MICHAEL JACKSON’S 2006 REFINANCING ASSETS: GIVE US ALL YOU OWN

This blog is a continuation of MJ 2006 refinancing assets: the Sony- Fortress-obstacles. I want to highlight that the clause Citigroup imposed on Sony clearly must have come following the examination in detail of Michael Jackson’s Bank of America accounts statements, which had highlighted payments shortcomings of royalties and revenues of MJ 50% partnership Sony ATV. So, contrary to what the press kept writing, it’s not hard to deduce that when Michael Jackson screamed at the world, his record label was screwing him about royalties accounts and not crediting him the money from his Sony / ATV stake, was right.
The new agreement that Fortress had to embrace contained explicit instruction for the Sony group: Michael Jackson Sony ATV revenues had to be paid in due time, and third-party offers were acceptable in case of the assets sale. Also, MJ companies would not be penalized to pay additional interests if no payment would have been caused or neglected by the Sony Companies, which was the main problem he had for ten years during the financial relationship with Bank of America.

The structure of MJ Group entities changed as per these below tables:

After Fortress confirmed the intention to exercise its first right offer by matching the Citibank project, it started the complex procedure to establishing the clearance of all the titles of MJ assets being used as security, including the creditors’ identifications.

Mr. Branca UCCs

During its due diligence process for the refinancing, Fortress was already aware that on September 27, 2005, John Branca, former MJ attorney, had filed UCC Financing Statements against the MJ Trusts claiming an interest in the assets. Given that Branca appeared as a secured creditor of MJPublishing Trust, Fortress and Sony were apparently uncomfortable completing the refinancing and restructuring of the Jackson Entities’ debt. Settling the Branca claim was an essential precondition for the refinancing to close because it directly affected the collaterals being used as security.

• A UCC-1 financing statement (abbreviation for Uniform Commercial Code) is a legal form that creditor files to notice that it has or may have an interest in the personal property. This form is filed to “perfect” a creditor’s security interest by giving public notice that there is a right to take possession of and sell certain assets to repay a specific debt with a particular priority. Such notices of sale are often found in the local newspapers. Once the form has been filed, the creditor establishes a relative priority with the debtor’s other creditors.

For some reason, Mr. Branca decided to join the “MJ bankruptcy fansite club,” and asserted to possess a membership interest in Sony/ATV and MIJAC Catalog for about 50 million.
Here below the detail of the figures requested by Branca’s to MJ.

  • 16’121.943.73 principal capital. 
    14’089,984.33 and additional amounts for the following reasons:
    1’621,943.73 representing his percentage on the 300 million Fortress loan then discounted to 589’,894.33
    1’032,049.40 representing attorneys fee
    13’500,00.00 being the principal balance

All items were contested by Michael lawyers except the principal balance amount of 13’500,00.00 that was accepted and paid.
In case of foreclosure or bankrupt of MJ during the refinance Fortress period, John Branca’s request included an amount of 4.5 million-plus interests payable by Sony Corp. Mr. Branca’s document specified that – if the amount collected in the bankruptcy proceedings had not had enough balance to pay his allegedly 4.5M – he would get the money in installments from Michael Jackson’s royalties up to March 2008.

Actually, Mr. Branca had an agreement as an agent since 1993, allowing him to take an overall 5% over Michael Jackson’s whole business. In addition to it, he was one trustee on MJPT trust.
Strange that he still had a signature over the trust in 2006; when MJ had him fired in 2003, he was asked to resign from all the trusts and return all the legal documents. He left the MJ/ATV trust, but nobody cared to check if he was out from all the other entities. Here Michael Jackson answers concerning his the trustees in connection with his trust entities:


White and Case law firm followed the matter. The unpleasant story was liquidated and closed for good on April 13, 2006, with 13.5 million representing some unpaid legal services to his law firm and the official mutual release agreement to give back all Michael Jackson legal documents.

However,  Mr. Branca’s disappearance from the creditor’s line meant to mortgage Neverland once again because Fortress refused to add amount the principal loan that was enough overcollateralized to be enlarged by a 20 million. Instead, they opened a separate mortgage procedure on Neverland property.

Before approaching the specific issue, let’s face for good, how misleading the media were towards MJ. Fabricated headlines that became a relentless smear campaign that wanted him ruined and on the verge of bankruptcy since 1995.

To confirm the above,  read what happened on the morning of April 13, 2006. Fortress had not even made the loan disbursement – the closing of the transaction occurred in the afternoon of the same day – but somehow, the press spread the news that Michael Jackson to have the new loan done and had to agree with Sony the sale of part of his 50% stake in Sony/ATV. The Prescient litigation lawyers were astonished after reading in the press. Nobody knew nothing about the turn of events: they had to interrupt the deposition because there was no such document within the court papers.

The testimony of Mr. Daniel Groppel – then Managing Director of Fortress Corporation –  reviewing an exhibit related to the Prescient lawsuit, was an enlightening reading.

It must be clear that Fortress, though purchased in May 2005 the Bank of America loans, had not yet refinanced the loan itself, so to give an extension, all conditions had to match with the Bank of America package of collaterals.

The document was nothing less than the negotiation that took place toward the end of December 2005 when MJ’s team asked for an extension of time to stop the payment due to Bank of America then purchased by Fortress Investment.

Below  “Put Option” clause as per Sony/ATV Operating Agreement on December 20, 2005.

The media divulged messy and selective news. In this respect, one wonders what kind of document was delivered to reporters – and above all, who instructed to give away these crappy masterpieces worthy of winning the Pulitzer for the trashiest journalism of the decade? If ever there was one.

As I said before, the refinancing with Fortress was already agreed upon but not concluded. But somehow, the lawyers and all the people involved found the below headlines all over the international media.

Everybody can remember headlines such as 

(published on Fox News and signed by R. Friedman) trumpeting that Michael Jackson will give up a part of his most prized asset for 200 million to Sony Corp.

This lawsuit’s documents show that what the media have been reporting since 2002 about MJ’s investments -from Bank of America to Fortress – are lies that have been deliberately released to mislead the public about MJ as a person. All the narrative about this cause is approximative and manipulated and has been set-up since the beginning.

The executed copy of the Credit and Security Agreement between Fortress Credit Corp and Michael Jackson Entities was a 35-page document consisting of five main articles and 20 sub-sections. The first article describes the definition and interpretation of the form.  Here the Sony Purchase Option:

The so-called purchase Option is nothing else than the Put option.
The put option was inserted at the beginning of Sony/ATV full administration of the ATV catalog.

It has been inserted in the third amendment of the Operating Agreement on December 23, 1998. The date coincided with the end of the ATV administration contract MJ had with Emi.

During the Fortress refinancing, the put option came into force three months after the loan disbursement date and remained in place until the end of the loan. The reason was that from May 2 up to July 30, 2006, the option to purchase the Sony shares in Sony/ATV was on Michael Jackson’s side, as per the dates agreed in the previous forbearance agreement. In jargon, it is called the baseball arbitration.

The put option was exercised by both parties for a limited period and was there to protect all parties’ interests. The purpose of keeping up the undertaking to the end of the loan was additional collateral representing the face value of the outstanding principal amount of the loan. The cost of this other collateral guarantee was for the MJ account.

The clause was a sort of first auction price, and in case of opening of the proceeding – subsequent rules had to be applied to get the real and commercial value of the asset.

Mr. Groppel, in fact, said:

And he was talking about the company corporate debt, not of Michael Jackson supposed debt with his record label.

On top of all, the put option amount represented a collateral guarantee to the principal amount of Michael Jackson loan and not a pledge over his 25% as the media insistently reported.

The 1995 Operating Agreement and its relevant amendments show the deal’s details and confirm that Sony never had a purchase option that they could exercise no matter what. It was always for a restricted time, and in case of no execution, the same option turned automatically to MJ and vice versa (in the context of the operating agreement).

It’s also understandable why both parties never purchased each other at that time. In fact, during the ten-year partnership, the company’s value grew starkly – and neither Sony nor MJ had the chance to pay each other such significant amounts. MJ suffered big losses due to bad managers, who stole and invested in questionable business endeavors (Not to mention the 2005 criminal trial that exhausted his vital energy and personal money. On the other hand, Sony was in financial distress since 2002 and had another deep crisis in 2008, and still today, some of its divisions are in bad shape.

As you can see, MJ’s financial transactions are referred to as investments – not loans, which is what this was. When Robert Holmes à Court sold ATV Music to Michael Jackson, documents show that MJ arranged a 30 million loan with Chemical Bank to facilitate the purchase, before transferring the ownership of Northern Songs to Nassau in the Bahamas – and appoint two local bankers to the board.  

The whole ATV group was acquired (including Bruton Music Ltd., ITC Filmscores Ltd., Marble Arch Music Ltd., and the long-established publishers, Lawrence Wright Music Co. Ltd.). There is no clear documentation of the total price paid, although press reports indicate Usd. 47 million.

The money of these transactions was used to make investments, pay corporate bills, lawyers, employees, offices, and business expansions – not to buy personal cars or shopping antiques, as MEDIA and some so-called friend claim.

But Sony/ATV structure was harmful to his finances from all points of view, and his money somehow kept disappearing, and the Citicorp dedicated chapter related Sony payments confirm so.

This Michael Jackson financial lawsuit –forgotten in the court archives’ depths confirms that investigative journalism no longer exists that MEDIA lives on financial connivances with the corporations and doesn’t check the sources. Inside these documents, there is enough material to overturn the news on Jackson’s economic problems.

It is also the key to believe Michael Jackson’s words when he was telling: “They want my catalog…. there is a big fight for it”. He frequently addressed these issues. And when he passed away, music producer Mr. David Zard and Michael Jackson’s former manager for the History tour, Tarak Ben Ammar, mentioned how Sony mismanaged his finances. The last one was Dieter Wiesner in his book Michael Jackson: The Real Story: An Intimate Look Into Michael Jackson’s Visionary Business and Human Side.

What the reader sees on this blog is public material and available to the press since then. The sealed records of this lawsuit had been destroyed on 13/10/2011. But almost nothing was divulged by the media. After the closing of the case, few headlines reported Michael Jackson press release through his PR people.

The point is that Michael Jackson was a target, and Sony, an influential group not in the business of exclusive gossip headlines. Michael Jackson was the biggest victim in the history of that type of journalism.

After twenty-four months, Fortress refinancing was in place and disbursed as well on April 13, 2006, although it didn’t solve Michael Jackson’s problems. The MIJAC catalog was still linked to the whole loan package and potentially at the mercy of Sony.

Stay with me…

Sources:

https://en.wikipedia.org/wiki/UCC-1_financing_statement

Rockmine.com

pacermonitor.com/case/16787632/Prescient_Acquisition__Group,_Inc_v_MJ_Publsihing_Trust_et_al  2005/2007

MICHAEL JACKSON’S 2006 REFINANCING ASSETS: THE SONY/FORTRESS OBSTACLES

At the beginning of January 2006, while media carried on to portray Michael Jackson’s apparent fluffy life, splinted between marriage invitations and shopping binge, his middle eastern advisors were actively looking for solutions to close the loop around useless meetings and related postponements that seemed very much an excuse to drive MJ to the point of no return: bankruptcy.
Bahrain-based financial adviser Ahmed Al Khan and Omni representatives were principally responsible for the restructuring of financial aspects on behalf of the various Jackson entities involved in the transaction. Five groups expressed interest in getting into business with Michael Jackson: Cerberus, Cheyne Capital, Citigroup Global Markets, Goldman Sachs, and Fortress.
Until that time, except for the documentation assignments with Bank Of America loans and the short-term forbearance papers, Fortress made no effort to present a concrete refinancing plane to Michael Jackson.

After the previous tentative of refinancing and sale collapsed with Dubai’s own government company Istithmar, due to Sony’s objections, Fortress, with the right of last offer condition, blocked a proposed deal with UK-based Cheyne Capital in early January 2006.

Mr. Zu’bi, with two other MJ’s financial representatives, Gaynell Lenoir and Frank Correa of Omni, met with Fortress and Sony at Sony headquarter in New York.  On that occasion, they concluded that there was a need for New York counsel to be brought in on the borrower side. There when White & Case, came in.

Villiers Terblanche, of White & Case LPP, described during a deposition of Sony people inappropriate behavior that was still around while he got his initial debriefing of the transaction. Sony people at different points, came in to pick up their bags and their documents, so they had to stop the meeting. During the deposition, Attorney Terblanche felt to point out this: “Can I just point out, I don’t think, I may be wrong about this, but I don’t think the original financing, meaning the old Bank of America financing, was with Mr. Jackson himself. He was ultimately added as a guarantor, correct to point out; I think that he was–He may not have been a borrower, to begin with”, which confirms that the initial project of an investment loan to support Sony/ATV expansion. 

 AQ was able to obtain Citigroup’s interest through a commitment letter and term sheet Citigroup’s stake. And among the other offers, it was the best. When Fortress was asked to put forth a financing proposal, most of the guidance line of terms came from Sony exec Rob Wiesenthal, who insisted on keeping the collateral assets pledged as per the Bank Of America loans (50% of Sony/ATV interest, Mijac catalog, Neverland & MJ personal guarantee). The value of Jackson’s collaterals was the ballpark of the total refinancing loan, and Fortress was not competent in the field. I ‘m going to summarize part of the testimony of Daniel Groppel, who was the managing director of Fortress at that time and supervised all the transactions.

There was no specific value in the catalog, other than saying that Mr. Jackson’s interest in Sony ATV exceeded the value of both loan facilities. The catalog is an income stream, and royalties are collectible for what is in the catalog. Music royalties have been bundled together and valued in the past, but different types of catalogs trade at very different types of valuations.  It was challenging to put a value on the Sony/ATV catalog because there had not been a music catalog like Sony/ATV, so it would be difficult to say with any level of precision that the catalog is worth X or 1.5 X because it was such a valuable asset that someone would have paid a premium for it.

