Michael Jackson’s $700M Last Dance With IRS Kicks Off In LA
Los Angeles (February 6, 2017, 11:46 PM EST) — Michael Jackson’s estate delivered opening statements Monday in its battle with the Internal Revenue Service over a tax bill that could reach $700 million, rejecting claims that Jackson’s image and music rights were worth over $800 million when he died and arguing they were instead rendered worthless by debts and scandal.

During the first day of a trial in Los Angeles that’s expected to run for several weeks, attorneys for the estate and the IRS laid out their respective cases to U.S. Tax Judge Mark Holmes, who is visiting from the tax court’s home base in Washington, D.C., to decide whether the estate underreported its value by hundreds of millions of dollars at the time of the King of Pop’s death in June 2009.

Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson’s death, his estate was burdened with over $400 million in debt, and that the key assets at issue in the trial were all worth vastly less than what the IRS has proposed. Those assets include Jackson’s music catalog — called Mijac — as well as his half-share of the music publishing company Sony/ATV, and Jackson’s name and likeness rights.

Mijac was actually worth $71 million, not $183 million, Salkin said. He added that although the IRS correctly predicted Jackson’s record sales would spike after his death, it shouldn’t have expected sales to stay at that level.

The estate’s debts included a $300 million loan with 9 percent interest, secured by Jackson’s interest in Sony/ATV, which the estate sold to Sony for $750 million last year — a sale that couldn’t have been assumed or foreseen at the time of the estate’s tax evaluation, Salkin said. The attorney said that because of that debt, any prospective buyer of the estate’s share of Sony/ATV would have to clear that $300 million balance before even being able to make an offer, and that onerous conditions imposed by Sony after it guaranteed the loan limited the upside for potential buyers.

Salkin argued that this meant the value of Jackson’s share in Sony/ATV was actually nothing at the time of the singer’s death.

As for Jackson’s publicity rights, Salkin said that they were only worth $3 million when Jackson died, not the $161 million asserted by the IRS, noting that Jackson’s image was tainted by the tabloid scandals that followed accusations of child molestation and accompanying civil and criminal suits, and wasn’t worth much without the singer’s music rights, which are held separately.

“Who would pay over $100 million just to be able to license Michael Jackson’s picture on T-shirts and guitars or to appear on a television endorsement … especially given some of the problems with his image at the time of his death,” he said.

Jackson’s estate had petitioned the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of the Mijac music catalog by tens of millions of dollars, but revising its proposed value of Jackson’s name and likeness upon his death to $161 million.

On Monday, IRS attorney Donna Herbert told Judge Holmes during her opening statement that the estate was asking the court to believe that Michael Jackson was a “pariah” or a “freak” who was so damaged in the public eye that his name and likeness were worth nearly nothing at the time of his death. That position is clearly contrary to the reality, pushed by the estate itself in its other ventures, that Jackson was “an international icon,” she said.

Herbert noted that the estate and made hundreds of millions of dollars off of Cirque du Soleil shows that featured Jackson’s likeness and music, and said that this value couldn’t be attributed entirely to the songs.

“They want the court to believe this is all about T-shirts and mugs; they are wrong,” she said.

After opening statements, the estate called its first witness — prominent music industry attorney John Branca, who has served as the estate’s co-executor, along with Jackson’s childhood friend and music industry veteran John McClain.

John Branca and Michael Jackson

Under questioning by his attorney Howard Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP, Branca testified for hours in a casual back-and-forth about the nearly three decades he spent representing or working with Jackson. When not getting laughs from the assembled audience and Judge Holmes from his anecdotes of his time with Jackson and entertainment industry figures, Branca testified about the struggles that faced the estate when he took charge of it in 2009, saying that it wasn’t generating enough income to pay its bills, thanks to the interest payments on the debts it carried.

Branca also testified at length about the care and creativity the estate took in exploiting its rights, noting that the estate had partnered with Cirque du Soleil without putting up any capital of its own, and had hired director Spike Lee and other carefully chosen individuals to create the documentaries, films and live shows that had pulled the estate back into profitability — in pointed contrast, he said, to the government’s assertion that it was Jackson’s name and likeness rights alone that drove that value.

“If you took Michael’s name and likeness and put it on a movie screen with nothing else, how many people would go see that movie?” he said. “If you took Michael’s name and likeness and put it up in the Staples Center, how many people would go to that show? None.”

