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Jackson's financial troubles detailed
Defense challenges witness over extent of singer's debt
By DAWN HOBBS
NEWS-PRESS STAFF WRITER
Michael Jackson was $224 million in debt in early 2003 and was annually spending up to $30 million more than he earned, according to a financial expert who testified at the entertainer's child molestation trial on Tuesday.
John Duross O'Bryan, who examined Mr. Jackson's finances for the prosecution, testified that the entertainer's overspending caused his debt to surge from $115 million in 2000 to $224 million in February 2003.
"The evidence shows he's spending $20 to $30 million more than he's making annually," Mr. O'Bryan said.
The testimony is significant because prosecutors are attempting to show Mr. Jackson had a financial motive to orchestrate a conspiracy to abduct, falsely imprison and extort the accuser and his family.
A British documentary that aired in February 2003 generated bad publicity that threatened Mr. Jackson's career and businesses, the prosecutors allege. The entertainer's associates held the family captive while they made a new video that would portray Mr. Jackson in a positive light, prosecutors say.
The defense vigorously challenged Mr. O'Bryan's analysis. The prosecution expert did not take into account all of Mr. Jackson's assets, lead defense lawyer Thomas Mesereau said.
"If Mr. Jackson sold his interest in March 2003 in the Sony-ATV joint venture, he could have paid off his ($200 million) Bank of America loan, he could have ended up worth more than $200 million after taxes, excluding royalties," Mr. Mesereau said.
The lawyer argued that his client would rather deal with a cash-flow problem than sell his interest in the Sony music catalog because it was potentially lucrative for him to hold onto it. Mr. Jackson purchased the entire catalog, which contains the rights to works of artists including the Beatles, in 1986 for $40 million and in 1995 sold half for $90 million. In 2003, the estimated value of the catalog was $1 billion.
"Today, it's estimated to be worth a couple billion -- and $4 to $5 billion by some," Mr. Mesereau said.
He pointed out that Neverland Valley Ranch was valued at $50 million in 2000 and Mr. Jackson's own catalog of songs had been valued at $128 million in 1998.
But Mr. O'Bryan insisted that the value of Mr. Jackson's assets would not "change my opinion about the liquidity or cash crisis."
Under questioning by Senior Deputy District Attorney Gordon Auchincloss, the financial expert testified that if Mr. Jackson sold his Sony holdings and his own catalog of songs, he would still be in debt after paying back loans and taxes.
Mr. O'Bryan said that according to information he analyzed from a 2002 financial statement, Mr. Jackson's total assets then were $130 million and his total liabilities $415 million, resulting in a negative net worth of $285 million. But, he added, that estimate of the assets was based on purchase price and not market value.
Mr. Jackson's annual expenses of about $20 million include about $5 million in legal and professional fees; $5 million for security and the upkeep of Neverland; $7.5 million for personal items; and $2 million for insurance.
A memo dated Feb. 13, 2003, from International Business Management, the entertainer's consulting firm, stated he had $10.5 million in unpaid bills and $38,000 cash in the bank, Mr. O'Bryan testified.
"Mr. Jackson has never gone bankrupt, has he?" Mr. Mesereau asked.
"Not to my knowledge," Mr. O'Bryan answered.
Prosecutors claim the British documentary "Living with Michael Jackson" threatened the entertainer's business, forcing him to compile the rebuttal, "Take Two: The Footage They Wouldn't Show You."
In the British documentary, Mr. Jackson is seen holding hands with the boy who would become his accuser as he states he innocently shares his bed with children.
Mr. Mesereau asked if the rebuttal video, which was expected to generate about $7 million, would significantly improve Mr. Jackson's finances.
"No, it would not," Mr. O'Bryan answered.
"It wouldn't be worth committing a crime over $7 million if that were the situation, would it?" Mr. Mesereau asked sarcastically before the prosecutor objected.
The prosecution paid Mr. O'Bryan $385 per hour to conduct the financial analysis, estimated to have taken up to 30 hours to complete
Mr. Jackson has pleaded not guilty to child molestation, administering alcohol to commit a felony and conspiracy. The prosecution is expected to complete its case against the entertainer today.
Earlier Tuesday, prosecutors put Sheriff's Sgt. Steve Robel on the stand in an attempt to salvage last week's testimony by Mr. Jackson's ex-wife, Debbie Rowe.
Prosecutors expected Ms. Rowe to testify that Jackson associates scripted her part in the rebuttal video, in which she called her ex-husband a good parent. That testimony could have bolstered the testimony of the accuser's mother who said her interview was scripted. Instead, Ms. Rowe undercut prosecutors by saying that the associates did not tell her what to say. She praised Mr. Jackson from the witness stand.
Santa Barbara County District Attorney Tom Sneddon asked Sgt. Robel about the interview he conducted with Ms. Rowe on March 3, 2004. Sgt. Robel testified that she told him that when they divorced in 1999 they had an agreement that she would only say nice things about him. At no time, he said, did she characterize Mr. Jackson as a good parent or a caring person: "She referred to him as a sociopath and his children as being his possessions."
But when Mr. Mesereau asked him whether he had asked Ms. Rowe if Mr. Jackson was a good person or about his parenting skills, he responded: "I don't recall asking that question."
Rudy Provencio, expected to be one of the final prosecution witnesses, took the stand at the end of the day. He worked with F. Marc Schaffel on a music project for Mr. Jackson. Prosecutors have named Mr. Schaffel as one of five co-conspirators, but have not charged him with a crime. Mr. Provencio is expected to testify today that he overheard a telephone conversation between Mr. Jackson and Mr. Schaffel about the alleged conspiracy.
Dawn Hobbs is also a news analyst for NBC and MSNBC. You may e-mail her at dhobbs@newspress.com.
CASE FILE
IN COURT: A prosecution expert, John Duross O'Bryan, tells jurors that Michael Jackson was $224 million in debt in early 2003 when he allegedly held a family captive at Neverland Valley Ranch.
QUOTE OF THE DAY: "The evidence shows he's spending $20 to $30 million more than he's making annually."
-- Forensic accountant O'Bryan about Mr. Jackson
-- DAWN HOBBS
WHAT'S NEXT
The prosecution is expected to rest its case today after putting on more than 80 witnesses during 10 weeks.
The defense team is expected to ask Judge Rodney Melville to dismiss all charges. If the judge turns down the request, the defense is expected to launch into its case, expected to take six to eight weeks, with a direct attack on prosecution claims that their client has a history of molesting adolescent boys.
"Home Alone" actor Macaulay Culkin, Brett Barnes and Wade Robson, all in their early 20s now, will take the stand to testify nothing improper occurred between them and the entertainer, News-Press sources said.
This testimony will contradict former Neverland Valley employees who testified for the prosecution that they witnessed incidents between the boys and the entertainer in the early 1990s at Neverland.
Mr. Barnes is scheduled to take the stand first, followed by his mother and sister. Mr. Robson, his mother and his sister are expected to be next. Mr. Culkin will likely testify early next week.
-- DAWN HOBBS
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