And the full potential exploitation of MJ asset was the central point for Fortress connected with this financing. They knew that there was a way to value and even sell that music royalty stream; they knew that bonds tied to music royalties were valued and sold as futures. It had been done in the Bowie context and other artists. But they could not focus on valuing this collateral with the securitization that had occurred previously concerning music royalties, which was among other things, a work done by  Mr. Koppelman for various artists but not for Jackson, who had paid him 1 million per year for two years to have “the nothing” but an offer that did not suit his requirements. 

Mr. Joe Lee of Fortress, who had some knowledge in the field of music catalogs securitization, confirmed that it would be complicated to put a value on this catalog. Traditionally music catalogs trade in a range of 10 to 15 times NPS, which it’s some kind of income stream coming off of a music catalog, but Sony/ATV catalog might have been inside or outside that range because of Sony’s control due to the agreement with which Sony operated the catalog and the fees that get laden onto the asset.

Fortress made the decision, based on a range often to times NPS, adjusted for those factors, that the loan would be comfortably covered. setsTen to 15 times NPS in this context, gave the gross number NPS $115 million, which would have been a billion to a billion six hundred-ish.

Fortress valued at the minimum of a billion gross value for 100 percent of the Sony ATV catalog for the very significant difference of this catalog between NPS and cash flow because Sony charged the ATV entity much money to manage. Sony ATV had about $250 million of debt on it, at the corporate level. It also had much cash, around $100 million-plus, some of which was being distributed to Sony.

With these numbers, anyone could think: “put the cash aside, it would be whatever value you put on the ATV catalog less than $250 million of debt,  times 50 percent plus the $100 plus million of cash.”

Well no: a lot of that cash was being distributed, cucked out to Sony and Mr. Koppelman and many other people, many executives knew a lot was going to Sony.

The method used for calculating this point was to take the low end of the range, which generally banks do,  which was one billion dollars, take away 250, which gives 750, and half of that is 375.

Sony was sucking all that money off the top, that $250 million of corporate debt plus the cash distributed at their own discretion, a legit liberty that was included in the operating agreement. It was how the ownership of Sony/ATV was structured right in 1995. That was money that came off the top when it came to determining what Sony ATV members got. But for some reason, although Michael Jackson was indeed 50% member and a director of the board, did not have the correct distribution or sometimes received the crumbles left.

If the catalog were sold, possibly the operating agreement might not exist; therefore, the catalog would have a higher value because fewer expenses were laden into that catalog. That’s why Michael Jackson wanted to sell to a third party. Selling 100 percent of the catalog might have been more valuable because it would have taken out that “administration fee,” that Sony used to get according to the pursuant Sony ATV agreement, as understand how it operates. For example, Sony was charging to Sony/ATV the double of what EMI was charging to MJ when he was the owner of 100% of ATV.

So, here is crystal clear that media was feed by false statements, or they were in cahoots with the industry into smearing Michael Jackson’s reputation. There’s no doubt that in 2006 Jackson owned 50 percent of Sony ATV. Also, Sony Music was cheating on Michael’s royalties’ calculation of his personal intellectual property and Sony/ATV revenues.

The result of all of the above was a no binding offer from Fortress with a high-interest rate and elevated fees proposal. It also included a right of Fortress to buy half or all of Mr. Jackson’s interest in Sony/ATV in case of the loan defaulting.

These coming and forth caused due to the lack of collaboration of Sony and Fortress, resulted that on January 13, 2006, the forbearance period was extended to February 18, 2006, according to an Amended and Restated Put Extension Agreement, among Fortress, MJJ, MJPT, MJ-ATV, and Sony. And Michael Jackson’s financial situation incurred substantially more liabilities, including liabilities arising from his delay in obtaining the necessary financing.

The short-term forbearance period granted by the Fortress entities, however, did not eradicate the risk of a foreclosure on the assets of MJJ, MJPT, and MJ-ATV, which would in all likelihood put them beyond the reach of any future judgment creditor, absent a refinancing of the existing facilities.

A couple of weeks later, the Citibank proposal came across Fortress desk. Fortress had a small period during which they had to determine whether they wanted to match the Citigroup financing, as was their right, and in the end, they decided to align with it.

In short, MJ came nearly to signing onto closing with Citibank; and then around February, Fortress purported to exercise a right of last offer, which basically gave them the right to match any refinancing on substantially the same terms and conditions as the refinancing. And that exercise caused everyone to revisit the City financing and explore the legal ramifications of going or not going with Fortress.

Contrary to Fortress, the Citigroup offer was a serious, professional, and structured financial project. And compared to the others, the most convenient one. Michael’s signature on the documents was already arranged through Mr. AI Kahn’s office. As of January 26, 2006, Citigroup was the potential lender to the trust in connection with this refinancing arrangement they have planned. 

Michael Jackson in Hamburg to visit the Shleifer family in January 2006

Citigroup proposed a bankruptcy-remote structure to refinance the Bank Of America loans to which the MJ Trusts’ assets would be conveyed in return for the beneficial ownership of the new trust. Citibank would then loan to the newly organized trust $300 million, secured by the assets conveyed by the MJ Trusts to the newly organized trust. The loan proceeds would then be distributed to repay the MJ Trusts’ existing indebtedness under the BOA loans.

Citigroup imposed on Sony and its affiliates that the guaranteed advances had to be paid and that third-party offers were acceptable in the event of a sale procedure. The project also had taken out the negative covenant – the main worry during the Bank Of America financing – defining “ no Event of Default “the failure of the borrower to pay interest when due or accrued upon the occurrence of default attributable to any net or omission of SME, Sony/ATV or Sony guarantor, (any such approval in a clause or above not to be unreasonably withheld or delayed). 

It must be clear that Fortress is not a bank but a financial group acting as the main contractor and purchasing credit lines from banks, then re-selling them to its customers at a higher interest rate.  Fortress was “placing a bet” on Jackson’s debts; they were specialized in distressed debt, typically associated with overleveraged entities or those at risk of impending bankruptcy.’ The firm and others like it “are designed for wealthy investors looking for big returns on riskier bets.”

Distressed debts are risky investments, but they have considerable profit potential, either in the event of the entity’s turnaround or because, in a lending-to-own strategy, the investor would acquire the asset should the debtor fail in Fortress’s case, that meant a chance at owning Jackson’s share of the music catalog. Fortress’s acquisition of Jackson’s debt was a risk, so replete with profit potential that – after Michael’s death – an analyst questioned Bank Of America’s “wisdom” — not for lending to him but for removing the loan from its books. Because the point was that Michael Jackson’s assets were NOT overleveraged entities either at risk of impending bankruptcy. But someone or something was actively working behind the scenes to bring his assets in those conditions.

The Citigroup project structure – re-establishing a decent interest rate for MJ entities – had a risk-adjusted rate of return, and based on the risks associated with the transaction, it provided an “appropriate” return.

  • The return is the interest rate and the points that were charged on loan.
  • Risks were assessed: the unique risk in this transaction was the chance of not getting paid back due to an event of default.
  • Risk covering: having determinate that the collaterals over-covered the loan value, from the return side, it was balancing the probability of getting repaid in full or getting repaid with or without default and whether or not the interest rate and points you were getting compensated.

Comparing Fortress’s request to one month LIBOR plus 3.50 % spread and Citigroup at one month LIBOR plus 1.50 % spread, it’s evident that the return was not interesting enough for a loan sharks entity like Fortress. I’m sure there are other reasons for the acceptance of a conventional and marketable refinancing structure as per Citigroup’s offer.

On February 14, Fortress informed Jackson by fax that they wanted to exercise their first right offer, matching the Citibank’s offer. Originally the closing refinancing was on March 2; however, due to complex open issues, included of the creditors’ identifications, as well as establishing the clearance of all the titles in Michael Jackson assets being used as security, the date was postponed.

  • What were the reasons that moved Fortress to comply with a substantially conventional and structured transaction?

They answered not to want this lucrative and over-collateralized deal to sneak from them, but – having read the depositions available of the plaintiffs and the defendant, Sony’s efforts and suggestions in the whole negotiation is self-evident.

Meanwhile, Media ran around Europe in search of “signs” of MJ in Italy and then in the UK.

MICHAEL JACKSON MIGHT HAVE WANTED TO SELL SONY/ATV. BUT NOT TO SONY

On May 25, 2005, Michael went to court, along with his parents, to listen to Chris Tucker’s cross-examination. Meanwhile, the two trusts created by Fortress for the specific acquisition of Bank Of America was processing plenty of documents.

MJ’s loans with Bank of America were an investment deal at ten years, both expiring in December 2005. From the execution copies of assignment and assumption agreements, between Bank of America and Fortress, there was a fourth loan agreement with MJ-ATV Trust, which appeared to have no balance. Actually, there existed specific unfunded commitments within the loan of about 3.5 million dollars and was also contemplated an undertaking to look at a $25 million further advance based upon due diligence and an analysis of the underlying assets.

Fortress Music Trust II held this money, and Yucaipa Company – Mr. Burkle organization, instructed to credit it to the MJ’s accounts.
It constituted the first Fortress refinancing of the Jackson Entities Bank of America Debt.

On May 25, 2005, the Jackson Entities entered into a new advance agreement with Fortress and requested an extension of credit for $25 Million. Fortress agreed to stop any action against the default under the BOA loan documents.

On June 13, the Jury reached the verdict. Michael acquitted on all counts! The trial is over, and on June 14 attorney Tom Mesereau gave an interview to Larry King:

With his passport back, Michael does not lose time, and already mid-June rumors tell he was in Paris with his kids to meet with documentary-maker Mark Stewart – the son of racing legend Sir Jackie Stewart. At the end of the month, he flies to Manama in Bahrain as guests to Prince Abdullah, a friend of his brother Jermaine.


When Jackson arrived in Bahrain, beside the open and pressing financial issue to refinance the now Fortress debt, he owed substantial amounts of money to his trade creditors, business and legal advisors, and employees. The situation precipitated Jackson’s efforts to seek new financing.

Pictures surfaced of MJ in Dubai for his birthday, along with Media comments of him trying to spend further money on useless amenities and in glittering parties.

Instead, MJ was around the Middle East with a Bahraini delegation to discuss and looking for fresh alternative refinancing. His middle east exilium was not a walk along the Arab sea.

At just one month of his acquittal back to back shitty events started again: 

  • July: Prescient sued MJ for $48 million for the direct Fortress acquisition of the BOA loans.

  • In New Orleans, there was a court proceeding in the Joseph Bartucci case. Michael was fined $ 10 000 for not showing at the hearing. The trial was later denied: it was another case of someone trying to extort money.

  • September: Michael had to go to London to give deposition of Marc Schaffel‘s lawsuit. Jackson lawyer filed a countersuit against Marc Schaffel, accusing him of misappropriating artwork, funds, and mishandled financial records. Schaffel was involved in“What more can I give,” a song supposed to would have raised 50 million dollars for victims and families of the September 11 terroristic attack and that Sony and some Jackson representatives lobbied to refrain the release. Schaffel was a well-known sex industry scumbag, and when MJ discovered his background, immediately ended the association with him. Schaffel was desperate to get the single release and was around the press, claiming he owned the song. In reality, he had no rights to exploit, distribute, or in any way interest in the master recording of ‘What More Can I Give.'” Shaffel was booted off of the recording project because of his lack of musical expertise and the rights to the song, was of Michael Jackson. He falsified books and records to try to get as much money as possible from Michael Jackson before the termination of his collaboration. After being fired, he postdated $784,000 in checks he wrote on behalf of the company Neverland Entertainment. When asked by an attorney to explain his fraudulent actions, he answered: “I just didn’t want to get caught holding the bag for expenses Mr. Jackson had agreed to,”; adding that MJ agreed to keep paying his expenses (including basics like rent and utilities) for another six months after letting him go.

  • John Branca filed UCC Financing Statements against the MJ Trusts in California. Branca claimed 5% of MJ-ATV’s membership interest in Sony/ATV and 5% of MJPT’s interest in the MIJAC Catalog.

Meanwhile Media reported a lot of fun and leisure. Michael and his kids back to Dubai. A great scandal was created when MJ mistakenly entered a “ladies’ room” in the Egyptian Court of IBN Battuta Mall in Dubai. The episode shows as an innocuous individual, in front of the opportunity reveals its wretchedness: the woman was a teacher.

Michael was shopping at the Emirates Mall in Dubai with Chris Tucker.

Michael was attending the Dubai Desert Rally Racing Tournament at Le Meridien Mina Seyahi Hotel in Dubai with a close friend and renowned UAE rally driver, Mohammad Ben Sulayem, and Saeed Hareb, managing director of the Dubai International Marine Club.

In Bahrain, Sheik Abdullah’s record label displayed posters advertising of 2 Seas Records single “Music to Heal the Pain” using images of the Katrina disaster and conveniently leaving out MJ’s name.

  • While in USA Dieter Wiesner filed a civil complaint against Michael and his company Triumph demanding $64 million for fraud & breach of contract of MJ Net Entertainment.
  • Good Morning America aired a recording of anti-semitic remarks during a phone call taped without permission two years before by Wiesner. The tape was given by the lawyer of Dieter Wiesner and Marc Schaffel.

Michael and family in Muscat (Oman) having dinner at the American Ambassador’s residence in Oman for Thanksgiving.

Most of Jackson’s efforts in the Middle East were to refinance his debts and liabilities, including the Fortress debts, and I call them debts and not loans because Fortress purchased a debt from BOA but did not provide any sort of refinancing project after that.

On November 26, 2005, MJ formalized an arrangement with AQ Business Consultants to assist him in obtaining new financing. AQ Business Consultants is a company organized under the laws of the Kingdom of Bahrain. The agreement provided that AQ would receive one percent (1%) of the financing committed to the project of loan financing. They commenced an aggressive effort to secure new financial commitments.
However, although they located several entities interested in the transaction, two main obstacles prevented a quick refinance securitization: Sony consent to Jackson’s for any further guaranteed loan and the Fortress right of last offer to provide financing for Mr. Jackson.

