MICHAEL JACKSON: THE 1998’S MEDIA HOAX ABOUT BANK OF AMERICA LOAN
Among the group of vultures that surrounded Michael Jackson for most of his life, Myung-Ho Lee – considering the short time he acted as a business adviser – turned out as a central figure in Michael Jackson debt affairs. What was spread by Myung-Ho Lee to the press it was nothing also that pure poisoned retaliation aiming to extort some extra money and get the lawyer fees paid by Michael Jackson. That’s why he disclosed MJ accounting to the press and crafted the baseless voodoo tale that only an idiot like Orth’s could collect and sell it as a gospel.
Lee alleged claimed of having arranged a 140 million of dollars loan for Jackson in 1998 using as a collateral “the complete catalog of Beatles’ songs”. First of all, it’s better to clarify that the ATV company was an ensemble of catalogs and “the Beatles songs” catalog was in there.
Who actually organized the facility was “the only and the one” John Branca and in fact, he appears as co-signer of the loan documents as co-trustee with Myung-Ho Lee. And the loan was far away from being new. It was an increase in the principal amount of a lending facility already in place.
- Michael Jackson was an already well-known client of the bank, having an escrow account where EMI used to credit part of the catalogs royalties as mentioned in the article 3 (Capital Contributions, Advances, Capital accounts) of the 1995 Operating Agreement of Sony/ATV.
- A credit facility with NationsBank then absorbed by Bank of America was already in place since 1993, and guaranteed by some of MJ assets.
- The so-called 140 million of December 23, 1998 – so much publicized by an ignorant and mean press – it was nothing else than a restated and consolidated Loan Agreement of a 90 million loan already existing. In simple words, the loan facility was increased of an additional 60 million and the new amount consolidated as principal capital. The expiring date of the loan was December 20, 2005.
It is common practice to open, close and/or expands credit facilities when you have commercial activities. When MJ expanded his activities and in 1985 purchased the ATV companies, he sold a small catalog belonging to him for about 6 million and borrowed something like 40 million of dollars from Chemical Bank. His companies had always credits lines, loans with banks directly or indirectly. Michael Jackson was a brand, a creator of services in the entertainment world, a music industry producer, an international marketing creative. I’m not going to list the number of companies he headed directly and indirectly – the web is full of it – so it’s clear that behind the way the press loved to picture him, especially from 1998 onwards sound a murky and sinister plot.
Fans should remember that after the infamous Chandler story Michael professional life changed sharply. Countless of frivolous litigations arrived on his desk – from alleged provable 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. People who attach themselves to a celebrity, leech off them for money, power, fame, and opportunity. So MJ, while trying to contain the whole bad publicity, had to pay out settlements and tremendous fees to lawyers. He was billed tens of thousands every month by the PR consultants and advisors.
In 1993 Michael Jackson recorded a horror-themed song for Addams Family Values and filmed a music video to promote it, “he had invested a large amount of money in the project, which was shelved in the wake of the child molestation allegations”.
From the ashes of that project, MJ produced the short film GHOSTS. The “entire project cost Michael a reported $ 15 million, 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”.
Most of the music videos of the History album were produced with his own money/credit lines/loans and I have NO documents to check if Sony reimbursed correctly. What I know for sure is that from 1999 Michael started to audit them in order to check his accounts revenues carefully.
Coming back to Myung-Ho Lee, his first official presence in the MJ universe is documented with the constitution of “Jackson International LLC” in summer 1998 he’s nominated as “president”. And regarding his alleged contribution to the loan, documents show that in 1997 Tarak Ben Ammar was still Michael Jackson manager and advisor. He resigned on January 16, 1998, and Mr. Lee official entry as co-trustee in the MJ trusts was on December 23, 1998. Just in time to co-sign the loan with Mr. Branca.
- For the occasion, the bank required MJ additionally put up his portion of Sony/ATV Music Publishing as collateral and consequently there is another change of the MJ trusts structures. Up to that moment, Sony involvement to MJ financing credit facility was limited to a guarantee in favor of the bank issued by Sony Capital on November 1st, 1995 and the Letter of Consent.
- This time Sony got into the game adding a new clause in Article 7 – the Put Option – (7.9) of the Sony/ATV Operating agreement. It consisted in the chance to buy each other at the expiration of the loan. It recited that ” from December 1, 2005, and on or prior to February 28, 2006, MJ could require to the Sony Music Publishing Members to purchase his Interest in the Company 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 for a purchase price equal to the Put Price”. The period it was not casual, it corresponded at the 10th year anniversary of the company wherein any case there was already set in place the “Trigger” procedure allowing the buyout of each other. In this amendment also appeared modification on future annual retributions and contributions aggravated with Libor and spread to be applied to it.
At this point, Bank of America was the official “holder” of the 50% of Michael Jackson Sony/ATV shares and the MIJAC publishing.
A “strange” comment relating the beginning of this loan I found in a deposition of one of MJ lawers:
Although it appears that Michael Jackson was aware of this loan,
there is no sign of his signature and name in the documents. Everything is under the name of the trust and signed by the two trustees: Mr. Lee & Mr. Branca.
- In February 1999 the promissory note of the 140 million loan had been reinstated per the same amount – that’s mean that interests and fees had been paid regularly and the reinstatement was due for an amendment or a documents change-. The applicable interest rate of the loan was 6.16 % per annum, provided however that any overdue amount on principal, interest, fee, payable on demand, at a rate equal of 2% per annum. Signature: Lee/Branca.
- On April 5th, 1999 MJ announced an investment in Tickets.com Inc. He partnered with other companies through his “Jackson International LLC” to back the $30 million funds.
- Jackson International LLC” 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 losing a lot of money.
