Michael Jackson has managed to do himself in again. It’s an amazing situation, and one only Jackson could pull off.
As I’ve told you for weeks, Sony Music has been trying to negotiate a way for Jackson to hold on to his partnership with them in what’s known as the Beatles catalog, aka Sony/ATV Music Publishing.
As I’ve also told you, long before the New York Times caught wind of it, Sony had convinced Citigroup to help finance the purchase of Jackson’s $270 million worth of loans from Fortress Investment Group. In exchange, Citigroup only wanted 6 percent ownership in Jackson’s holdings.
But a year ago, Jackson had made a fatal mistake. He instigated the sale of those loans by Bank of America to Fortress. The deadline for paying the loans back was Dec. 20. Fortress extended the deadline to Feb. 20, at which time they could have foreclosed on Jackson.
They didn’t, but they also wouldn’t sell to Sony and Citigroup. As I told you in this space, Fortress wouldn’t let go. And, according to my sources, they wanted far more than Citigroup: more like 20 percent.
Now it seems a deal has been struck, but the deal is exactly the same one Jackson was offered last year, before the Bank of America sale, by advisers Charles Koppelman and Alvin Malnik and bankers at Goldman Sachs.
In that deal, Jackson would sell one half of his Sony/ATV holdings, retain the other half and have enough cash to pay off his debts and leave him with a nice piece of change, plus an annual $10 million income.
At the time, Jackson refused, deciding that the Goldman Sachs group was “out to get him.” He asked billionaire Ron Burkle to intercede instead with Bank of America.
Burkle, according to sources, called B of A’s CEO, Ken Lewis, and said he thought Jackson was getting a raw deal from the bank. Lewis was furious.
Jackson’s personal banker at B of A, Jane Heller, had held his finances together with toothpicks for years. B of A was offended by Burkle’s comments, and decided to sell the loans. Fortress, which had already made an offer, was the buyer.
Now, a year later, Fortress — holding Jackson’s notes — has still refused to let go. So now, in addition to Sony and Citigroup, Jackson is also in business with them.
The deal he’s getting isn’t much different from the Goldman Sachs one, and if you think about it, how could it be? Jackson always had one alternative: to sell part of his ownership in the Beatles catalog.
And now the moment has come. Jackson — whose group leaked information to the New York Times yesterday — gets a loan from Fortress for $300 million, but sells Sony half his interest in the company. The details still have to be worked out, but by calculation, in the end, Jackson loses now for not taking the Goldman Sachs deal last year.
Of course, this is what Jackson doesn’t know about Fortress Investments, and what he’ll likely never know unless someone reads him this column.
A few years ago, Fortress financed something called The Songwriters Collective. TSC, as it was known, was designed to help songwriters — mostly in Nashville — so they would get some money for their work. It seemed like a noble idea, but it backfired wildly.
Last year one of the writers in the Collective, Annie Rogoff, sued Fortress to get the rights back to her songs. The case has been settled, and Rogoff got the rights back, but at a high price. If Fortress was interested in helping songwriters, this was not a good example of caring about artists’ rights.
Presently, three different lawsuits are proceeding against Fortress and The Songwriters Collective, according to Rogoff’s attorney. They are similar to Rogoff’s. One is in state court in Tennessee. Two are in federal, one which includes as a plaintiff Holly Lamar, who co-wrote Faith Hill’s biggest hit, “Breathe.” All of the songwriters involved are demanding the return of their rights. In the end, it is likely they will have to buy their own work back from Fortress.
Jackson still has to deal with another manifestation of the Fortress agreement. He is currently being sued for $48 million by Prescient Capital, a one-man operation owned by Darien Dash, cousin of hip-hop entrepreneur Damon Dash.
In late 2004, Dash was asked by Jackson’s brother Randy Jackson to find someone who would put up the financing to buy out Bank of America. Jackson agreed to pay Dash a 9 percent fee if this was accomplished.
Dash found Fortress, which agreed to put up $530 million to get Jackson out of his entire Sony mess. In the end, though, they only had to pony up $270 million. Dash asserts in his lawsuit that he’s owed 9 percent of $530. That comes to $48 million.
Last year, during his short term as Jackson’s financial adviser, Burkle, I am told, spoke with Dash and offered him $1 million as a settlement. Dash refused.
“The problem is, Michael signed the document with him,” says a source.
So even if the legality of the agreement is questionable, Jackson’s liability may yet be proven.
Of course, there’s also another lawsuit, brought by Jackson’s former business partner Marc Schaffel. It’s set to begin June 2 in California, and so far no one from Jackson’s side has indicated that they are not ready.
If Jackson doesn’t show in the case, it’s possible his videotaped deposition, made last September in London, could be played for a jury in lieu of an appearance.