For example, Istithmar World, an investment group owned by the government of Dubai, expressed interest in providing Jackson with the necessary refinancing in exchange for his interest in the
Sony/ATV. MJ was not the idealistic fool that many fans still want to believe. He was wise and skilled when it came to business, also for the Sony ATV catalog. Being the visionary he always had been, he knew that times had changed quickly. With the right partners and at the right price, he was willing to sell part of his catalog to streamline his complicated financial situations. You have to keep in mind that being the owner of the 50% of Sony ATV meant for him to be also responsible for 250 million dollars of Sony/ATV corporate debts generated by stranger expenses and company management high fees.
However, the deal collapsed in the wake of Sony’s objections. Their refusal, clear out that Sony did not want any other partner, but MJ, waiting to put him in a corner and take the whole catalog at Black Friday discount price.

That’s the reason AQ’s initial endeavors to obtain finance before the date for repayment of the Fortress Loans failed. Sony didn’t help Michael Jackson to find a bank that would solve the problem. Actually, in the particular case of this refinancing, they had done their best to object and delay everything. By the documents I have read, I saw so much red tape to choke in.

Considering that part of his investments with Bank of America, were hedged, and Jackson activities generated royalties and right incomes wholly credited into the dedicated loan accounts, he had to support about $4.5 million monthly interest.

Which means Jackson had been paying more than 20 percent in monthly interest payments. That comes to about $50 million a year just in interest. That is familiar in the world of credit cards, subprime lending, and loan sharks and not commonly encountered by wealthy people with substantial assets. Michael Jackson had a first-class asset, and I could not believe he was paying the trailer-park credit card rates on $270 million worth of debt since I analyzed the BOA documents. What were they doing his financial advisers? What about Sony?

The financial calculation of these loans has a multitude of variabilities: there are managerial fees, compliance fees, and marketing expenses. All paid for by the guarantor. It means that 3-6% of funds are going out the window. And most of the time, these costs are not visible to borrowers entering these investments. It is also essential to understand how the mechanics of costs work. One of the things that can lead to increased costs of these funds are brokers, guilty of some degree of churning into their client’s account (and this is the Michael Jackson case), and it constitutes mismanagement. The industry sells performance and does not talk much about cost. And financial advisors are like any profession – there are good ones, and there are bad ones. But a competent advisor should alert you and explain what you are paying and whether there are better and cheaper alternatives out there. And Michael could not believe he didn’t have enough money to repay the loan. Here his testimony of 2006 June 12 and 13:

The Default on the Bank Of America Loans and the Forbearance Agreement

When it was clear that the MJ entities did not have sufficient funds to repay the loans, AQ representatives helped to negotiate an agreement under which Fortress agreed to forbearance any enforcement action based upon the existing loan defaults due in December 2005.

This agreement allowed MJ a forbearance period of 30 days, including January 16, 2006, extendable of additional 30 days that cost him a 1% the total due amount as fee.
Another condition included was a breakup fee of $2 million payable to Fortress if the refinances would have come from another party. Everything was nothing else than a copy/paste coming from the original Bank of America notes. The forbearance was that Fortress would stand down concerning their rights on loan.

The genesis of the forgiveness was the result of a negotiation that took place toward the end of December and involved AQ, as MJ representative, Sony, and Fortress.  Chief Financial Officer of Sony Corporation Rob Wiesenthal guided Fortress, due to the problematic comprehension of the “Put Extension Agreement” and the relevant amendment of Section 7.9 of the Sony/ATV Operating Agreement, which was part of the collateral package for the Bank of America loan. And part of the condition for extending to 60 days was the agreement by Sony to maintain their support under the put agreement for Fortress on the Sony/ATV loan of $200 million. What Sony had regarding the “put option” was an obligation, not a right. Fortress had the ability in loose terms to put the Sony/ATV interest to Sony and require Sony to buy the Sony/ATV interest for $200 million, and the “put option” was governed by a period that had an expiry. Since Fortress was giving forbearance on loan, they wanted to make sure that Sony’s credit support for the ATV loan would have the time associated with it extended as well.

  • December in USA Michael’s lawyer had to officially respond to tabloids reports of Tom Sneddon alleged investigating MJ for the use of illegal drugs. The law firm clarified that Michael prescription drug use is nothing illicit or illegally obtained.

  • MJ’s “Christmas gift,” that year, was a Court hearing in the Debbie Rowe’ s children visitation rights case in Los Angeles.

The year closed nibbling around the edges, and future perspective had obstacles premise to be solved. Meanwhile, media doodled and spread pictures of a careless Michael Jackson in disguises strolling around the Manama Malls with family and friends.

Sources:

Pacermonitor.com/case/16787632/Prescient Acquisition Group, Inc v MJ Publishing Trust.  

Hollywood, Interrupted: Insanity Chic in Babylon — The Case Against Celebrity by  Andrew Breitbart &‎ Mark C. Ebner 

https://www.eonline.com/news/52782/jackson-lawyer-plaintiff-had-no-right-to-charity-record.

 

 

 

 

 

 

WELCOME TO THE ENTERTAINMENT WORLD: CROOKS, CHARLATANS, IMPOSTORS

“Word of mouth is the best publicity. Nothing beats it”. And considering the countless passages of Michael Jackson’s financial papers in so many hands and in such a short time, I feel having to start beginning the story in a fairy tale fashion.

‘Once upon a time’ Prescient, together with Perfect Circle, contacted Copper Beech Equity partners and explained that Michael Jackson was looking to refinance his debt. Copper Beech Equity partners contacted Transitional Investment LCC and told them that Mr. Jackson and his entities were looking to refinance particular credit facilities. Transitional had a preferred financing relationship with Fortress Investment Group. Fortress was a company specialized in distress debt and asset-based lending Investment.

Displaying the discretion of a jackhammer, this bunch of idiots (I cannot find a better word to qualify them) had meetings and phone calls with some of Jackson’s former advisors. A practice that ignored the strict caution guidelines Michael expressed, especially regarding Koppelman/ Branca and without informing him.

So, let’s trench on through because the events happened in chains that brought up suspicious numbers of “randomness.”

In December 2004, under the request of the group guided by Prescient, Transitional provided a letter of intent (LOI) for a first bridge loan to be used to close the relationship with Bank of America, and a project fitting Michael Jackson’s desire to exercise the buyout option and purchase the 50% of Sony/ATV owned by Sony Music. The aggregated amount was 537.5 million dollars. The initial LOI referred to a senior secured credit facility for $420 million, the percent subordinated note for $80 million, and a redeemable convertible preferred stock for $37.5 million.

February 1st, 2005: Michael Jackson enters the court if Santa Maria where Jury selection takes place.

On February 1st, 2005, the LOI became a commitment letter for bridge financing. The commitment letter now being presented by Transitional Investors LLC as a joint venture partner of Fortress Investment Group.

Between January and February of 2005, Transitional met with the accountants, reviewed the financial statements, and evaluated the condition and the obligations of Michael Jackson, including his income and expenses.  The result was the below report:

From the documents, it appears immediately an agreement between Transitional and Fortress Credit Corp, represented by Chief credit officer Constatine Diakollas. The reason for the bridge facility was an entirely expected refinance of this preponderance with a comprehensive package that included providing financing for the acquisition of the other half of the Sony/ATV library. The commitment letter and the term sheets have three components: Senior bridge loan of 207.5 million, a subordinated bridge loan of 80 million, and preferred bridge stock of $40 million.
They initially wanted Michael Jackson to sign it. But between the various handlers, there was concern that there would take an extended time for him to sign another piece of paper that he would want to be explained. Then, accordingly, they kept as good the signature what they understood to be the advisor to MJ Publishing and Michael J. Jackson. Don Stabler.

Here now comes the beauty: from his testimony, Transitional Managing Director Mr. Shelley confirmed to having talked to Mr. Branca to explore the financial condition of Michael Jackson.

Structure and put in place that kind of refinancing package, would have taken some time that MJ did not have. BOA threatened to call the note, and such an event could have triggered a potential sale of assets. The group of handlers requested to put together and immediate refinancing for the credit line, On March 25, Transitional/Fortress presented a new LOI.

March 25, 2005: Michael Jackson in Santa Court. Testimonies about DNA found on adult magazine.

Clearly, their interest was not just lending money to Michael Jackson to allow him to recover and to pay off his obligations; In fact, that loan would be upside down, so they structured an investment, which would not usually have done, that would allow them to also participate In the future contemplated transaction which was the buying a partial interest in the Sony/ATV through several different operations.

On April 6, Jackson and Tom Mesereau attended Johnnie Cochran Funeral. There they found friends such as Reverend Jessie Jackson and supermarkets mogul Ron Burkle.
MJ was reluctant to the whole situation, and opened up with them regarding these financial transactions. He asked Mr. Burkle to help and revise the papers. It resulted in suggesting to MJ not signing the commitment and consequently taking all the duly actions with BOA blocking all authorization previously made to represent him except for his brother Randy Jackson and Mr. Burkle company.

The handlers supposed to have Michael sign the deal. Instead, there was an unpleasant discussion that ended with MJ invited them to get out of Neverland. When they left, Michael’s assistant phoned and told them to go and meet with Ron Burkle. The discussion was around the meeting and had to do with the Fortress deal and why they thought that was a good deal for Michael. Burkle told them that he didn’t believe that Fortress would be able to do such a deal because they didn’t have the money.

Michael was also supposed to signing off on loan secured against the Hayvenhurst property. In this regard, Mr. Burkle’s and his attorney Mr. Mortensen felt they could do better due to the interest rate being charged on that loan was too high. Still, considering there was not enough time to set up the loan documents, they could not provide financial information to have Michael’s FICO score generated, the right solution was to take what they had already opened.

As necessitated by the emergency, Mr. Burkle lent money to Jackson in a few days. He forwarded the cash to Allan Whitman’s account on MJ behalf, and bills could be paid. Mr. Burkle advanced over a half-million dollars without asking any type of guarantee. Jackson immediately reimbursed Burkle as soon as the funds were credited.

Meanwhile, Transitional worked on the refinancing documents with Fortress lawyers. On April 18, Fortress sent to the old group of handlers a 92 million Senior secured loan commitment and 3 million secured option purchase.

April 18, 2005, Michael Jackson goes to court with his mother Katherine

I insist on explaining the flow of events before the refinancing cause we are faced with what in finance is called by definition, predatory lending.

Predatory lending is any lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative, or unscrupulous actions. If it is not clear enough, I’ll give you an example: predatory lending practices triggered the subprime lending crisis in the United States and global recession. If someone from your friend lost his house after 2006, you have to thank these kinds of financial companies.

Within the negotiations, the transaction comprehended a 1.5% to Fortress upon the commitment letter’s execution. 1.5% was on Prescient, for its role as advisor. And in case Jackson would not use the facility or some alternative financing were completed within a specified period after the agreement had been signed, a break-up fee of 1 million would have to be paid to Fortress. In short, if Michael Jackson signed this letter of commitment with Fortress and not get into financing with them, he would have to pay 1 million still to compensate the financial institution for the use of their stationaries. The offer nullified all the previous ones but did not include the obligation to pay the 9% break-up fee as liquidated damages, as outlined in Section 6 of the letter dated December 30, 2004, (which 9% break-up fee is comprised of a 2% break-up fee to be paid to Fortress and a 7% to be paid to Prescient as advisor). Fortress agreed to fund $3,000,000 before April 30, 2005, against an option to purchase 51% of Michael Jackson’s beneficial interest in the MJ/ATV Publishing Trust for $175,000,000. The validity of the offer was 90 days. Crook behavior? Definitely. You can read the whole document here.

Here the compensation formula developed by Lehman Brothers in the ’60 for investment banking services related to the finder fee that financial brokerage companies used at that time.

-5% of the first million dollars involved in the transaction
-4% of the second million
-3% of the third million
-2% of the fourth million
-1% of everything thereafter (above $4 million).

Despite Lehman was and still is the most common form in use, this does not mean that rates are not still negotiated on a case by case, particularly for $100 million and higher transactions. Serious brokers take 0.25% of the whole loan. 

Something was off with that financing, and Michael Jackson did not sign the commitment letter. All the conversations with Fortress ceased as soon as Yucaipa Company controlled by Ron Burkle, got involved with Michael Jackson. Fortress conversations with them began after the purchase the loan from BOA. In fact, Fortress had other surprises in its sleeves.

Unexpectedly, the first week of May 2005 the Media announced Fortress acquisition of the Bank Of America’ Michael Jackson loans leaving the handlers high and dry. It came out of the blue even for Jackson. Prescient’ people read it in the newspapers and alerted Transitional.


During his testimony, Shelley was asked if any sort of complaint had been addressed to Diakollas. He admitted he asked: “Don’t you think you owe us at least our fee for the purchase under our agreement, our joint venture agreement?” Diakollas went through the preamble, and responded, “I thought we had a better relationship than that this. That’s right? Other people, not you, showed us the deal.”
Diakollas was correct. The proposal came out from another source: it came nothing less than from Jane Haller, Michael Jackson personal banker.

Fortress intentionally withheld from Mr. Jackson any written agreement between the Fortress entities and Jackson’s entities and did not tell anyone that it was negotiating with Bank of America the loan purchase. As already explained, Fortress was still in active negotiations with Michael Jackson and his people concerning the $92 million loan facility on April 17th and 18th. Yet, by May 3, they executed assignment and assumption agreements with Bank of America.

  • What was going on during those two weeks between April 18 and May 3? It’s possible that Fortress thought, “Well, if we hear from Bank of America, maybe we will just buy this loan directly?
  • What were all of the reasons why Fortress didn’t tell MJ that it was in discussions with Bank of America to take an assignment and assumption of his loans?

Fortress defended the subject by saying they signed a confidentiality agreement with Bank of America. But they also had entered into a confidentiality agreement with Michael Jackson. So it was just inappropriate not to tell him that they were trying to buy his loans.

