In December 2007, Michael Jackson, with the help of attorney Londell McMillan, representing him in the last fraud attempt filed by Transitional Investors LLC, finally found a way to end the relationship with the Fortress Investment.
Barclays Bank refinanced the $300 million loan against Sony/ATV from Fortress. In addition, all media report that HSBC lent $30 million against MIJAC and Plainfield Asset Management, a hedge fund, another $40 million against MIJAC at a 16% interest rate. “Terms that allowed Jackson to defer payments.”
Anyone who works in the financial field knows that Hedge funds use their clients’ capital to generate profits in the markets, using different investment or trading strategies. In other words, investors invest their money in hedge funds, and managers invest at their place, fixing management or performance fees. Hedge funds are typically open only to qualified investors and institutions and are among the most exclusive speculative investments in the world. As a result, thousands of the best finance experts in the world revolve around this universe, with very selective barriers to entry: in fact, clients are rarely accepted who are willing to invest less than 1 million dollars.
However, we must not forget that during the 2007/08 financial period called the great depression(and actually, the world never got out of it), banks tried to get rid of as much as possible from loans and mortgages. It was an epic financial and economic collapse. And many hedge funds plummeted. As early as August 2007, the Fed had begun extraordinary measures to prop up banks. As a result, they started to cut back on lending to each other because they were afraid to get stuck with subprime mortgages as collateral. Clearly, the lending rate raised on short-term loans.
There are no public documents of the Barclays and HSBC transactions, so I have to rely on media news and a few books that talk about it. But all repeat the same “tale” and O’ Malley “Michael Jackson Inc,” the only Jackson biography that touches some finances, do not even mention it, jumping from the 2006 Fortress Investment refinance to Tom Barrack and AEG, which is very telling.
So, likely, HSBC lent 70 million dollars which 40 were transferred to the hedge fund and invested in the attempt of some good speculation. 16% sounds a good rate as interest and/or cost/return; Usually, hedge funds’ average management fee is 20%. But without documents to work with, it remains my humble assumption. And Media, as usual, treated this matter superficially, doodling words without a real significance. I have no idea if it was ignorance or because a possible brilliant financial idea did not suit the narrative of the broken and desperate Jackson.
Reportedly, both loans were structured as usual so that Jackson was unable to access any of the money – dividends and profits went directly toward debt payments to have “interest reserves” plus Jackson’s agreed with Sony that Sony/ATV could spend up to $ 400 million (200 million dollars for the 50% account of MJ ) to purchase the 125,000-song Famous Music LLC catalog, which included rights from the Footloose theme song to Eminem’s and many others. In addition, this time, Michael received the guarantee of cash distribution from the company of $ 11 million per year through 2011. Loans would have expired in September 2011.
MJ used much of the fresh revenue to negotiate and settle the outstanding lawsuits (Marc Schaffel and Dieter Wiesner, to name a few).
His whole finance went through an intensive examination performed by Washington, DC-based accounting firm Thompson, Cobb, Bazilio, and Associates that prepared the statement of financial condition for the refinancing purpose. Jackson had $567.6 million US in assets, including Neverland Ranch, his share of the Sony/ATV Music Publishing catalog, 100% owner of his music catalog MIJAC, an assortment of cars, antiques, collectibles, and other property. The report stated that Jackson had $331 million US debts, leaving him with a $236.6 million US net worth. However, liquidity: “just” $668,215 US, according to the report, which was dated June 12, 2007.
2008 started with a positive vibe and marked sharp changes. To celebrate the 25 years of the Thriller album, Sony organized a promotion that never did for some MJ original releases, making agreements weeks before the album distribution for a midnight showing of John Landis’s “Thriller” video at Odeon cinemas throughout the UK, Internet podcast, a “Thrillicious” Sobe Life Water campaign that would kick off at halftime of the Super Bowl, and the presentation of a Lifetime Achievement Award to Michael at the NRJ Awards in Cannes, among numerous other PR and advertising events.
The largest retail music chain in Britain, HMV, planned an event featuring twenty-five Michael Jackson impersonators, plus the “Thriller LIVE” dancers on the day Thriller 25 CDs and vinyl records began appearing in its stores.
