisted that it was nothing unusual. Soon after, the boy’s family accused Jackson of molesting him, which led to a criminal trial. In 2005 he was acquitted by a jury in Santa Maria, Calif. By then, Branca had been fired again, though he continued to get calls for help from Jackson’s advisers. Finally, the Jackson maelstrom became too much, and Branca walked away from his former best man.
Without Branca, Jackson floundered. He was no longer releasing records or touring, so the only way he could afford his lifestyle was by basically borrowing against his half of Sony/ATV. By 2008 his debt secured by the publishing company had swelled to $300 million. Fortress Investment, a New York hedge fund, purchased his mortgage on Neverland and threatened to foreclose if Jackson didn’t pay up.
Then Dr. Tohme R. Tohme appeared, a person often described as a mystery man because he declines to provide details about his history or the provenance of his degree. “I’m a self-employed guy,” Tohme says. “I advise many people, many top people in the world, about investments.”
Tohme first met Jackson, who was in a wheelchair wearing mismatched socks, in Las Vegas, through his brother Jermaine. Tohme connected Jackson with Colony Capital, a real estate buyout company founded by Jackson admirer (and now Trump confidant) Tom Barrack. Colony purchased the debt on Neverland to keep the property out of foreclosure. “It was 10 days from being sold in court,” Tohme says. After that, he became Jackson’s manager, persuading him to return to the stage so he could raise money to pay off his debts.
Jackson agreed in late 2008 to perform 50 concerts at the O2 arena in London the following summer. The concerts quickly sold out; Jackson expected to make $50 million on ticket sales alone. Tohme insists the pop star wanted nothing to do with Branca and spoke ill of him in his final months. Eight days before his death, however, Jackson summoned Branca to a meeting at the Forum in Inglewood, Calif., where he was rehearsing. They embraced, and the attorney says Jackson told him, “Branca, you’re back.”
At this point in the interview, Branca disappears into a closet and returns with a framed letter bearing Jackson’s signature. “Here’s the letter he signed at that meeting confirming I was his lawyer again for all the family members that doubt it,” Branca says.
Spike Lee’s documentary Bad 25 aired on ABC in 2012; the anniversary edition box set flew into the top 50 on Amazon.com.
Jackson looked sleepy at their meeting, Branca says, but he assumed his client was trying to conserve energy for his rehearsal. Eight days later, Jackson overdosed from the mix of sedatives administered by his personal doctor, Conrad Murray, who was later convicted of involuntary manslaughter. The outpouring of sympathy for Jackson was overwhelming. “His extraordinary talent and his music was matched with a big dose of tragedy and difficulty in his private life,” then-President Barack Obama told CNN. “I don’t think we can ignore that, but I think it’s important to affirm what was best about him.” Obama’s eventual successor provided a more self-referential tribute. “I knew Michael Jackson very well. He was a special guy. He was with me many times at Mar-a-Lago and Palm Beach.” (On the campaign trail last year, Trump offered some unexpected analysis about the nature of this tragedy at a GOP town hall: “He lost tremendous confidence because of, honestly, bad, bad, bad plastic surgery.” Jermaine Jackson, claiming it was external stress that broke his brother, tweeted back: “This fool Trump needs to sit down.”)
Shortly after Jackson’s death, Branca says, he read the singer’s final will, dated July 7, 2002, and signed in Los Angeles, to the family at Jermaine’s home. As he recalls, they applauded. But Joseph Jackson, the family patriarch, accused Branca and McClain of forging the document, insisting that Jackson had been in New York that day lambasting Sony. According to court documents, Joseph also revealed that his son had been paying him a monthly allowance of almost $60,000. He wasn’t likely to keep getting it if Los Angeles Superior Court Judge Mitchell Beckloff accepted the will, which he did. He also gave Branca and McClain the power to manage the estate.
Now that Branca was in charge, he discovered that concert promoter AEG had footage of rehearsals for the O2 shows that had been filmed at Jackson’s request. Several movie studios were eager to distribute a documentary stitched together from this material. Branca orchestrated a bidding war. Sony, the winner, agreed to pay the estate a $60 million guarantee and almost 90 percent of the profits. When it released This Is It in November 2009, the movie grossed $290 million globally, making it one of the most successful documentaries ever. With cash flowing in from the movie, the estate was able to refinance its debt. It pushed the rate on a $75 million loan secured by Jackson’s compositions from an onerous 17 percent to 6 percent and lowered the rate on the $300 million loan backed by Jackson’s share of Sony/ATV, from 5.8 percent to 2.9 percent, saving millions of dollars a month in payments.