In the end, Michael Jackson was the one that received a “hello” letter that basically says: “Hello, Mr. Jackson. You owe us something million dollars. You don’t owe the Bank of America anymore. We have purchased the debt, and here is some information for the current status and some further pieces of information that we require from you”.

Some other factors might have motivated Fortress business decision to pursue the purchase of the BOA loans directly from BOA. In fact, in April 2005, MJ needs to cap off a relatively small interest payment of about 600’000 dollars due on the credit line with Bank of America, and funds were not available to cover it. As a result that Bank of America called the note to actuality accelerate the default. At that point, MJ was “technically” in default with the bank.

May 3, 2005: Michael Jackson enter to Santa Maria Court to listen testimonies of Steve Robel, John Duross & Rudy Provencio.

MJ was under criminal trial, and all his cash, when available, served to pay defense experts, apartments of the lawyers, and the employees that had to live in the area at the time.

The technical default of the credit line was triggering a mechanism that competitors were waiting for years, any of them with their own reason. Still, all with the same intent: divest MJ from intellectual property ownership. Like Koppelman with the revised offer of Goldman Sachs, Branca, with two different offers and Sony, that drove the bank actions behind the curtains, waiting for the step that, in the end, would have brought to bankruptcy procedure.

Fortress’s handy and straightforward solution to purchase the loan directly rather than bid against anybody else or continue to negotiate something according to the commitment letter that was existent and issued by them with MJ while entering the confidentiality agreement had been a winning move.  That what Mr. Burkle suggested that happened. Whether that’s plausible or not, the reader can decide it.

However, the Fortress purchase was not a refinancing yet. They had to find a bank to pay the loans to Bank of America.

 

MJ:”SOMETIMES PEOPLE DO THINGS BEYOND THE SCOPE OF WHAT I TELL THEM TO DO”

On January 16, 2004, his formal arraignment drew a horde of news media and in Santa Barbara County. The press did not cease to put their nose in his business and in what they called “his mysterious finances.” Depending on the source, Jackson was either spending his way into bankruptcy or presiding over wealthy music and real estate empire.

In reality, MJ had been the target of numerous lawsuits over the years, many of which cost him millions. ( Lee, Sotheby’s, Avram, Vaccaro, Royalty Claim lawsuits dismissed with Motown and Universal). The only successful trial was one of five former Neverland employees that lost a wrongful termination suit against Jackson and were ordered to pay $1.4 million in attorney fees and $60,000 in damages. A jury rejected claims that the employees were fired for cooperating in a probe into the 1993 molestation allegations.

When in March, the Arvizo’s were deposing before the Grand Jury, Michael Jackson had to increase his credit with Bank of America on the credit line guaranteed by MJPT (Michael Jackson Publishing Trust). The lending aggregate principal amount was $72,500,000 at that point. 

Here too, The New York time through Al Manik’s interview, published misleading pieces of information one month before the documents were filled and signed. This third amendment and restated loan agreement of 2.5 million dollars had a specific use, which was: to fund the Minimum Interest Reserve Account, to finance the Borrower’s expenses and professional expenses, to pay the Guarantor’s taxes, to pay the legal fee and approved Invoices.

I wonder which documents provided the “insiders” who diligently fed Media jesters. From 1997 on press was wild and meticulous in detailing over MJ’s crazy borrowing.

Too bad that these assets were already pledged under the bank agreement. By the documents disclosed in various financial lawsuits, it’s clear that numerous agreements were entered into in connection with the MJPT Loan, including, among others, the MJPT Trust Agreement and a Security Agreement between BOA and MJPT, dated September 29, 1999. MJPT was restricted in disposing of, transferring, or selling the MIJAC Catalog or the Administration Agreements until full payment and performance of all obligations under the Loan Document. In short, MJ could not take any action before the loan would not have been fully paid. Neverland was pledged to BOA under this agreement, and if it was not enough, a personal guarantee of MJ was imposed.

2004 April 1, Humanitarian Award

On April 2, 2004, Mark Geragos and Ben Brafman brought a massive amount of pieces of evidence into a Santa Maria courthouse for the preliminary hearing into the Jackson case. The material impacted the credibility of witnesses. One of the evidence they obtained was the Arvizo family court documents in the JC Penney case.

On April 11, Medias reported the allegations of Daniel Kapon, a young man who claimed to have been abused by Michael when he was a kid. It turned out that the Santa Barbara Police Department did not find him credible and closed the case after investigating it.
Regarding the episode, Geragos said: “This appears to be a malicious attempt to undermine Mr. Jackson’s right to a fair hearing on the presently pending charges.”We have to question the timing and purpose of this 20-year-old false allegation being raised at this time.”We believe that this smear campaign is driven by money-hungry lawyers, seeking to capitalize on Mr. Jackson’s current legal situation.”

But everything started to become too dangerous. Gavin Arvizo deposition had been leaked, and several of Jackson’s associates faced charges of conspiracy and obstruction of justice for allegedly threatening the child’s family accusing the MJ molestation. The co-conspirators were: Marc Schaffel, Dieter Wiesner, Ronald Konitzer, Frank Tyson (Cascio) & Vincent Amen.

Michael, who was in Orlando, learned that the Grand Jury had indicted him. He asked his brother Randy to intervene, and Tom Mesereau, that knew Randy for many years, eventually came on board. On April 25, Michael announced that he had changed his legal team. And a few days later was the Nation of Islam turn.

I’m going to introduce a summary of a series of testimonies collected in one of the scummiest lawsuits MJ had to confront with. It would have revealed almost illegal acts of many industry big names and open an embarrassing can of worms. So, most of the media wisely shirked the real content deflecting public over gross gossip against his brother Randy and the charlatans’ group who tried to defraud MJ. By the testimonies, I can say that Randy helped as much as he could. Still, most likely, MJ’s financial structure was beyond its capabilities, and he got into a bunch of crooks with a poor understanding of the whole situation. 

This transaction became a sort of pyramid selling. Time wasted to assure everyone the “right percentage,” too many people involved, and not following the MJ request of discretion in disclosure of pieces of information. It was a real mess that allowed who had an interest in having MJ bankruptcy to organize themselves and buy some time.

These people had to go through examinations and cross-examination in detail, offering a clear understanding of the dirt that was behind MJ finance troubles. Their statements provide and visualize the vultures that stalked Jackson for about all his life, the way Sony directed and sanctioned his loans from the beginning. The not precisely crystalline attitudes of some of his historic and essential former collaborators, the percentages and bribes applied to his investments, rates that belong to usury banking crimes, prosecuted and convicted in many civilized countries. And last but not least, it shows what Michael Jackson went through during the preparation and all along with 2005, as if the trial and the risk of lengthy detention were not enough.

Michael Jackson at the Santa Maria Court House in Santa Maria California on August 16th, 2004
Fame Pictures, Inc – Santa Monica, CA, USA – +1 (310) 395-0500

 

During the summer of 2004,  Michael Jackson was preparing to be on trial in connection with the criminal matter involving allegations of child molestation. He was understandably preoccupied with the criminal case and, therefore, could not personally handle his financial and business affairs.

Michael had fired his prior managers, except a few, including the accountant Mr. Whitman. MJ put his brother Randy Jackson in charge of securing a partnering entity to assist in refinancing particular then existing debt. Debts were owed to Bank of America by two of MJ’s Trusts, the MJ Publishing Trust (MJPT), and the MJ-ATV Publishing Trust (MJ ATV).

Randy hired Don Stabler in July 2004, to assist him with the financial management of Michael’s affairs. Mr. Stabler had had an ongoing relationship with Randy Jackson for services concerning tax return. Stabler’s tasks were to order documents and reduce costs.

In September of 2004, Jackson was in a horrific financial crunch.  At the time, the principal concern was the credit line.  Bank of America had an open lockbox and was sweeping all of Michael Jackson’s income into it to repay the interest on those loans. All of the royalty payments and all the other sources of income that Michael had were swept into that BOA account proceeds, and they shouldn’t have done it.  They were, in essence, overreaching. Moreover, the loan terms and conditions were extraneous and very difficult for Michael to manage his own affairs, and as a   result, they wanted to get out of them.

The situation was pretty much tapped financially. There was not enough money to pay the monthly expenses; there were many of the costs for people staying up in the Santa Maria area being charged to Randy’s credit card. Randy’s credit cards had been run-up to the max. Not only his credit cards, but Randy had used the credit cards of friends of his or people who were assisting him during the trial and his representation of Michael.

 (Photo by Hector Mata-Pool/Getty Images)

 

Tom Mesereau and Susan Yu needed funds to bring experts on due time because they feared that the judge would prohibit them, if not careful, in bringing them on time. In fact, most of the resources were to just get to Mesereau team the money that they needed to hire the experts or to retain them. Throughout the trial, Susan always thought that there was more money than we acknowledged. And she had a hard time believing that Michael Jackson was cash poor.

Due to the enormous expenses derived by the upcoming criminal trial, MJ was looking to refinance the Hayvenhurst property because it was the one asset that was free and clear that could get income. So in an attempt to circumvent the covenant of Bank of America line of credit, it was asked to Janet to get the loan against the Hayvenhurst property. However, she could not handle it.

In October 2004, Mr. Stabler and Randy contacted Robert Pryce of Perfect Circle Entertainment, Inc. with the intent to find sources or contacts in the financial industry to enable refinancing of the BOA debt.  After reviewing the documents received relating to the Bank of America financing and the securitization against the Mijac and the Sony ATV catalogs, the consultant expressed a specific concern detailing various aspects of the documents, including the trust. The analysis was focused on the potential jeopardy to the Jackson Entities’ ownership interest in the Sony ATV Catalog. 

The refinancing purpose was to restructure the outstanding BOA Debt and provide much-needed liquidity to MJ.  Also, the Jackson Entities and their advisors believed that the BOA Loans’ terms and conditions were extraneous and very difficult for MJ to manage his own affairs.

Given the loan amount, the asset of Sony/ATV was more than sufficient. There was no need to have Neverland as a pledge, as well as there was no need to have MIJAC as securitization. Bank of America loan guarantees seemed like it was an overkill request. The Sony/ATV catalog was worth in between one billion, possibly 1.2 billion, which means that the 50% owned by MJ would have an average value of the half. So, why did they need to take all his assets? Something was not right with these loans, and further testimonies will explain it.

Perfect Circle located Prescient, who was “apparently” engaged by the Jackson Entities as an agent to secure financing and “take out” the BOA debt, keeping as security asset the MJ/ATV Trust only. If the loans were funded, Prescient would then be entitled to a fee.

The initial scope of the loan was the $72,500,000 loan of the credit line. That was the focus when these people got involved. The loan was imminent for a disaster that needed to be taken care of first. And that was supposed to be the mezzanine or bridge loan of 90 million dollars. It was the one that could get MJ out of trouble. As previously stated, the $200  million loan was not in jeopardy because it was secured by his interests in the Sony/ATV catalog. 

The line of credit caused everyone the most heartburn. MJ accounting had to provide to BOA with monthly reports because there was a covenant in Michael’s line of credit saying that if at any point in time his accounts payables exceeded $2 million, Bank of America would call the note. So Randy’s role was to try and make sure it kept it below the $2 million. Any funds that either Mr. Jackson received or his trust would go through Bank of America. They would then take the portion needed for the loan. And the amounts not required would then be forwarded to a bank account controlled by Allan Whitman at his firm and then used for paying expenditures.

In that line of credit agreement, there were several covenants, any of which could have triggered a default, which would have caused damage to Michael. One of the most uncommon conditions was that Bank of America finance documents required Charles Koppelman to remain as trustee in the trust governing that asset for so long as the loan existed. It also had Michael Jackson to pay Mr. Koppelman a fee of 1 million dollars a year for his consulting relationship for that trust.

Why MJ had to pay someone $100,000 a month? What did he do for him? What did he get for it, when there were other more pressing matters not being paid. Mr. Koppelman was not a trustee of the MJ Publishing Trust or MJ-ATV Publishing Trust. He was merely a consultant tied into the Bank of America loan, which required him to remain as a consultant and paid separately by Michael Jackson, not for his services on an annual basis, paid quarterly. And that troubled everybody because Mr.  Koppelman was providing no services for the fee he was receiving, and Michael Jackson didn’t have the money to continue to pay him.

In 2003 Jackson hired Charles Koppelman to do some kind of a deal or loan to restructure his contract with Bank of America before the expiring date loan. Mr. Koppelman had at least a two-year head start on working on something to do just that and had people in place who were pretty much ready to go. In fact, they had tendered an offer that Michael flat out rejected.

What was Charles Koppelman’s involvement regarding Michael Jackson and the Bank of America loans, again, still staying in late 2004? None: Koppelman was still trying with Goldman in either buying out Michael Jackson’s interest or financing it in some other way.  John Branca also wanted to introduce a deal with a publishing group called Blackstone Group while helping Koppelman with Goldman. But Michael Jackson was specifically interested in terminating the employment relationship with Koppelman. As a result of that fact, Koppelman was fired by Randy Jackson and by Don Stabler.

Bank of America notified them that it would cause a default in the loan documents and that they could not do that first. Secondly, if they didn’t pay Mr. Koppelman his fee as required under the loan documents, that would also cause a default on the Bank of America loan documents, which would give them a basis for calling the loan. The default would cost MJ a 1 % rate increase and possibly 10 million upfront penalties.

Michael believed that the trial’s primary reason was happening, and going forward, was because of a conspiracy connected with the business involved, and he didn’t seem to trust many of the people around him. Michael was extremely concerned that he had the potential that this conspiracy involved taking his catalog of music Sony/ATV and, the major part of this conspiracy had to do with his ownership of the catalog of containing the Beatles music.

Michael was also disenchanted with Sony Music and how it was managing the Sony ATV catalogs. He also felt that Sony Music was siphoning his proceeds, those that he should have received as part of his interest from the income of that entity and securing it for his own profits on the one hand and expending it for extraneous costs and expenses on the other for purposes of the management of the catalog.  So, at the appropriate time, he wanted to buy out or somehow remove Sony from the transaction.