Despite reports indicated an ecstatic Jackson ready to go in the studio and commit himself to a new album, in reality, he was not so interested in participating in the album promotion. He refused many invitations. Journalist Roger Friedman wrote that Jackson’s musical manager, attorney Peter Lopez, told him that MJ had no interest in touring or performing: “Thriller 25 will be issued by Sony because it is part of the catalog. But Jackson has no recording contract and, frankly, no interest from record companies. He feels he’s done with that.” On the other hand, Michael had already explicitly stated the same in the interview with America’s Ebony magazine: he said that dancing days were behind him – because he did not want to kill himself on stage like his hero JAMES BROWN. Instead, he hoped to work on movies – because he could not imagine headlining world concert tours. He explained, “Not the way James Brown did or Jackie Wilson did. They just kept going, running, killing themselves. I wish he (Brown) could have slowed down and relaxed and enjoyed his hard work.”
Thriller’s 25th Anniversary was released in Europe and the United States in early February 2008. The album was one of the best-selling records of 2008. It sold 24,000 copies in just one week. MJ got his first gold record in years and years and the second for the same album released in 1983.
Meanwhile, Fortress Investments still held the note on Neverland Ranch and intended to wring every penny from Jackson.
A notice of default was already issued on October 22, 2007, and a notice of trustee sale was recorded on March 31, 2008, at the Santa Barbara County Courthouse. The Notice of Default recited that the unpaid principal and interest amount to $23,212,963.83. Then a Notice of Trustee’s Sale was recorded with Santa Barbara County on February 25, 2008, for the same unpaid amount.
Around the same period, brother Jermaine introduced Michael to Dr. Tohme R. Tohme, a Lebanese businessman. Mr. Tohme was someone used to leveraging his network of relationships to broker deals in the real estate and entertainment worlds.
Michael Jackson asked Mr. Thome to help him locate financing to pay off the Promissory Note and stop the foreclosure proceedings against Neverland Ranch. Thome had professional and personal contact with Colony Capital. He arranged a meeting in Las Vegas between Michael Jackson and Tom Barrack. As a result, Colony Capital agreed to advance funds to pay off the Promissory Note and consequent cancellation of the foreclosure proceedings against Neverland Ranch.
Thome located an attorney named Earle Goodman, who represented Michael Jackson in negotiating with Colony Capital regarding preparing the documents to memorialize the deal to form Sycamore Valley Ranch Company. As part of the transaction between Michael Jackson and Colony Capital, title to the Neverland Ranch real property was transferred to Sycamore Valley Ranch Company LLC, now owned by Michael Jackson, and 1224 LLC, an affiliate of Colony Capital. Properly restored, Barrack believed, Neverland could easily be worth $60 million or more. Colony Capital would cover the cost of rehabilitating the estate, and then together, and they would sell it, each pocketing a share of the proceeds, and for Tohme Tohme a nice finder’s fee.
By early July 2008, Tohme Tohme officially became Michael Jackson’s new business manager succeeding Raymone Bain. After having analyzed Jackson’s financial situation, Tohme began pushing the idea to MJ to go back onstage. Also, Tom Barrack saw great potential in a Michael Jackson comeback; he knew what restoring his public image would do for the resale value of Neverland too. Among its many interests, Colony Capital was the owner of the Las Vegas Hilton, where Elvis Presley had made his historic comeback in 1969. Barrack approached the idea of Jackson performing there, but Jackson still balked at the idea of a Vegas show. In July, Thome also signed with the auction house Julien agreement to auction the assets of MJ, who were at Neverland.
August 29, 2008, Michael was interviewed by Good Morning America.
Early September 2008, Mr. Tohme and attorney Peter Lopez were about setting up a new concert tour. Tom Barrack called his friend Philip Anschutz, owner of the Anschutz Entertainment Group, to talk of possible contact of Jackson and AEG together for a show at AEG’s O2 Arena in London, not knowing that AEG was already thinking along identical lines.
AEG was looking to work with MJ since 2007, as repeatedly stated by Randy Phillips himself in interviews. Jackson was asked several times to take into account the opportunity to perform in London since Raymone Bain had set up a dinner for Jackson with the CEO of AEG Live, the live-performance division of the Anschutz Entertainment Group. Phillips wanted to discuss the idea of putting on a series of comeback concerts at AEG’s O2 Arena in London the year before, but Jackson wasn’t interested. Since then, the context had changed.