This Is It addressed another one of Branca’s chief concerns: He wanted to restore Jackson’s tainted legacy. Jackson looks spectral in the film, but he banters about music with his band members and footwork with his choreographers. “I went to see it 11 or 12 times,” says Susan Fast, a professor of cultural studies at McMaster University in Hamilton, Ont., who wrote a well-regarded book examining Dangerous, Jackson’s eighth studio album. “They did an amazing job of humanizing him, showing him as being kind of vulnerable, and giving us a glimpse into his artistic process.” She did also think it was “exploitative” to have released the imagery of Jackson when he looked like he already had one foot in the grave.
The estate’s income grew further in 2010 when Branca negotiated a $250 million deal with Sony to release 10 albums featuring old and new Jackson material. He also enlisted Spike Lee to direct documentaries to accompany rereleases of favorites like Off the Wall and Bad. Lee and Branca were in agreement on the direction: “I just wanted to focus on the music, his musicianship, the great artist that he was,” Lee says. “All the other stuff? I wasn’t down with it.”
In the midst of this productive whirl, Branca got a call from Celine Dion’s manager asking him if he was interested in meeting with the top executives of Cirque du Soleil, the Canadian theatrical company that had produced the successful Las Vegas show called The Beatles LOVE, featuring the band’s music. He flew to Montreal to see Guy Laliberté, the company’s founder, who’d just returned from a voyage in a space capsule during which he hadn’t been allowed to enjoy a single cigarette. He was now chain-smoking to make up for it. “I said to Guy, ‘We want a show in Vegas that’s like The Beatles LOVE only better,’ ” Branca recalls. “He said, ‘I want a show that’s going to tour around the world.’ So we said, ‘OK. Why don’t we do both?’ ”
Xscape, a 2014 album of previously unreleased recordings, sold 2.5 million copies.
The Cirque traveling show, called Michael Jackson: The Immortal World Tour, featured many of Jackson’s band members, ran for three years, and, according to Billboard, became the eighth-top-grossing tour of all time, with $360 million in box-office revenue. Two years later, Michael Jackson: One, the company’s Las Vegas show, complete with a hologram of its star, premiered at the Mandalay Bay Resort and Casino. “I think it will run forever, because Michael’s music will be popular forever,” says Daniel Lamarre, Cirque’s chief executive officer. Branca also negotiated a video game deal; the rerelease of Moonwalk, Jackson’s 1988 memoir edited by the late Jacqueline Kennedy Onassis; and an agreement with Pepsi to put Jackson’s face on a billion soda cans. By 2012 the estate had paid off Jackson’s debt except for the Sony/ATV hunk. Jackson was proving to be more popular in death than he’d been when he had a pulse.
The following year, 60 Minutes, in a highly flattering segment, called Branca and McClain’s management of their ghostly client “the most remarkable financial and image resurrection in pop music.” Correspondent Lara Logan asked Branca, “His image was so battered and tarnished by the time of his death. Have his fans just forgotten about all that?”
“We don’t really pay attention to the tabloids,” Branca replied. “We look at the Michael that we knew, the real Michael, the artistic genius, the visionary.”
“The real Michael Jackson also told Ed Bradley on 60 Minutes that he let young boys sleep in his bed,” Logan persisted. “You can’t run away from that, right?”
“Well, I don’t recall that interview,” Branca replied. “The Michael Jackson that I knew was somebody I considered a very honorable person.”
The IRS took notice of the estate’s prosperity, too. In 2013 the agency informed Branca and McClain that they’d insufficiently appraised the Jackson estate. The IRS said it was worth $1.1 billion. The estate, however, claimed he was worth $7 million at the time of his death. To hear Branca and McClain tell it, Jackson was on the verge of bankruptcy in July 2009. The star owed $500 million. He hadn’t filed personal income taxes in three years. He’d neglected to make the mortgage payments on his mother’s home, which he owned, in Encino, Calif. IndyMac, the subprime mortgage lender, was preparing to foreclose. Meanwhile, more than 60 creditors claimed that Jackson owed them money. They included Ola Ray, the actress who played his easily frightened love interest in the Thriller video, and a woman who said she was the real Billie Jean.