Barlowe and Dash also talked of MJ’s personal catalog and his possible interest in wanting to be involved in companies on Wall Street that might be interested in financing. There was contact with various brokerage firms and a hedge fund. A couple of the companies expressed an interest but had reservations due to Michael’s pending trial. That was a problem for several companies. An example was when Dash reached out to GE Capital to financing for the BOA debt. GE was very interested in the deal but very concerned about the status of Michael Jackson and the negative publicity that was being generated with it. In the end, no transaction was ever effectuated.

In December 2004, another company appeared in the already crowded scenario. Transitional Investor LLC. The task is the same: refinance the permanent loan, the credit line financing. They added an offer for Michael to purchase the 50 percent interest of Sony Corporation in the Sony Music ATV company. Meanwhile, still in December, a meeting regarding Sony/ ATV catalog was held in New York, and Al Manik, one of the two trustees of the MJ/ATV Trust, sent an email informing he only flew charter. Clearly the expenditure was not authorized this time.

In between November and December 2004, some of Michael’s friend Hamid Moslehi files a civil complaint about no payment followed by a crazy Dr. Sebi and Marc Schaffel.

 

 

MICHAEL JACKSON: NOT TO TRUST EVERYBODY IN THE RECORD INDUSTRY

 

The 2002 scenario marked the public back and forth of the war and the problems between MJ, Sony, and CEO Tommy Mottola. MJ words on Mottola speak alone.

There is no need to comment any further, primarily because it must not be forgotten that Mr. Mottola was a hired man at the end of the day.  Rumors tell of MJ and Masao Morita of Sony Entertainment Worldwide busy working on a video game with using the Invincible songs, and neither of them bothered to tell Mottola.  But in the USA, the hard fight to destabilize MJ  financially was officially on “screen.” 90% of the press was on random aspersions.

Also, people such as Russell Simmons and Ricky Martin had spoken out against Michael Jackson in his feud with Mottola and made in derisive public statements about him. Comedians like Dennis Miller and Robin Williams had bad mouth using comedic references to the allegations that MJ faced several years before. And even the people who have worked with him suddenly disappeared. No one stood up for MJ, and their non-support was uncannily the same when Michael faced molestation allegations.  Only the Jackson family supported MJ and, in particular, Jermaine Jackson, who defended his brother in public fiercely.

Jackson’s attorney Martin Singer stated during an interview that a lawsuit against Sony was into consideration. They had enough forensic audits. There were claims for breach of the agreement and fiduciary duties, accounting claims for under-reporting of revenues, and other alleged improper accounting practices worth hundreds of dollars.

Sony has always been famous for this kind of practice with artists under contract with them. They did not get money from their hits because the record label said the artists owe them money. It was their consolidated skill being mainly aware that only a minority of artists would have been able to fund on its own the audits (we are talking about a few hundred thousand dollars).

Sony, methodically diverted revenues from Jackson’ and his companies disguising the revenues of reproduction, use of it, and exploitation of his musical assets, as “profits” instead of “royalties,” by removing the royalties from the pool of revenues upon which MJ royalties were calculated and purposely reducing the royalties and his Net Receipts. Jackson recording artist contract agreement also provided that Sony should credit to Jackson account an amount equal to the portion of the foreign tax credits attributable to Jackson royalties.

Another Sony game was the allocation of the available tax credits.  An example is subparagraph 11.02 of Michael Jackson’s recording agreement. It provided that Sony would credit  MJ’s account an amount equal to the portion of the foreign tax credits attributable to MJ’s royalties after a final audit by the IRS. Once the IRS completed its audit, it became evident that Sony did not allocate to Michael Jackson a portion of the available tax credit. 

Contracts must be written in plain and understandable language and cannot contain unfair contract terms. The complexity of contractual clauses was instead the winning tool of the Sony strategy. And the issue with MJ lay in between good-faith interpretation and the abuse of the right. 

The same story of MJ for the Sony/ATV catalog. Another example of how Sony could mess up the accounts is showed in the letter sent to Sony/ATV by Jackson’s company to summarize the agreements they had gotten into:

The letter mention two crucial issues: 

  • The bank involvement (his infamous loan, pictured by the media, as frivolous expenses and capricious)
  • Further payments to him upon liquidation of the company. 

The capital contribution represents what Sony had to pay MJ to reach 50% of its shares. Sony/ATV, being newly born and having insufficient funds to assume operating expenses, took loans from Sony Entertainment to pay Jackson. These loans were bearing interests per annum rate of LIBOR plus 100 basis points. And here it started the debt circles that affected the company for all their partnership. To make a long story short: MJ was getting money for the sale of his 50% wholly-owned catalog, and Sony ATV generated debts to become 50% partners. Not to mention the byzantine priorities of financial management and the discretionality of how profits were distributed.

The Joint Venture signed between them in 1991, and the publishing catalog resulted in a multi-millionaire contracts/agreements intersected with each other was a breeding ground for accounting manipulations since the money flow passed largely in Sony coffers.

Sony could be able to show MJ account in debt somehow.  Because if it is true that as per the contractual principle that record labels cannot sue an artist if they cannot recover the advances disbursed, MJ was a business partner involved in gains and losses.

Wendy Day, founder of the artist advocacy group Rap Coalition correctly understood the situation. She said in a 2003  interview: “Michael Jackson’s problem is like racism: when you’re not the person being oppressed, you tend not to see it.”

It had nothing to do with Jackson’s personal issues toward Mottola. It was a dispute involving the recording agreement and relates to their business relationship in the publishing venture, Sony/ATV.

Jackson claimed Sony acted inappropriately in the marketing of  “Invincible,” and the record company defended its budget to show initial support for Jackson. In reality, the 25 or whatsoever Million claimed to have spent making and promoting the album were inflated and far from accurate, as well as the number of record sales attributed to it; because there’s a world of difference between them spending money and spending it adequately. The cash was, in no small measure, purposely wasted. Recording studios and hotel rooms left empty and booked for months with no one caring about it and pressures put on MJ to use new and young producers, convincing him he needed them when indeed it was the contrary. Sony’s mismanagement during the production of the album was well documented.

It was only in  November 2001, after the acquisition of 50% of the MJ ATV catalog, that Sony started to deposit copyrights into Sony/ATV. Sony/ATV signed a co-publishing deal and acquired Martin’s Baby Mae Music catalog of 600 songs. In July 2002, Sony/ATV Music Publishing purchased country music publisher Acuff-Rose for $157 million. It’s a mistake to think that Jackson had deposited no additional copyrights into the catalog since Sony/ATV was a partnership, and MJ was on the board of directors. The company could not act without his consent. The Operating Agreement specified that both shareholders were forbidden to purchase catalogs if not for the interest of the company.

Meanwhile, the company had raised substantially in value. There’s an official survey dated 1999 saying that Sony/ATV value was 993 million of dollars. And MJ 50% was still the most valuable and significant income of the company.

Since 2000 Sony Corp. was in full crisis, having many of its divisions in precarious situations, and their interest was to put MJ into liquidity constraints, not to squeeze him into a bankruptcy procedure. If MJ had gone bankrupt, as news had deceitfully reported, Sony would not have been able to apply to the option imposed by Bank of America, namely the “Put Option” price. If this had happened, the bank would have owned 50% of Sony/ATV shares and subsequently auctioned them to the highest bidder. And Sony couldn’t let it happen.

By the timeline of the events, it is clear that the album boycott and the purchase of new catalogs were the occasions to absorb most of MJ’s incomes deriving from Sony/ATV and consequently for Sony to acquire more leverage in their joint-publishing venture. Michael Jackson’s financial situation wasn’t insecure to the extent that Sony could put some hopes on it. But the truth was that Michael had his assets pledged into Bank of America loans, and part of his revenues placed in the reserve accounts to guarantee the payments of the interests and secure the loan itself.  That’s was the reason he was seriously planning other ventures and solutions to diversify and strengthen the sources of funding and developing other corporate alliances.  

On September 30th, 2002, a third amended and restated term loan agreement between Bank of America and MJ-ATV Publishing restates in its entirety the Existing Loan Agreement plus the already agreed third loan od 11.5 million of dollars that inject cash in the collateral accounts, and settled banking costs, interest, and expenses. Only 3 million were available for MJ corporate expenses.

Contrary to what the press was heralding,  it was the same old corporate loan in agreement with Sony since 1995. At that time, MJ’s financing had gone from a prime rate regulated by Federal reserve funds to LIBOR to try to earn on futures operations through collateral accounts that accrued interest.

The year 2003 started with management “clean up.”  There was another change of the structure of MJ/ATV, and MJPT trusts with Mr. Branca and Mr. Siegler replaced by Mr. Malnik and Mr. McClain.

Dieter Wiesner and Ronald Konitzer were working on a plan named MJ Universe, which was supposed to relaunch Michael’s career. Meanwhile, Jackson strolled around the world journalist Martin Bashir, who was introduced to him by his friend Uri Geller.

As per a 2005 testimony of attorney David Le Grand, Wiesner and Konitzer tried to take over Jackson’s management, working subtly behind his shoulders. They messed up a great time with Michael’s money to synthesize their work, but they did not succeed in their intent. There were too many people around and too much at stake for everyone.

Michael was not a fool and immediately realized that Le Grand was unable to care for his publishing affairs and dismissed him after only three months. And this was his consideration regarding Konitzer: (excerpt from the 2006 Schaffel lawsuit) regarding Konitzer: 

So, even if in bad terms,  Mr. Branca law firm still had the management for the licensing of MIJAC. However, it was a real mess.

The controversy that arose after the broadcast of  Martin Bashir’s documentary,  Leaving with Michael Jackson,  followed by the leaked Chandler’s 1993 deposition, appeared “magically” on The Smoking Gun website had almost immediately a disparaging effect on his business efforts and his finances.

It resulted that by the end of August 2003, he raised the credit line guaranteed by MIJAC from 35 to 70 million and the relevant amendment of the Sony inter-creditor agreement. The document shows MJ was in debt with Sony Music of 12.5 million.

An Intercreditor Agreement sets out the arrangement between financiers providing loans or credits to a borrower and reconciles their different interests. It deals with the commercial behavior of the parties and also the ranking of their debt and security, particularly on insolvency, by subordinating junior lenders (Sony in this case) and regulating the rights of lenders.  Commercially this kind of agreement provides for the subordination of the Inventory lien solely to the loans made under a Revolving Credit Agreement. 

I have no documents related to it, so I cannot have a clear understanding. What it’s sure is that the agreement is linked directly to MJ advance on royalties and the exploitation of his music and intellectual property.

I found a document dated 1998 referring to various agreements between them. The most interesting is the “use period” connected with Michael Jackson’s recording contract.

The document refers to the sixth album for which MJ was still under contract, specifying the insertion of a new wording in the Subparagraph of the Recording Agreement.

“Notwithstanding the foregoing, if prior to your delivery of the sixth album of your recording commitment Jackson, MJJP or MJV becomes a debtor in a case under the Bankruptcy Code section 365 (an applicable rejection order) the used period shall continue until the later January 1st, 2024, and the date that is seven years after entry of an Applicable Rejection”.

The above is another example of the many interpretation legal diatribes that must have been to get out of Sony. MJ was strangled in a finance facility that engaged all his assets. He still had other resources, but the lack of liquidity gave him little room for maneuver when negotiating new agreements or renegotiating existing ones.

 

All of the above, it makes me wonder why all of a sudden, almost a year after MJ had lashed out at Tommy Mottola, the new allegations came about. So I wonder why the very same day of the Number One’s CD release, Tom Sneddon with a search warrant and 70 cops went to raid Neverland.

And also why in October of 2004, while Michael was facing child molestation charges in Los Angeles, there was news spread in the Media asserting MJ was on the way to agree to sell his 50% catalog to Sony. And they dared to go into details such adding that general discussions between Sony and Jackson’s representatives, John Branca and Charles Koppelman, were in place to discuss already the post-merger direction of the partnership. 

 

 

WHEN MJ SPOKE HIS MIND AT THE NATIONAL ACTION NETWORK

When Michael Jackson appeared at the National Action Network in Harlem with Al Sharpton’s, he was trying to let people know how the music industry was hopelessly corrupt. He blamed them, described the recording industry as racist, and denounced the injustice against artists, dead and alive.

At that time, it was not just Michael Jackson having problems with record companies. Many USA artists joined forces with the Artist Empowerment Coalition (“AEC”), an activist organization rallying recording artists to end what they believed was unfair business practices. Artists such as Roberta Flack, Faith Evans, Stevie Wonder, Tony Bennett, and many others, invoked throughout the evening the names of those musical greats who – after huge recording successes – woke up one day and were unable to scrape together two nickels.  Blues legends like Billie Holiday and Bessie Smith were denied royalties and died indigent.

Beck and Billy Joel protested against restrictive contracts; the Dixie Chicks were locked in a contract dispute over money with Sony. Courtney Love was fighting with the Universal Music Group. George Michael had to insist on reviewing his contract with Polydor each time he had a new album.

The central conflict had to do with a complex equation of copyright laws, publishing rights, royalty formulas, and expense recoupment, how money was paid out. The paradox for artists was that while they are obligated to pay back most of the costs for recording and promote an album, labels retained control of the master recordings, which is essential to generate ongoing income from minims and greatest hits reprints. Record companies’ response had always been they couldn’t exist without assets like masters.  With the battle between artists and record companies, AEC was taking its case to the legislature of New York State (the center of the music business).

On the other side, they had the help of California Democratic state senator Kevin Murray. A bill was introduced to repeal the music business’s exemption to California’s seven-year contract rule. The little-known labor code allowed record companies to sue for damages if an artist did not complete an agreed-upon specified number of albums regardless of how long that might take. The music industry execs predicted dire consequences for the California economy and foresaw fewer artists’ signings. But Murray was unmoved, calling the seven-year rule “a well-paid form of indentured servitude that gives record companies unfair control of artists.” The debate over the seven-year rule inspired Murray to hold two additional hearings on the recording business accounting practices before the California Senate Selected Committee on the Entertainment Industry. For once, the record companies were on the hot seat.