The IRS declined to cross-examine Branca, with IRS attorney Sebastian Voth telling Judge Holmes that the agency intended to recall the witness to testify during its case-in-chief.

Judge Holmes said this was fine, but granted Weitzman’s request that Branca not be recalled until next week, so that he can handle the business of “Grammy’s week,” which Branca said includes the filming of a tribute to his clients The Bee Gees and his receiving an award for the record sales of Jackson’s albums’ “Thriller” and “Bad.”

Trial continues Tuesday morning with testimony from Karen Langford, a paralegal that handles marketing and related issues for the estate.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC, Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Musen and Laura Mullin.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.



Abuse Claim Dulled King Of Pop’s Image, Tax Judge Hears
Los Angeles (February 7, 2017, 10:47 PM EST) — Michael Jackson’s former merchandising rights expert testified that the child molestation accusations against the music icon sent sponsors running for the hills as she took the stand Tuesday in a Los Angeles trial to determine what the King of Pop’s estate — including his name and likeness — were worth when he died.

Paralegal Karen Langford was called by the estate, which is petitioning the Internal Revenue Service over a notice that it might owe up to $700 million for underreporting the value of Jackson’s assets and rights, during the second day of the trial before U.S. Tax Judge Mark Holmes.

A sometimes teary Langford testified that over decades working for Jackson’s one-time attorney John Branca, who is now the estate’s co-executor, she came to be the point person for helping Jackson determine which merchandising and sponsorship deals were allowed to use his name and likeness. The value of those rights at Jackson’s death in 2009 has been hotly contested by the Internal Revenue Service, which contends they were worth $161 million and not the $3 million claimed by the estate.

Under direct examination by the estate’s attorney, Howard Weitzman of Kinsella Weitz Iser Kump & Aldisert LLP, Langford described the childlike enjoyment that Jackson would show when he came to the offices of her employer, entertainment law firm Ziffren & Brittenham, and looked at all the prototype toys, posters and other merchandise she had been sent by aspiring licensees of his name and likeness.

“It was playful. It was an opportunity to sit and play like a kid with all this stuff laid out in front of you … He loved coming and doing that,” she said.

Langford also testified about deals she had been a part of in her work for Branca, such as Pepsi’s sponsorship of Jackson’s tours supporting the “Bad” and “Thriller” albums, Jackson’s short film for the “Thriller” single, and tour merchandise deals — a plethora of corporate favor that began to vanish in 1993, when Jackson was accused of child molestation in a civil suit. Langford said that when Jackson went on the road behind his 1995 album “HIStory,” no national sponsor backed the tour, and the singer even had to pay back several million dollars to a company that had agreed to handle tour merchandise because of lackluster sales.

“Unfortunately Michael, who had had this image, had built an image, of effectively innocence and childlikeness, best behavior … He wasn’t like Keith Richards or Mick Jagger who had the bad boy image,” she said. “Those allegations happened, as unfair as it was, the idea of his name attached to their brands was something companies weren’t interested in.”

Langford added that when she got involved with the management of the estate, she saw that there were no name and likeness deals in place at the time of Jackson’s death “to her knowledge.”

Jackson’s estate had petitioned the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

Karen Lanford on TV showing off Michael Jackson belongings.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson’s Mijac music catalog — which held the singer’s own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson’s name and likeness upon his death to $161 million.

During Monday’s opening statements, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson’s death, his estate was burdened with over $400 million in debt and that the name and likeness rights were only worth $3 million. Salkin also said that the IRS had overvalued Mijac by roughly $90 million and Jackson’s half-share of music publishing company Sony/ATV by $200 million. Jackson’s estate sold that share to Sony for $750 million last year.

The trial continues on Wednesday morning with the IRS’ cross-examination of Langford.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC, Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Musen and Laura Mullin.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.



Greenberg Atty Explains Michael Jackson Estate’s IP Moves
Los Angeles (February 8, 2017, 11:12 PM EST) — Michael Jackson’s estate Wednesday called Greenberg Traurig LLP’s entertainment practice co-chair to testify about the estate’s efforts to protect and expand Jackson’s intellectual property rights after his death, in the trial to determine if the estate owes the IRS hundreds of millions of dollars for undervaluing its assets.

During the third day of the three-week trial before U.S. Tax Judge Mark Holmes in Los Angeles, the estate called to the stand Vincent Chieffo, the co-chair of Greenberg’s national media and entertainment practice, to testify about the work he had done helping the estate protect its trademarks, copyrights and publicity rights. The value of those publicity rights, also known as name and likeness rights, have been hotly contested in the estate’s dispute with the Internal Revenue Service, with the two sides being nearly $160 million apart in their respective valuations of the rights at the time of Jackson’s death in 2009.