Jackson appointed Tohme to be his representative on the board of SONY/ATV and co-trustee with his mother, Katherine Jackson of the MJ Publishing Trust. From August 2008 till MJ’s death in late June 2009, Mr.Tohme was responsible for reviewing and approving all MJJAC music licensing requests through Warner Chappell due to the many manager’s changes and relevant mismanagement needed all the attention, being a robust resource of income.
He also pressured Sony and oblige them to hand over to Jackson account the $12 million in royalties it had withheld from the sales of Thriller 25; since Sony Music and Sony/ATV Music Publishing were two separate entities, the company had no right to hold revenues from one to cover administrative costs from the other.
It must have been a shock for Sony to face someone who “dared” to remember them the illegal attitude in handling Jackson’s multiple accounts with them. The dirty accounting games Sony had played represented a huge part in MJ losing control of his finance since 1995.
By late September 2008, Tohme Tohme and Tom Barrack’s preliminary talks with AEG lead to a handshake agreement to stage a series of concerts at the O2 Arena in London the following year.
Shortly after the deal was defined, Jackson left Las Vegas for the Hotel Bel-Air in Los Angeles and began having meetings with various choreographers and musicians in the hope of finding the right people to join him for the new show.
The music industry at this point was in turmoil and the news that Michael Jackson was going back to work around the world. AEG first and second, the Jackson family.
In fact, while making a public appearance in Australia that October, Jermaine Jackson announced to local reporters that the Jacksons, including “Michael, Randy, and the whole family,” were in the studio and planning on being out there next year.
However, the day after Jermaine’s comments to the Australian press, Michael released a statement saying that he loved his family dearly but had “no plans to record or tour with them.“
Since then, it’s been a mess: Joe Jackson began meeting with the concert promoter, Patrick Allocco of AllGood Entertainment, promising a Jackson reunion Michael included. Despite Michael’s public denials, Patrick Allocco followed Joe Jackson’s instruction to contact MJ “manager” Frank DiLeo.
But Frank DiLeo had no business relationship with Michael Jackson since 1989. Still, DiLeo met with Allocco and claimed to be in a position to bring a deal to Michael for a family reunion. On November 21, DiLeo signed an agreement with AllGood Entertainment to produce a Jackson family reunion concert.
Note: even if MJ would have been interested in a reunion with the brothers, there was little chance that AllGood would be able to match what AEG was putting on the table. Mr. Tohme was already in negotiations for the London concerts, and he was making demands that favored Jackson, such as a large cash advance, a house in Los Angeles for Jackson and his family to live in until the show. AEG agreed to all of it.
Then on November 17, Sheikh Abdullah’s case went on trial in London. To avoid MJ going back on the witness stand and because no deal for the O2 shows could be finalized until Abdullah’s claim was resolved — one of the many claims of the Sheikh was that Jackson signed a contract with music label Two Seas Records. (Later, it came out that Jackson never signed a contract with the company that additionally was not even properly registered), AEG stepped in and advanced to Jackson $5 million, of which 3 million went to the Sheikh.
In December 2008, with the help of Tom Barrack and Mr. Tohme, Michael finally committed himself to ten concerts at the O2; Tohme, Lopez, and Dennis Hawk initiated official negotiations with Randy Phillips, CEO of AEG Live. By the end of 2008, MJ and his children move into the Carolwood Drive chateau.
Philip Anschutz, Randy Phillips, Tohme Tohme, Tom Barrack, the Jackson family, Patrick Allocco, Frank DiLeo, Londell McMillan, Peter Lopez, MJ personnel are just some in the list of players ready to be a part of Michael Jackson’s billion-dollar comeback and was growing longer with each day. Few days before his demise, former adviser and longtime attorney John Branca would rejoin the bandwagon as well.
Only a few of these people had only the best intentions and the desire to see Jackson’s free of debt and back on top of the world. Many had different motivations. However, all of them shared one thing in common: the interest in seeing Michael Jackson back onstage in the summer of 2009, never mind if he was ready for it.
“Hope is such a beautiful word, but it often seems very fragile. Life is still being needlessly hurt and destroyed.”
– Michael Jackson
Court of State of California Case No. SCl 15988 Tohme R. Tohme vs. John Branca and John McClain, as Personal Representatives of the Estate of Michael Joseph Jackson