The demands of Al Sharpton’s National Action Network were pressing, and Jackson’s contribution compelling and straightforward. But it backfired him, and there was no shortage of coverage of the outburst. It took a couple of comments made by some “insiders” to trigger a media war against him. Tabloids brought the trashing of Michael Jackson to another level, plastering mockery headlines picturing him as an eccentric star of bizarre behaviors and made him a joke in the English-speaking parts of the world. Who was behind the Media headlines knew very well the meaning of these actions. For MJ, the problem was more than a black and white issue: it was about big businesses and questionable distribution of wealth.

Michael was more politically savvy than what people gave him credit.  Prince, putting the word ‘slave’ on himself in his struggle with Warner Music, didn’t reach out. He succeeded to some degree, but he didn’t exploit black consciousness. Michael reached out to the black community successfully, as evidenced by the enthusiastic presence during his rallies.

Media fine-tuned propaganda was highly implausible and went hand in hand with the winning backed up formula of the insider that does not want to be mentioned and whose tip becomes the backbone info in the whole article. And the anonymous “donor” spills the “breaking news” semen protected by the first amendment.

Tabloids sold millions of copies launching headlines telling a sordid story of MJ pawning a $2 million diamond watch to borrow money from a bank. Never mind if  Jackson spokesperson Howard Rubenstein dismissed it. The same happened with the story of borrowing cash from Sony against the Beatles songs. The industry insider stating the record label did not seek to buy” ATV Music Publishing but that the word “foreclose” would have been appropriate since Sony technically already owned the songs. Sony’s execs asserting that the Harlem speech was staged cause of MJ’last album had sold only 2 million copies, calling Invincible a flop when worldwide sales figures listed the record from 8 million to 13 million.

Daily News June6, 2002

Daily News June 6, 2002

 

During an exhausting back and forth on the same day, Jackson accused Sony Music of making a false claim such he owed it $200 million, calling it ”outrageous and offensive.” And Sony immediately denied the quote of the anonymous executive saying, “’We have never issued any statement verbally or in writing claiming that Michael Jackson owes us $200 million; as a result, we are baffled by the comments issued today by his press representatives.” 

All of the above, when just seven weeks before the Harlem speech, MJ was with President Clinton at the Democratic National Committee benefit concert, and the Media described him as a role model. How come, once he decided to expose Sony, he became, all of a sudden, “a freak”?

Sony Harakiri for the Invincible album was the juxtaposition that tells there was more going on than what transpired in the news.

Many people think that record companies loan money to artists to record their album. Well, there is a big difference between an “advance” and a “loan.” An “advance” is a pre-payment of royalties, and no interest is applied. It is a misperception that artists are in debt “with record companies or writers concerning their publishing. The advance is NOT a “debt,” and it doesn’t have to be repaid. The advance is only “recoupable,” meaning that it is applied against earned royalties.

The artist funds album using their own royalties. That means paying for recording costs, the recording studios, producers, arrangers, and engineers. And it’s part of the artist’s lawyer’s job to get as much of an advance on royalties as possible. The record company can recoup the investment selling more records to increase the volume of the artist’s royalties. If the artist doesn’t generate enough royalties to pay that back, then the record company has to live with that. They can’t pursue the artist personally for un-recouped royalties. Also, the cost of producing videos is considered advances against the artist’s royalties. Record companies try to recoup 100%, but a good negotiation gives the chances they agree only to recover 50% of video costs.

No record company would do something like what Sony did with the Invincible album that unless there’s so much more at stake. And that’s why Sony’ execs felt comfortable: MJ was not just an artist under-recording contract. He was their business partner, with his ass firmly fixed on an armchair of Sony/ATV board of directors and a bunch of other companies’ agreements and Joint Venture business. In short, he had a say in Sony. For obvious reasons, most of his income flow (not all but many) was credited into Sony accounts and reverted to him deducting the records company commissions and percentage. And it was the card they played. Whatever sum was for MJ accounts as a recording artist could have been used to implement Sony/ATV, recover advances, and any other company emergency because of their joint venture.

When Sony/ATV was set up, technically and in practice, it was Michael Jackson purchasing Sony Publishing, not the contrary. Sony Publishing had limited ownership of the libraries. It was generated by co-publishing or administration deals. Instead, Michael Jackson was the sole 100% owner of the publishing rights – including all of the Beatles’ titles – owned by ATV and was almost the sole owner of his publishing right and copyrights of MIJAC.

Here the excerpt of one of the few articles that got the news correctly:

 

Michael Jackson’s made sure to keep the most valuable stake of the ATV catalog. His 50% ATV Catalog had higher incomes compared with Sony’s other half. There’s an article in the operating agreement, specifying that Sony had to pay to MJ “all losses and various reimbursements while the two companies started making money together.” Did they comply with their obligations? I strongly doubt it, and by listening to MJ words, they didn’t pay the due.

From Court documents, it is clear that already in 2002, MJ wanted to take back from Sony the licensing distribution of his master recording catalog and not to renew his recording contract with them. And he was actively looking for a financial solution to take back from Sony’s at least his stake in ATV. Sony balked. And it was the beginning of a whole series of shading episodes to destabilize his finances, a peculiarity which distinguished Michael Jackson during the last decade of his life.

While seeking for solutions, he stumbled across a bunch of adventurers. These typical leeches gravitated in the undergrowth of political and financial environments. Among others, they include Marc Schaffel, Ronald Konitzer Rabbi “Shmuley” Boteach, and James Meiskin. Jackson met Meiskin, a commercial real estate broker, at the house of Howard Rubinstein while presenting his new charity with Rabbi Shmuley Boteach. At that time, the media described Meiskin as Jackson’s financial advisor.

Meiskin himself spread the news that he had helped set up Jackson’s performance at the Apollo Theatre while trying to line up investors to salvage Jackson’s financial problems. However, the only real connection I found between Meiskin and Jackson is Meiskin’s research for a mansion in South Florida on behalf of Jackson (early 2003). In the lawsuit that Marc Schaffel leveled against Jackson, there’s a statement from Jackson confirming that, in April 2003, he had instructed his accountant Alan Witman to transfer a deposit for a house. However, in October 2003, Meiskin was arrested along with his attorney Samuel Gen on charges of extortion. I would like to dispel an internet myth about the discovery of Jackson’s name linked to Samuel Gen on Epstein’s black book. Gen was never Michael Jackson’s lawyer in any form or occasion.

MJ’s name appearing in Epstein’s book might come from the grapevine of those who mention big names to impress people. This infamous book is also obsolete. It contains email addresses from portals that no longer exist, Epstein’s own phone numbers, hotels, restaurants, and contacts of representatives places. It looks like an old business agenda of general contacts met at parties or meetings. A superficial tool. Nothing useful for any criminal discovery. Since countless notable names are included, the mention (but not the contacts) of a worldwide personality like Jackson is not surprising. But was Gen Jackson’s lawyer? In short, no. The only mention of Samuel Gen as Jackson’s lawyer comes from a 2012 article by a freelance blogger, David Musk, who wrote one of the many improbable stories about Michael Jackson. The story is about Musk’s meeting with Denise Rich in Jackson’s hotel suite in New York. The article is mostly focused on the sarcastic and relentless body-shaming of Jackson. Given how the content could have been subjected to a defamation lawsuit, Musk would not have been able to write such claims while Jackson was alive. While I read (with much disgust) the tons of offenses leveled at a human being, I found the following passage:

“We all saw Michael Jackson on August 31st, 2001, when NASDAQ officials presented him with an original 1934 Shirley Temple’s poster, while staffers rolled out a vanilla birthday cake lined with strawberries and sang “Happy Birthday.”

There are two options here: either Musk is giving an offensive and disrespectful fictional narrative or Jackson took the piss (which wouldn’t surprise me).

All of the above seems to debunk the preconception that someone’s name listed into anyone’s contact book has their reputation compromised.

 

Sources: 

https://musictechpolicy.com http://www.techdirt.com   https://music.asu.edu/  

Vibe Mag 2003

 

 

 

 

JACKSON’ JOINT VENTURES, MASTER RECORDING AND “SONY SUCKS”

 

The above excerpt represents the beginning of Jackson’s Invincible album promotion that meant the opening of the poisonous Pandora’s box between Sony Music and Michael Jackson Corp.

  • An amendment in Sony ATV Operating Agreement dated 2000 related to section 7.9, the Put Option. The value has been increased by 45 million dollars, bringing the new loan facility with Bank Of America to 185 million dollars, and it states that if MJ had delivered the new album by June 2001, the loan raises to 200 million dollars.

While analyzing this document, it comes clear that Michael Jackson’s recording artist contract undergone several modifications after 1991. You can read in full here on the blog dedicated page.

The below screenshot is from journalist Zack O’Malley Greenburg book:

Michael Jackson, Inc.

Greensburg implies Michael took his time to release the album because he thought his contract with Sony was on his way to expire. But between MJ and Sony, there was a group of companies all linked together through the Joint & Venture set up in 1991, which included an exclusive distribution agreement of his catalog and Sony/ATV set up in 1995. Moral of the story: around 2000, MJ learned that due to the fine print and various review of contract clauses, the date his licenses were to be reverted to him proved to be many years away, apparently, in July of 2009. In short, he would not get the distribution of his catalog that would allow him to promote his old material how he liked and prevent Sony from getting their cut the profit. Michael said he had never been informed about these added clauses.

And to make the matter worse, Sony began to limit Michael creative control over the production, promotion, and budget; something never happened before, or at least not so blatantly. And Michael could not obtain the advance he required against future sales.

MJ and Branca had a short business separation, about three years, be back working together in 1993. In court documents, I found the amendments list of MJ’s contracts with Sony, and I noticed that after 1994 there is another amendment to his recording agreement in 1995 and another one in 1996. Mr. Branca’s services were back into force at that time. How not pay attention to such crucial matter while examining the documents for the constitution of Sony/ATV? Also, inside the documents related to their employment relationships final closure in 2006, I found the list of all the contents of the MIJAC catalog administered by Branca’s law firm, regularly issuing distribution licenses at Sony request. I could easily dismiss Mr. Branca’s work by stating that he is a distracted lawyer, a lousy lawyer. Still, he’s known as one of the brighter and smart lawyers of the entertainment industry. It feels a sort of intentional careless towards his client.

Coming back to mid-2001, news of MJ recording a new album it spread around the world along with the low blows that Sony lashed against Michael Jackson project behind the scene.

The first example of artist control limitation was Unbreakable that MJ wanted as first release single supported by a spectacular short film. But Sony Music said “NO” and told him that the first single to be released would have to be You Rock My World. Michael never used on being told NO, but his hands were tied. He had to rush the concept for the video clip of “You Rock My World” sort out the production.

I want to bring attention to a specific document dated July 15th, 2001, which is one of the many amendments to the original agreement between Sony Music and Michael Jackson companies.  Keep in mind that everything is heading to the original CBS recording artist and the relevant changes and renewal – and the joint-venture between them dated January 01st, 1991.

  • It resolves an issue related to the Foreign Royalty. The agreement states that upon the release of the studio album (which I assume it would have been Invincible)  and any re-issued version of the catalog controlled by the Jackson Recordings Division (audios, phonograph records) derived from master recordings, the royalties percentage was increased from 23% to 25% with effect from January 01st, 2002. In a few words, there was a rise in royalties rate outside the USA.

MJ knew very well that his sales were good worldwide except the USA. And for a guy targeted by the press as ruined and irreversibly in debt with his record company, it was not such lousy move renegotiate his foreign percentage. It shows he was very much aware of the leverage he had on Sony, and he used it for his benefit.

  • There was a partial audit settlement: Sony Music recognized and accredited $3 million to MJJP’s royalty account. The audit period in controversy was through December 31st, 1999, and there was still pending other claims on Sony Music for the wrong payment of mechanical royalties.

  • MJ returned the equipment listed under the “End User Sales Agreement” dated August 20th, 1995, and Sony had to accredit $300,000 to MJJP’s royalties account.

  • There was another change in the definitions of the MJ Recording Agreement.

As already mentioned, the MJ recording artist agreement is always sealed, which doesn’t surprise me given the sensible and reserved content. I was still able to understand how the changes evolved, thanks to the many excerpts found in the testimonies exhibit. But I want to emphasize that pieces of the puzzle are missing. And mine is logical speculation reinforced by having read court documents and many books talking about the music industry business commenting on some of the definitions of his agreement with Sony.

So, it can be confirmed that – just before the release of Invincible – MJ expressed the desire to end the recording contract with them and no longer produce albums under the Sony label. The return of the equipment is an excellent reason to support this idea.

Michael Jackson’s decision to leave Sony Music, and taking his profits with him, would have been an economic disaster for an already in dire straits company as it was Sony at that time. (who ‘s willing to read Sony financial conditions at that time can read the links about Sony at the bottom of this article). That’s the only rational reason for Sony’s to sabotage the Invincible promotion. They initiated the friction and manipulated the situation and public perception to make MJ look like a problematic artist, so when his contract was fulfilled, no other label would pick him up. If that happened, he would have had three options: renegotiate a deal with Sony, sell his catalog or retire. And they were banking on the middle one. If MJ could not earn enough royalties, he would have had severe trouble with Bank of America, and consequently, it would have further problems finding other sources of loan investments.

Another unusual setback was “You rock my world” leak to two US radio stations. The song was played on August 17th, by both stations every two hours. The day after Jackson’s record label, Epic Records called the program director Frankie Blue and asked him to stop. Blue, never said how he got the single. Rumors say that the entire album was leaked and available on the Sony Russian website over a month before the official worldwide release, but it cannot be verified.