Under direct examination by Robert Horwitz of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, Chieffo testified about how he was brought in as part of the legal team assembled in the days after Jackson’s death, and that after attorney John Branca and Jackson’s childhood friend John McClain were named co-executors, Chieffo and his colleagues began a multipronged effort to protect and expand the estate’s intellectual property rights.

Chieffo said that when Jackson died, he had only two active registered trademarks in the U.S., having let other marks lapse or abandoning them, and so the estate not only had to begin sending cease-and-desist letters and filing lawsuits against entities that were now selling rip-off merchandise or claiming a right to use Jackson’s name and likeness, but also had to file dozens of new trademarks to actually be able to capitalize on the King of Pop’s image.

“[The estate’s legal team was] growing and expanding the business of the estate from what it was when Michael died, so as to create what’s called secondary meaning… and create more value in the estate than was there when Michael died,” he said.

Things got heated shortly before the conclusion of Chieffo’s direct testimony, however, when Chieffo was testifying about a cease-and-desist letter he had sent to an attorney, Laurence Nimmer, who had made and was selling an unauthorized Michael Jackson documentary comprised of footage he obtained while working for criminal defense attorneys that represented Jackson in a 2005 trial on child molestation charges.

IRS attorney Donna Herbert objected to the estate introducing into evidence an email sent by Nimmer, purportedly in response to Chieffo’s cease-and-desist letter, to attorney Paul Gordon Hoffman — who is representing the estate in the tax trial — and to Nimmer’s brother, noted copyright expert David Nimmer.

“Mr. Nimmer isn’t in the courtroom,” she said. “‘We could call Mr. Hoffman but then he’d have to recuse himself.”

The estate’s attorney Steven Toscher of Hochman Salkin Rettig Toscher & Perez asked Herbert if she meant from the instant proceeding, and when she responded in the affirmative, he leaped to his feet in protest.

“And we could call Ms. Herbert and she could be excluded; let’s get on with it,” he said. “This is ridiculous.”

Judge Holmes ruled that the email would not be admitted into evidence, and the direct examination was concluded.

Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson’s Mijac music catalog — which held the singer’s own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson’s name and likeness upon his death to $161 million.

During Monday’s opening statements, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson’s death, his estate was burdened with over $400 million in debt and that the name and likeness rights were only worth $3 million. Salkin also said that the IRS had overvalued the Mijac catalog by roughly $90 million and Jackson’s half-share of music publishing company Sony/ATV by $200 million. Jackson’s estate sold that share to Sony for $750 million last year.

On Wednesday, before calling Chieffo, the estate called to the stand Matt Forger, a sound engineer who worked with Jackson during his life, and then had helped the estate go through unreleased material after the singer’s death to determine what songs might be viable for later commercial release.

The IRS has contended in the trial that the estate undervalued significantly the value of the unreleased material, while the estate has countered that these songs were unreleased for a reason, and could not have been expected to be smash hits.

Forger testified that IRS expert Wes Anson’s assessement that the estate had eight to 10 albums worth of unreleased material at its disposal at the time of Jackson’s death was predicated on assuming all of the unreleased masters were in shape to be released, when many were “recordings of fragments of songs.”

IRS attorney Jordan Musen cross-examined Forger, asking him to confirm that the estate was in possession of songs that Jackson had completed before his death, and that simply hadn’t been included on the albums they were originally recorded for.

“They were not included because Michael did not feel they were of the quality of the ones that were included,” Forger responded.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC, Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Musen and Laura Mullin.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.



Michael Jackson’s Image Was In ‘Nuclear Winter’: Expert
Los Angeles (February 15, 2017, 10:42 PM EST) — Michael Jackson’s estate on Wednesday called a business appraisal expert to testify at the Los Angeles tax trial over the estate’s value at Jackson’s death, with the expert testifying that child molestation allegations had plunged the singer’s publicity rights into “nuclear winter,” reducing their value to just $3 million.

During the second week of the trial before visiting U.S. Tax Judge Mark Holmes, the estate called to the stand business appraisal expert Jay Fishman, the managing director of Financial Research Associates, to explain how he had settled on the $3.078 million number for Jackson’s publicity rights. The value of those publicity rights, also known as name and likeness rights, has been hotly contested in the estate’s dispute with the Internal Revenue Service, with the estate saying the IRS has claimed they were worth $161 million at the time of Jackson’s death in 2009.