A holographic image of Michael Jackson performs onstage during the Billboard Music Awards, at the MGM Grand Garden Arena, on May 18, 2014, in Las Vegas.
Photographer: Kevin Winter/Billboard Awards 2014/Getty Images for DCP
If it weren’t for the executors’ smart plays, Branca’s position goes, everything might have been sold off in a fire sale and there’d have been little for the beneficiaries. Branca declines to discuss the IRS case, but in a 2015 deposition in a civil suit filed against the estate by another of Jackson’s former managers, he said the molestation investigations “would have negatively affected his commercial value” and that Jackson had received “minimal income from pure name and likeness rights.” This offers some explanation for why the estate valued his name and likeness at only $2,105. Still, it seems a puzzlingly low number. “Well, let me put it this way,” says Jeffrey Eisen, an estate attorney in Los Angeles. “If somebody had come to you in July of 2009 and said, ‘I will sell you all of the rights to Michael Jackson’s name and likeness for $2,106,’ one more dollar than the estate tax, would you have bought it? You bet! I would have. So the real number has to be higher.”
The IRS is also skeptical. The agency has subpoenaed Tohme, who scoffs at the estate’s valuing of Jackson’s image. He argues that he resuscitated Jackson, rather than Branca, with the AEG deal—which, Tohme says, led to a flurry of endorsement offers from Louis Vuitton, Nike, and others. “Most of the money the estate has collected is because of me,” Tohme says. “I did all the work.” He and the estate are battling in court over his claim that he’s owed millions in unpaid fees; the estate argues that Tohme abused his position and sought to enrich himself by persuading Jackson to sign overly generous contracts.
The IRS also disputes the claim that Jackson’s interest in Sony/ATV was worth nothing at the time of his death. But documents from the estate value Jackson’s piece of the company at $242 million, less than the $300 million loan against it at the time. The estate didn’t pay all the debt off until last year when Branca, in another negotiating coup, sold the singer’s share to Sony for $750 million. Meanwhile, the dispute puts Jackson’s personal effects in limbo, which, according to Paris Jackson’s lawyer Craig Peters, is hard on the children. “The kids would like to have some of their dad’s stuff that he wanted them to have,” he says, describing clothes Jackson wore and pictures that hung around the house. “Mostly because of the IRS, it is still tied up in a warehouse. It’s not the shimmering glove. It’s personal stuff that means something to them.”
The government’s attorneys write repeatedly in their court filings that all of the estate’s deals were “foreseeable.” In other words, all he had to do was stop breathing, and the money would come flowing. “It’s like what they said about Elvis Presley when he died,” says Michael Morris, a former IRS trial lawyer now in private practice. “Good career move.” But this suggests that anybody would have turned Jackson into a thriving multimillion-dollar business.
Brancalytes would disagree. “What John did for Michael while he was living, he did probably 10 times more after he had died. He really protected a man who was no longer here,” says Motown’s Gordy, who once called Branca the “Smokey Robinson of dealmakers.” Bee Gee Barry Gibb, another client, calls his lawyer’s insight priceless: “I always listen. He’s taught me a lot.”
The estate’s feud with the IRS isn’t likely to tarnish Branca’s image. Even if he has to give in, the Jackson estate, which has been paying income taxes all along, will survive and refill the children’s coffers. Branca says he’s been trying to slow down now that he’s reaching retirement age, but his practice continues to grow in one area. Because of his success with the Jackson estate, he’s attracted many clients who are no longer with us. He’s been hired as a consultant by the estates of Kurt Cobain, Janis Joplin, Otis Redding, and Muddy Waters.
Much as he’d like to take them all, Branca has to set limits. “I got a call from Sammy Davis Jr.’s heirs,” Branca says. “I always try to help them, because he and Michael were friends. I said, ‘I can’t represent you. You guys are all fighting.’ The late Rat Packer’s heirs worked out their differences and tried once again to hire him. “I told them, ‘I can’t,’ ” Branca recalls. “ ‘You guys don’t have enough assets.’ ”

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