And on August 20th, an amendment to section 7.9 of the Sony ATV Operational agreement postponing the album release date.

Meanwhile, MJ started the album promotion. 

Opening up the NASDAQ stock market.

At the Metropolitan Opera House in New York appeared on stage as part of ‘NSync’s performance of the song “Pop” within the MTV Video Music.

Then the Michael Jackson: 30th Anniversary Celebration memorable shows at Madison Square Garden. On November 13, the show collected an 18 percent share of the TV audience. The show drew a record of 25.7 million USA viewers on CBS, and You Rock My World bang the US Billboard Charts at #10 – without been available commercially jet.

During the same period, MJ recorded the single What More Can I Give to raise money for the victims’ families and survivors of the terrorist attacks in New York. At the time of the attack, MJ stated that he hoped to raise $50 million for those affected and that that the recording would be released as soon as possible. The song failed to gain an official release for reasons that surely are NOT what media, producers, and Sony told at that time. Later different allegations arose as to who was to blame, which will be detailed later on this site.

What transpired publicly was CBS taking action to Jackson’s representatives to force ABC to remove MJ’s performance on the benefit show United We Stand to protect their exclusivity agreement for the upcoming special drawn from the 30th-anniversary concerts to be broadcasted on their channel.

In substance, they made an issue for the participation to a single charity show, because of an they show to be released ten days later.
CBS feared a risk of overexposing that might compromise a special? Hey….they were talking of Michael Jackson, a man who had his image overexposed since he was five, and people never got tired to see it.

One thing that is already certain was ABC had to condense the show. The much advertised Jackson’s solo performance of Man in the Mirror was removed and during the television broadcast, there was no mention of Jackson’s name, and he was never featured in the foreground. No footage of Man in the Mirror performance was released, and limited photos exist. But the full concert was broadcast live on National Radios in the United States.

Originally Michael performed two songs; “What more can I give” and “Man in the mirror.” After listening to the performance, the Radio DJ’s proclaimed themselves fans and apologized for any MJ jokes in the past. You can listen to the audio of “Man in the Mirror”:

 

But there is more; MEDIA demolished the show for the many technical problems. And who got the fault? Michael Jackson, naturally! The concert has been called “The worst benefit concert ever, describing all the “horrors” that happened during the broadcast, and some journalists had the gut to claim that Jackson did not want to be broadcasted because he did not get paid for it.

Finally, on October 29th, (30th, for the USA), Michael Jackson’s “Invincible” had officially been released. The album was available in five different colors covers for a limited time.

MJ went to New York for the Time Square Virgin Mega Event: fans gathered in the streets surrounding the Virgin Megastore. And although critic reviews were not enthusiastic on November 11th, figures revealed that Invincible had sold 4.4 million copies worldwide.

In the wake of September 11, Michael had decided to release the song Cry as the second single worldwide. Again there were issues with creative control, and Sony denied Michael the video clip he wanted. Michael refused to be in the video clip, the song was released in December and was a monumental failure in the charts.

The third single Butterflies, without video clip or single release in the US, was, however a hit, even with the little promotion the album received. The song made it to the no.1 position on the R & B billboard charts, and no—16 on the hot 100. The release date was pushed back several times, as was the video clip, and then both were later abandoned. The news of this pushed the single out of the top 20, never to return.

During 2002, Michael Jackson was nominated in the category Best R&B/Soul Album, Male for Invincible at the 16th Annual Soul Train Music Awards, and was inducted into the Songwriters Hall of Fame. Michael also won three awards at the 33rd Annual NAACP Image Awards, which took place at the Universal Amphitheatre, Universal City, CA. But thanks to frivolous lawsuits like Myung-ho Lee running almost every day to the rags showing supposed loans, debts and unpaid pharmacy invoices or ex-wife Rowe going to a private judge to have her parental rights for the two children, his name was always in the lowlife gossip timelines, instead than be on magazines celebrating his artistic achievements.

On March 29th Michael Jackson made an exceptional live performance at the American Bandstand 50th Anniversary TV special.

Michael’s album, which had managed to debut at no.1, was losing ground fast and tension with Sony Music mounted. They refused to release What More Can I Give, and they set a miserable budget for the video of Unbreakable giving the work to director David Meyers. Michael was not satisfied with the project and decided to finance & produce the video by himself. Sony asked MJ to go on the world Tour to promote himself. But when he was about to start shooting the Unbreakable short film, Sony announced their decision to cease the promotion of Invincible. By the end of March, Sony Music deleted Michael Jackson album as it was not considered a priority only five months after its release.

April 21st, Michael Jackson performed “Dangerous” at the American Bandstand 50th Anniversary TV special in Pasadena, California. The show was aired on May 05th on the ABC network.

On 24th gave a rare performance to launch a campaign Democratic National Committee’s Every Vote Counts. An enthusiastic crowd greeted Jackson at the Apollo Theatre in Harlem, New York. The concert raised almost $3m for the Democratic National Committee.

On May 15, 2002, comes The Mirror with this HEADLINE:

IT’S WAR WORLD EXCLUSIVE: MICHAEL JACKSON BREAKS HIS SILENCE IN HIS FEUD WITH RECORD BOSS

And shortly after the news totally changed and culminated with Michael paraded in New York City and in London on a Double Decker holding up big posters with written “Sony Suck” and “Sony Kill The Music”.

From there, Media had gone crazy writing about everything they got on MJ/Sony subject without an ounce of a clue. They were just reporting the bullshit that “industry insiders” were referring to them. But this one is the Pearl of the 2002: Sony refused to renew Michael Jackson’s contract and spent 25 million promotional campaign; money that went up in smoke by MJ refusal to go on tour.

Even Michael Jackson own Estate appeared comfortable with the old gossip. And considering the inaccuracy of content in that specific document (the pre-trial memorandum on the case with IRS), I believe that this one, together with many others, has as a primary source the tabloid narratives.

Besides the fact that the “Invincible” album contains 16 songs and not 14, I find the comments concerning the sales untrue and tasteless. But what don’t you do to avoid paying taxes, huh?

Mr. Branca himself, contradicted the lame memorandum during his deposition of February 7, 2017

Here Mr. Branca omits the fact that MJ grown suspicious of him because his law firm was also giving service to Sony, and he did not even wait for the full results of an investigation to send him a termination letter on February 2nd, 2002 resulting in his resignation from the MJ/ATV Trust. However, he said the truth concerning Michael Jackson contract recording agreement.

Because of the 1991 Joint Venture that included the exclusive license for the distribution of Michael Jackson master’s recording, and all his intellectual property, Sony found his way to remained inseparable from his business. What was the catch? It might have been the thin print, or they cheated by slipping the expiring dates between one amendment and the other. In any case, only with November 2003 the terms changed, giving MJ the freedom he wanted. Mr. Branca also confirmed it:

Here there’s another interesting word which Sony loved at the Invincible time to defend their decision to put the word end to the album: advance…and how do generally work the “ADVANCES” in an exclusive recording contract with a records label? And how do they worked with the MJ/Sony Venturer?

Stay with me…

 

Sources:

 

MICHAEL JACKSON & SONY DIS – AGREEMENTS

 To better figure out Michael Jackson’s relationship with Sony Music, we have to pass through how artists’ contracts with record labels evolved. 

The record companies ripped off the musician, songwriters, and producers from the ’20s through the ’70s. Artists signed contracts in terms of one year with an option of further four. And recording contracts were possibly intentionally complicated and non-transparent. Artists thought to have a five-year contract with the record company, but it was not the case. The record company didn’t have to pick up the second year. There was a provision ( a very tiny one, the typical one nobody read) stated that during that contract year, the record company had the right to record one album on the artist and at their choice to record a second one. The second album had to be delivered within that one year, and the time would have been extended until completion.

 With the coming of MTV, videos became popular, and record companies decided that an artist, instead of releasing an album per year, could do one every two or three. It was becoming fashionable to make a video on each single and make three or four singles on an album over two years. The album sales continued over two years, and the related videos broadcasted. In the ’90s, despite some lawsuits brought up to record companies and widespread discontent, things did not change: the year plus became period. It meant that the first period would be the time it took to record and release an album plus some months, to let the record companies check the album reception in the marketplace before picking up the option for the second period. And during each period, the artist was required to record one album. So, there was no real difference between the two things. Artists were still bound with very long contracts.

The most flagrant example was Prince that in 1993 stopped going by his name and just went by a symbol. Prince was the first vocal example of what was happening between artists and record companies. He participated on the Today Show and had “slave” written on his face.

He felt that record companies signed artists with extended agreements and were treating them like slaves due to the exclusive rights to their recording services and for much too long time. His public behavior was tentative to raise awareness in the artist’s community and start advocating for more fairness, more transparency!

Credit: Photo by Brian Rasic / Rex Features  PRINCE

His first contract with Warner Brothers Records dated 1977 and didn’t end until he negotiated a settlement in 1995 and still owing two albums to them. Prince then was able to release one single, “The Most Beautiful Girl in the World,” through an independent distributor, Al Bell’s Bellmark Records. That record became very successful. It was what the industry calls a “one-off.” After he ended the contract with Warner Brothers Records, Prince became the one artist who could have one-offs with various major record labels. In short, he could have released albums with different companies each time. Very few artists could do that, but his example gave the possibility of that happening.

That gives some kind of an idea of the length of the contracts and why artists were upset about provisions that required them to stay with one company for such an extended period and possibly their whole career.

It was also one of the reasons why Michael Jackson could not change the record company in the ’90. Though the seven years had elapsed from the first agreement, his contract expired, and California law could have been on his side,  Michael still owed CBS 4 more albums. And CBS could have had sued him for damages and ask an average compensation for loss of profit, taking into account the sale figures of Off the wall, Thriller and Bad.  Too much money even for someone like David Geffen.

The exclusive recording services mean that whoever makes that mechanical reproduction and distributes it – usually the record company – has to get a license for the mechanical reproduction from the publisher of that particular song. Publishers do that by issuing licenses to record companies to be paid the mechanical royalty for sale and distribution of the recording of their songs.

But usually, the transference of ownership clauses sound like this:

A “master license deal” means the label takes 15-25% of all licensing earnings. It secures the master license revenue to the record company while allowing the artist to retain the majority revenue and the control of his master recordings, free to take it away from the record label and get into the distribution agreement with another or even sell it.

But contract negotiation key it always comes down to the artist leverage. If the artist has sold many products, if he is very popular and become an essential asset to the record company, he’s in a position to negotiate better terms. That’s how the record companies dealt with artists.

MJ surrounded himself with a bunch of famous lawyers in double-breasted suits ad had much leverage. Right? Well, apparently, not anymore.

Michael Jackson lawyers negotiated the 1991 renewal recording contract in the new fashion offered by major labels at that time: sign a six-album deal. And usually, a smart attorney could negotiate with record companies a lesser number. Nevertheless, it was the record company that had the right to pick up the option. Record companies wanted the freedom to pick up the options because they claimed to invest much money over the artist in recording, producing, marketing, distributing the record. So they wanted the right to try to get profit from the initial investment.
The contract with Sony contained obligations on MJ’s part to deliver finished CD’s and a certain number of required songs. Sony also had certain rights to repackage Jackson’s back catalog. Their contractual power was forceful but not absolute, and they needed MJ’s agreement for any greatest hits compilation released. So, Sony had to keep Michael Jackson happy.

You can read the loudly-trumpeted contract details delivered by Sony to the press here: https://www.latimes.com/la-me-jacksontimeline-sony-story.html#page=1

Since Motown Records times, MJ’s relationship with the record label had always friendly. Jackson and CBS CEO Walter Yetnikoff had been associated and closed for years. In some way, due to his leverage and the friendship with the executive, he was always able to do pretty much whatever he wanted.

While under the CBS contract, there are several examples of MJ’s behavior: the ET production where he sang the storybook of the movie. It resulted in a lawsuit between Universal and CBS. Or Captain EO, with Yetnikoff, that brokered a half-baked solution of partial promotion with Disney that satisfied nobody. And even with Sony at the beginning was very good. MJ and Sony founder, Akio Morita had a real warm relationship.
    cbs-sued

After the Chandler story, rumors say that Sony wanted to release a Jackson’s greatest hits, while MJJ insisted on a batch of new songs. The “History” album appears to be the compromise of it. After much delays on June 15, 1995, Michael Jackson’s long-awaited new album, HIStory, was released around the world. Five days later, it entered the US Billboard LP Charts at number one, like in many other countries around the world. “Scream” and “You Are Not Alone,” went on to create chart history worldwide. But something was already wrong behind the curtain.

On November 4, 1995, Michael performed for the first time “Hearth Song.” at the European show, Wetten Dass…? in Germany. The song was released throughout the world, except for the USA. Besides the long wait for the singles releases, MJ rose up in no uncertain terms against Sony’s refusal to release Earth Song in the US, holding Sony responsible for bad marketing choices that got the record to fall off US charts. To recover the damage and try to improve the sales, Sony gave to Radio stations promo copies of the song, backed with mixes of “This Time Around.” It was a spectacular failure of Sony USA, and American fans did not forgive them for not allowing the American public to decide whether or not the song was a top ten material. Earth Song video, became MTV America’s most requested video, usually unheard of for a song that hasn’t been released. Not to mention the mess raised by the Jewish community following protests asserting the record was anti-Semitic, which brought Michael Jackson to change the lyrics to the song They Don’t Care About Us and make public excuses.

On March 19, 1996, at a press conference held in Paris, MJ announced plans for his new company, Kingdom Entertainment, jointly owned with Saudi Prince, Al-Walid bin Talal bin Abdul Aziz al-Saoud.

The company was founded aimed to use the film deals that MJ had with Sony/Columbia. Instead, Ghosts was presented in its first version, initially exclusively in the United States between 25 and 31 October 1996, together with copies of the film The Eye of Evil (Stephen King’s Thinner) only in some selected cinemas owned by Sony. Ghosts short film distribution, and many other projects with Columbia Pictures did not go in the right way.