- It was on 29 September 1999 that a new credit line facility was put in place. This time using as collateral the trust containing MIJAC. As usual, the Security Agreement was signed by Mr. Lee and Mr. Branca and there is a continuing and unconditional guarantee signed by MJ in order to open a credit line of 30 million of dollars.
- On July 1st, 2000 it’s been reported that MJ invested into HollywoodTicket.com through his “Jackson International” company. The service was designed to give space to young movie artists, as well to give the fans a chance to get closer to their idols. The website got blank in early 2001 and that the managers of the project sued MJ for alleged unpaid bills. Both the website and the company behind had been shut down in January 2003.
- In December 2000 there a third loan guaranteed again by the MJ/ATV trust of 45 million at 7.14 % per annum, provided however that any overdue amount on principal, interest, fee, payable on demand, at a rate equal of 2% per annum. Signed as usual by the couple Lee/Branca.
- On September 30, 2002, reinstatement of the loan of 140 and 45 million and a new loan of 11.5 million guaranteed by MJ/ATV Trust.
What ‘s weird about this third loan?
That the sole purpose of these 11.5 million was to fund the cash collateral account as per the loan contract, pay the amendment fees and the remainder to finance MJ professional and personal expenses.
In the light of the above, Michael Jackson words gain a new meaning and confirm he was right by saying that his loan should have been paid with his royalties but the money was not there.
It must be clear that most of MJ royalties and incomes derived from his compositions and the licensing of the publishing catalogs were always linked as a collateral of the various investments he went through his career. That’s how the structure of these loans was.
Michael Jackson earning estimation was around 20 to 35 million annually in the mid ’90. Even with less income due to fewer sales of his records and some money lost into doubtful and insecure transactions, he was up to date with fulfilling his duties with the bank and managing his life. He was very far from being on the brink of bankruptcy, despite Media was writing him off.
To add more, the roughly 115 million of dollars Sony had to pay to him to reach the parity on Sony/ATV shares were paid in different installments in the course of the years and most of the money was kept in the company books to capitalize and to serve operational costs. That’s was the situation Michael Jackson was at that point.
I still wonder what Mr. Branca tried to explain to the judge when he said that “MJ was taking an equalizing amount from Sony ATV and the beauty of Sony Capital guarantee… (*see 1) the structure of the “equalizing amount” was this one:
- Equalizing amoµnt shall mean, at any time, the excess of (A) the cumulative amount paid to MJ pursuant to Section 5, 3 (b) (including the applicable portion (determined pursuant to clause (iv) of Section 5.3(a), if any, of the Initial Avance) in the First Guaranteed Distribution Period plus (y) 50% of the cumulative amount paid to MJ pursuant to section 5.3 (b) in the Second Guaranteed Distribution Period, over (B) the cumulative (amount theretofore paid to the SMP Members on account of the Equalizing Amount pursuant to clause (iv) of Section 5.3. (a) 1, and clause (iv) of Section 5 4, and Section 8 2 (c), in each case to the time of calculation.
In simple words:
Let’s take into consideration just the relevant period of guaranteed distribution that was from October 1, 1995, up to September 30, 2002.
- To the extent of the Excess Cashflow, the First Guaranteed Distribution Period was 13 million of dollars pro rata. (see *2)
- After 1995 should have been 11.5 million of dollars or much lesser due to the fact that it was taken into account the distributions made in preceding Guaranteed Distribution Years pursuant to clause (v) of section 5.3 (a) (1), (see *3)
- The amounts distributed to MJ in the First guaranteed distribution period pursuant Section 5-3 (b) (including the initial advance) had to be not less than $32,500,000. By those 32 million guaranteed on papers, Sony deducted from the initial payment about 1 million that was to reimburse Epic for the production of the “Childhood” video and obliged MJ to put a 16 million advance payment received by EMI (see *4) into the escrow account.
As I said more than once, the impression that MJ was partially paid for the sale of the 50% of the ATV shares while he had been heavily billed is very strong. And still, I wonder what Mr. Branca meant about the Joint-Venture being for MJ a “forced saving“??
How come that a man that in 1995 had to receive 115 million in cash for selling the 50% of his catalogs and had annual revenues of about 25 million of dollars find himself in 2002 to borrow 11 million which five served to pay his accrued loan interests and six to allow the survival his companies and his personal life?
He had a spending habit? Who wouldn’t have got them, being one that earned for most of his life millions of dollars? The real guilties in the tragedy who led him to the other world are the group of financial vultures that have surrounded him the last thirty years. Their bits of advice, their filthy schemes, and their plans have brought him to the brink of bankruptcy. Most of these former advisors are now sitting on their ass counting the millions of dollars they made and still make in fees on his dead body. Whatever it turns Michael Jackson financial issues, his wagon of ex- advisors are far more than outrageous individuals.
( * see 1) Sony Capital guarantee was issued at the time of Sony/ATV Joint- Venture constitution and had a cost debited for MJ account of a sweet amount of 9 million per year.
(*2) This amount represents 1995 and 1996 guaranteed amount of 6.5 million plus the excess cash flow. To all the amounts you have to take off 5% that went straight into Mr. Branca pockets as per their 1994 agreement.
(*3) This is related to the payments due to MJ in accordance with the sale of part of his ATV catalogs to Sony, that “might” have been paid or not, depending on the company priority and at the manager discretion, who could decide to consider the amount as an additional capital contribution instead than distribute to MJ.
(*4) ATV was under contract with EMI for the administration of the catalogs for a period of 5 years that lapsed in 1998.
Making Michael: Inside the Career of Michael Jackson by
Avram vs Jackson Case no. 1007622 November 4, 2002
- Joe Jackson objection documents case no. bp 117321 November 10,2009