To this financier, Michael Jackson is an undervalued asset
Others have tried to revive the onetime pop star’s performing career. Tom Barrack is convinced he’s the ‘caretaker’ to do it.
Tom Barrack is third person on pic
Tom Barrack, a Westside financier who made billions buying and selling distressed properties, flew to Las Vegas in March 2008 to check out a troubled asset. But his target was not a struggling hotel chain or failed bank.
It was Michael Jackson. The world’s bestselling male pop artist was hunkered down with his three children in a dumpy housing compound in an older section of town. At 49, he was awash in nearly $400 million of debt and so frail that he greeted visitors in a wheelchair. The rich international friends who offered him refuge after his 2005 acquittal on molestation charges had fallen away. His Santa Barbara ranch, Neverland, was about to be sold at public auction.
In Jackson, Barrack saw the sort of undervalued asset his private equity firm, Colony Capital, had succeeded with in the past. He wrote a check to save the ranch and placed a call to a friend, conservative business magnate Philip Anschutz, whose holdings include the concert production firm AEG Live.
Fifteen months later, Jackson is living in a Bel-Air mansion and rehearsing for a series of 50 sold-out shows in London’s O2 Arena. The intervention of two billionaires with more experience in the boardroom than the recording studio seems on course to accomplish what a parade of others over the last dozen years could not: getting Jackson back onstage.
His backers envision the London shows as an audition for a career rebirth that could ultimately encompass a three-year world tour, a new album, movies, a Graceland-like museum, musical revues in Las Vegas and Macau, even a “Thriller” casino.
“You are talking about a guy who could make $500 million a year if he puts his mind to it,” Barrack said recently. “There are very few individual artists who are multibillion-dollar businesses. And he is one.”
Others have tried to resurrect Jackson’s career but failed, associates say, because of managerial chaos, backbiting within his inner circle and the singer’s legendary flakiness.
Even as Jackson’s benefactors assemble an all-star team — “High School Musical’s” Kenny Ortega is directing the London concerts — there are hints of discord. Last week, two men identified themselves as the singer’s manager; a month before, a respected accountant who had been handling Jackson’s books was abruptly fired in a phone call from an assistant.
But Jackson’s backers downplay the problems. “He is very focused. He is not going to let anybody down. Not himself. Not his fans. Not his family,” said Frank DiLeo, his current manager and a friend of three decades.
Jackson needs a comeback to reverse the damage done by years of excessive spending and little work. He has not toured since 1997 or released a new album since 2001, but he has continued to live like a megastar.
To finance his opulent lifestyle, he borrowed heavily against his three main assets: his ranch, his music catalog and a second catalog that includes the music of the Beatles that he co-owns with Sony Corp. By the time of his 2005 criminal trial, he was nearly $300 million in debt and, according to testimony, spending $30 million more annually than he was taking in.
Compounding his money difficulties are a revolving door of litigious advisors and hangers-on. Jackson has run through 11 managers since 1990, according to DiLeo.
At least 19 people — financial advisors, managers, lawyers, a pornography producer and even a Bahraini sheik — have taken Jackson to court, accusing him of failing to pay bills or backing out of deals. He settled many of the suits. Currently, he is facing civil claims by a former publicist, a concert promoter and the writer-director of his “Thriller” video, John Landis.
John Branca, an entertainment lawyer who represented Jackson for more than 20 years, blamed the singer’s financial troubles partly on his past habit of surrounding himself with “yes men.” Branca advised Jackson to buy half of the Beatles’ catalog in 1985 for $47.5 million. The catalog is now estimated to be worth billions, and the purchase is considered his smartest business decision.
“The paradox is that Michael is one of the brightest and most talented people I’ve ever known. At the same time, he has made some of the worst choices in advisors in the history of music,” said Branca, who represents Santana, Nickelback and Aerosmith, among others. He said he split with the singer because Jackson invited into his inner circle “people who really didn’t have his best interests at heart.”
The singer’s financial predicament reached a crisis point in March 2008 when he defaulted on a $24.5-million loan and Neverland went into foreclosure. Jackson’s brother Jermaine enlisted the help of Dr. Tohme Tohme, an orthopedic surgeon-turned-businessman who had previously worked with Colony Capital.
Tohme reached out to Barrack, who said he was initially reluctant to get involved because Jackson had already sought advice from Barrack’s friend and fellow billionaire Ron Burkle.
“I said, ‘My god, if Ron can’t figure it out, I can’t figure it out,’ ” Barrack said.
“I sat down with him and said, ‘Look . . . we can buy the note and restructure your financial empire,’ ” Barrack said. But, he told him, “what you need is a new caretaker. A new podium. A new engine.”
Tohme, who acted as Jackson’s manager until recently, recalled the urgency of the situation. “If he didn’t move fast, he would have lost the ranch,” Tohme said. “That would have been humiliating for Michael.”
Jackson and Barrack reached an agreement within seven days. Colony paid $22.5 million and Neverland averted foreclosure.
Jackson has not spoken publicly since a March news conference and his representatives declined to make him available for an interview.
Barrack said his position outside the music industry seemed to endear him to Jackson. “He looks at me like ‘the suit.’ I have credibility because I don’t live in that world. I’m not interested in hanging around him. I’m not interested in girls. I’m not interested in boys. I’m not interested in drugs,” Barrack said.
After buying Neverland, Barrack called his friend Anschutz. Barrack said the prospect of helping Jackson, given his recent criminal case, gave Anschutz, a devout Christian, pause. (Anschutz declined to be interviewed.)
Barrack had spent significant time with Jackson and praised him as a “genius” and devoted father. Ultimately, Anschutz agreed to put Jackson in touch with Randy Phillips, the chief executive of his concert subsidiary.
As the head of AEG Live, Phillips oversees a division that grossed more than $1 billion last year and has negotiated such lucrative bookings as Celine Dion’s four-year, $400-million run in Las Vegas and Prince’s 21 sold-out dates at the O2 Arena in 2007.
Phillips had his eye on Jackson for some time. In 2007, Phillips had approached the singer with a deal for a comeback, but Jackson, who was working with different advisors, turned him down. “He wasn’t ready,” Phillips recalled.
This time, however, Jackson was receptive. He needed the money, and he has a second, more personal reason: His children — sons Prince Michael, 7, and Michael Joseph Jackson Jr., 12, and daughter Paris Michael Katherine, 11 — have never seen him perform live.
“They are old enough to appreciate and understand what I do, and I am still young enough to do it,” Phillips quoted Jackson as saying.
Jackson stands to earn $50 million for the O2 shows, “This Is It” — $1 million per performance, not including revenue from merchandise sales and broadcast rights. Jackson is considering options including pay-per-view and a feature film. But the real money would kick in after his final curtain call in London.
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This fits in with what the book I read said actually, and shows that Michael did have money troubles, apparently Tohme Tohme used to work for Colony Capital, the company that this Barrack guys owns. what about this scenario, So Tohme Tohme decides the way in which Michael can raise some money is to have an auction of his stuff, which has been sat at Neverland since 2005, because Michael didn’t want to go back there, it now held bad memories for him and he’d said he’d never live there again. He arranges for the auction with Julian’s Auction House, but then this Barrack guy decides to help Michael, so he doesn’t need to go through with the auction now and calls it off. If he makes enough from the concerts, he can pay off the note for Neverland and take ownership of it again – problem solved.