MJ took money out of his pockets, promoting his latest album, “HIStory” and financing the related videos. According to insiders, Sony advanced Jackson at least 2 million dollars for music videos supporting the marketing drive, but he spent at least 9 million dollars more of his own.

“HIStory” is the most crucial album in Michael’s career, after what he had to go through in 1993. And it’s without a doubt the most personal. Michael told his story about the false allegations, the lies, the greedy people, tabloid, and Jackson’s case. The album proved why Michael was the world’s greatest entertainer.

But Michael Jackson’s dispute with Sony Music started long before the “Invincible” production. That had only been the tip of the iceberg.

In 1997, only two years after ‘HIStory,’ Sony released the album Blood on the Dance Floor – HIStory in the mix. Critics called it a hybrid record. Before recording started, Sony, through exec Tommy Mottola invoked its right to ten new songs knowing that Jackson, who was already experimenting with a different attitude from his record company than he had enjoyed in the past, would refuse.

And sure enough, MJ did not agree with Sony’s interpretation of their contract. After negotiations with Jackson’s advisors, the compromise resulted in a CD containing five new songs plus eight remixes of tracks from ‘HIStory.’ However, what seems to be a usual negotiation process was actually part of the campaign to manipulate Jackson in the interests of Sony. Usually, the benefits of the artist and the record label coincide, or they should. In the case of Jackson and Sony, they were now massively divergent.

And the release of Blood on the Dance Floor was a mistake even if it proved the turning point in his professional career.
The new generation was reinventing American pop music through hip-hop and rap. MJ was going with this flow with his usual pioneering approach. In fact, by the end of 1997, Michael Jackson began working on an entirely new set of songs.

It was the end of May 2001, when Michael Jackson finished recording what would become his latest album Invincible: his last studio album with unreleased material.

The exact content of Michael Jackson’s recording contract with Sony Music is unknown; I never found it in any lawsuit exhibit up to now. But I spent a lot of time setting up a timeline based on other documents linked with the recording contract to have gained enough knowledge of rights and obligations on both of the parties convey.

The release of the album coincided with a dispute between him and Sony Music Entertainment. The conflict originated from Jackson’s inability to obtain the masters to his records, even though he believed that he possessed this right in his contract with Sony.
But there’s an explanation for everything, and sure enough, it does not come from what Media divulged.

Stay with me…

Sources:

  • John Kellogg, Music Business Second Legal Aspects
  • Digital Technology and the Allocation of Ownership in the Music Industry. The Centre for Market and Public Organisation 09/228, Department of Economics, University of Bristol.
  • Transaction Costs Determinants of “Unfair” Contractual Arrangements. American, Economic Review, Klein B.
  • https://futureofmusic.org/article/article/major-label-contract-clause-critique
  • Linton Guest: The trial of Michael Jackson 2006

MJ’s ADVISER MYUNG-HO LEE, AND HIS ALLIANCE WITH MAUREEN ORTH

Maureen Orth is the fraudulent journalist that reported false stories on MJ for most of her career. She also implied that Michael Jackson intoxicated a 13-year-old boy, Richard Matsuura, with wine served in soda cans. Matsuura went on TV denouncing the story as completely false. And the father corroborated the son’s statements. The place these reports deserve is a dedicated parodies site of fake news. And it’s still Maureen Orts, the sloppy researcher that together with FX and Netflix is currently being sued for defamation by the Versace family over her portrayal of Versace in a show.

Among the vultures that surrounded Michael Jackson for most of his life, Myung-Ho Lee turned out as one of the central figures regarding financial malpractice against MJ. History tells they met in Seoul in the fall of 1996. But Mr. Lee’s first documented presence in the commercial MJ universe appears on a company called Jackson International LLC which shows him as “President” in 1998. With the resignation of Mr. Tarak Ben Ammar from the co-trustee position in the MJ/ATV trust on January 16, 1998, Mr. Lee’s fill the hole on December 23, 1998, just in time to co-sign a loan of 60 million over an already open line with the other co-trustee Mr. Branca.

On this occasion, Bank of America required MJ to put his 50% of Sony/ATV Music Publishing as collateral. And wanted Sony to agree on the loan as co-guarantor, being the other partner in the company. Sony/ATV officialized the bank request with an amendment in the Operating Agreement.

It consisted of Sony’s obligation to pay off the loan Capital to the bank only in case of MJ defaulted to reimburse. It recites that from December 1, 2005, and on or before February 28, 2006, MJ could require the Sony Music Publishing Members to purchase his company interests for a purchase price of $140,000,000 (the “Put Price”). If MJ did not exercise the Put Option on or before March 1, 2006, Sony Music Publishing could require to MJ, from March 1th, 2006 to May 31, 2006, to purchase their SMP Interest in the Company (Sony/ATV) for a purchase price equal to the Put Price.

On April 5, 1999, MJ announced an investment of rumored 30 million dollars in Tickets.com Inc. partnered with other companies through his Jackson International LLC. He owned 20% of Ticket.com for a short period. Right after this investment, Ticket.com’s losses started to grow. MJ likely lost or sold his shares. In brief: he lost money.

On September 29, 1999, a new credit line facility of 30 million was put in place using as collateral the trust MJPT, which included among others his catalog MIJAC. As usual, the security agreement was signed by Lee and Branca, and additionally, there was a continuing, unconditional guarantee provided by MJ.

On July 1, 2000, it was reported that MJ invested in HollywoodTicket.com through Jackson International LLC company. The service was designed to give space to young movie artists and give the fans a chance to get closer to their idols.

The website got blank in early 2001, and managers of the project sued MJ for alleged unpaid bills. Both the site and the company behind had been shut down in January 2003.

In December 2000, a third increase of 45 million dollars guaranteed by the MJ/ATV trust at the rate of 7.14 % per annum. Signature by Lee/Branca.

MJ fired Lee in August 2001 to rehire him almost immediately. It’s unclear when they separate their ways for good, but it occurred sometime between fall 2001 and the filing of Lee’s lawsuit in April 2002.

Lee sued MJ alleging had signed a document to pay him 12 million of arrears. Court documents immediately available to the press caused the diffusion of some specific facts of Jackson’s private life.

In December 2002, MJ lawyers presented a complaint against Lee’s claim. In March of the same year, the judge ruled in favor of Jackson, who could go ahead to countersue Lee for breach of contracts and fraud. In an affidavit, Jackson denied that he signed the deal, saying he was “not even in Los Angeles” that day. Jackson alleged that someone forged his name on the agreement Lee introduced to the Court. He added to have paid Lee for his services 3.5 million, but he wanted more. MJ alleged that Mr. Lee stole millions from him. Jackson lawyers asked the judge to toss away the suit.

The 140 million dollar loan hoax had ignited the imagination of journalists to the point of messing up a growing proliferation of millions while divulging a story much closer to the multiplying of loaves and fishes described in the Gospel than fair and informative reports. Except the situation was unpleasant anyway, I guess MJ would have had much fun reading it.

https://www.foxnews.com/story/hard-numbers-show-jacko-in-constant-financial-peril

https://nypost.com/2002/07/27/king-of-debt-suit-jacko-owes-200m/

Here the mess transpired in the press:  

  • Lee alleged claimed having arranged a 140 million dollars loan for Jackson in 1998 using as collateral “the complete catalog of Beatles’ songs.”

In reality, MJ already had the Beatles catalog since 1985. And the loan was far from being a new one. And it was not organized by Myung-Ho Lee but by “the only and the one” John Branca. Michael Jackson was a well-known client of the bank, having an escrow account where EMI credited the catalogs royalties. A credit facility with NationsBank, then absorbed by Bank of America, was already in place since 1993 and guaranteed by some of Michael’s assets. The 140 million of December 23, 1998, so much trumpeted by Media was nothing than a restated and consolidated Loan Agreement with the 90 million loan facility already in place. In short, there was an additional 60 million disbursement. The expiring date of the loan remained December 20, 2005.

It is common practice to open, close and expands credit facilities when you have commercial activities. When MJ expanded his operations and purchased the Northern song’s publishing in 1985, he sold a small catalog of about 6 million and borrowed something like 40 million dollars from Chemical Bank.

His companies always worked with banks, credit lines, loans, direct or indirect. Michael Jackson was a brand, a creator of services in the entertainment world, a music industry producer, a marketing genius. He was an International Corporation. I’m not going to list the number of companies he headed, directly and indirectly, the web has all these lists. What I care to point out is that when it came to business, MJ was not the sensitive, fragile, and the childlike guy showed in public.

Thanks to Chandler extortion, Michael’s life changed sharply. Countless of frivolous litigations arrived on his desk (from alleged false molestations claims to crazy women allegedly pregnant or with an already done child by him). I think many of us underestimate how desperate people can be. The entertainment industry is rife with beggars and hangers-on who leech themselves to a celebrity looking for power, fame, money, and opportunities. MJ tried to contain the whole lousy publicity, paying settlements and tremendous fees to lawyers. He was billed tens of thousands every month by the PR consultants and advisors.

MJJ Productions and Kingdom Entertainment, produced the short film GHOSTS coming from an old project of 1993 the “Addams Family Values.” Michael Jackson recorded a horror-themed song for Addams Family Values and filmed a music video to promote it, he invested a large amount of money in the project, which was then shelved in the wake of the Chandler child molestation allegations.

GHOSTS  “entire project cost Michael a reported 15 million straight out of his pockets, but he wouldn’t see much of a financial return. Television stations were offered the film as part of an hour-long special but were put off by the high price”.

  • Lee alleged that in the middle of 1999 procured for Michael a $30 million line of credit.

In reality, in February 1999, the promissory note of 140 million been reinstated per the same amount. It means that interests and fees been paid regularly, and the reinstatement was due to amend company documents. The applicable interest rate of the loan was 6.16 % per annum, provided that any overdue amount on principal, interest, and fee was payable on demand, at a rate equal of 2% per annum. Signature: Lee/Branca. And on September 29, 1999, Bank of America opened a new credit line facility of 30 million that was put in place using as collateral the trust containing MIJAC. As usual, the security agreement signed by Lee and Branca, and there is a continuing and unconditional guarantee signed by MJ.

  • In October 2000, Lee alleged to be able to raise the original loan by 60 million — with the provision that Jackson uses 30 million dollars of the increase to pay off the credit line, which was now due.

In reality, in December 2000, there a third loan over the MJ/ATV Trust of 45 million at 7.14 % per annum, provided any overdue amount on principal, interest, fee, payable on demand, at a rate equal of 2% per annum. Signature: Lee/Branca.

Once Myung-Ho Leech (sorry Lee) was fired for fraud and incompetence MJ liquidity shortage is evident.

On September 30, 2002, there’s reinstatement of both loans with the relevant security agreement. (which mean that all matured interests and fees were paid, and the principal amount reinstated) and a loan increase of 11.5 million under the MJ/ATV facility. What ‘s weird about this third loan? That the only purpose was to fund the cash collateral account as per the loan contract, pay the amendment fees, and the remainder to finance MJ’s professional and personal expenses.

Most of MJ royalties and incomes derived by his compositions and the licensing of the publishing catalogs were linked as a collateral of the various investments he went through his career. Michael Jackson earning estimation was around 20 to 35 million annually. Despite records sales reduction and losses in doubtful and insecure transactions, he could still manage the coverage of the bank interests and fees and deal with his life. The 11.5 million borrowed look as a Sony/ATV advance guaranteed distribution not received from Sony due to one of the many priorities at the company benefits. MJ was entangled with them in excess, and they had control over most of his assets and money.

The roughly 115 million dollars Sony had to pay to reach the parity on Sony/ATV shares seem to have been settled in several installments over the years. Most of the money remained in the company books to capitalize on the company and to serve operational costs. That’s was the situation Michael Jackson was at that point.

Meanwhile, South Korean Myung-Ho Lee had become Maureen Orth “adviser,” a woman representing the definition of trash journalism, as her sole competitor is Diane Dimond. Lee told Orth an incredible number of stories. Among many, one was about Jackson cleansing himself with sheep’s blood. Another, that Jackson sent Lee in Switzerland, to wire 150,000 dollars to an African witch doctor named Baba to perform a “voodoo ritual” intended to curse twenty-five people of a Jackson’s alleged “enemies list.” Orth spared no details such as Baba’s curses had been sealed with the blood of forty-two ritually sacrificed cows.

In April 2003, Orth targeted MJ writing the article on Vanity Fair magazine. Being a magazine of international resonance, and the article content highly ridiculous, news had a full day of laughing. (at that time).

What is more incredible is that her shit binge was once again rehashed the moment Leaving Neverland mockumentary appeared.

Despite Jackson nearly had Lee’s lawsuit thrown out, the Korean attorneys successfully scheduled a deposition of Michael Jackson in June 2003, where the singer’s finances would have been fully explored. It was an obvious tactic to scare the Jackson camp into settling before the expensive trial started. And it worked: the day before he was to be questioned, he ended out of court Lee lawsuit. A predictable Hollywood story.

Knowing how MJ used to keep his private life out of tabloid headlines, what Myung-Ho Lee delivered to the press, it was nothing also that pure poisoned retaliation aiming to extort some extra money to him.

Had he a spending habit? Who wouldn’t have got it, when earning for millions of dollars since he was a child? Then note that “burn” 90 million dollars in 4 years means 22.5 million per year. And Michael Jackson was a Corp, giving jobs to hundreds of people. There’s nothing sensational in the amount when you read the way money was employed.

The group of floaty vultures around him are guilties. Most of these former advisors are sitting on their ass, counting the millions of dollars they made and still make on his dead body. Whatever it turns on Michael Jackson’s financial issues, his former advisors, are far more than outrageous individuals.

Sources:

Avram vs Jackson Case no. 1007622 November 4, 2002 pacermonitor.com/case/16787632/Prescient Acquisition Group, Inc v MJ Publishing Trust et al 2006-2008Joe Jackson objection documents case no. bp 117321 November 10,2009