Under examination by Steven Toscher of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, Fishman first went through his background, and how he went from being a small business value appraiser to something of a specialist in celebrity name and likeness appraisals. Fishman has been called on to value the publicity rights of Nicole Kidman, Tom Cruise, Rudy Giulani and Bryant Gumbel as part of those celebrities’ respective divorce proceedings’, he said, and was retained by businesses to value both Muhammad Ali’s and Marilyn Monroe’s publicity rights.

Fishman said that while Ali was able to sell 80 percent of his publicity rights for $52 million in 2008, he hadn’t used that as a comparison when valuing Jackson’s rights — noting that the business that purchased Ali’s rights eventually wrote down the purchase and sold the asset for only $12 million, and adding that this occurred even with Ali, who has a clean personal reputation and is viewed as a “hero.”

Jackson, while an entertainment icon, was unfortunately not viewed the same way by the public at the time of his death, as child molestation accusations in 1993 and 2003 — culminating in a 2005 criminal trial in which Jackson was acquitted on all counts — had irreparably damaged his reputation, Fishman said. Fishman added that even compared to other scandal-tainted celebrities, Jackson’s alleged crimes were so heinous as to render him untouchable for name and likeness deals at the time of his death.

“I’ll only say it once, there are taints and then there are taints, there are Kobe Bryant type of taints, or I had Kate Moss, and then there are things with children … those things are nearly impossible to overcome,” he said. “I call it like being in a nuclear winter.”

Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson’s Mijac music catalog — which held the singer’s own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson’s name and likeness upon his death to $161 million.

During last week’s opening statements, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson’s death, his estate was burdened with over $400 million in debt and that the name and likeness rights were only worth $3 million. Salkin also said that the IRS had overvalued the Mijac catalog by roughly $90 million and Jackson’s half-share of music publishing company Sony/ATV by $200 million. Jackson’s estate sold that share to Sony for $750 million last year.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC; Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker APC; and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Musen and Denise Larson.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.



King Of Pop’s Ex-Manager Says Brands Lined Up Before Death
Los Angeles (February 16, 2017, 8:15 PM EST) — Michael Jackson’s former manager Tohme Tohme took the stand at the IRS’ behest Thursday in the Los Angeles trial over the value of the late entertainer’s estate at the time of his death, testifying that Nike, Sony and others had licensing deals in the works when Jackson died.

During the second week of the trial before visiting Judge Mark Holmes of the U.S. Tax Court, the Internal Revenue Service began its case in chief, arguing that the estate underreported its value, including Jackson’s name and likeness rights, by hundreds of millions of dollars at the time of the King of Pop’s death in June 2009. So far in the trial, the estate has put on percipient and expert witnesses to testify that child abuse allegations against Jackson rendered his image poisonous for brands and that he had no name and likeness licensing deals in place when he died.

On Thursday, the IRS called to the stand onetime Jackson manager Tohme, who has previously been sued by the estate for allegedly tricking the entertainer into entering extortionate management agreements. Tohme testified about his time managing the entertainer from mid-2008 until Jackson’s death in June 2009.

Under examination by IRS attorney Sebastian Voth, Tohme testified that there were numerous deals in the works before Jackson’s death, including a plan with Nike to create “Moonwalk” sneakers named for Jackson’s famous dance move, a plan with James Nederlander of The Nederlander Organization to create a Broadway show based on the music video for Jackson’s song “Thriller,” a plan with animation producer Andy Heyward to create a “Thriller” TV show, a plan with Sony to create a Jackson-themed video game, and the beginnings of plans with Cirque du Soleil to create a Jackson-themed show.

While no deals were actually signed for the Nike shoes or the Sony video game, Tohme testified that the companies had given the go-ahead for the projects, and that they only fell by the wayside because of Jackson’s death.

The present case has its origins in a petition Jackson’s estate sent to the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

Tohme Tohme & Michael Jackson in London for the “This Is It” concerts Pres Conference at the O2

The most notable discrepancy between the competing valuations as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the runup to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson’s Mijac music catalog — which held the singer’s own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson’s name and likeness upon his death to $161 million.

During last week’s opening statements, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson’s death, his estate was burdened with over $400 million in debt and that the name and likeness rights were worth only $3 million. Salkin also said that the IRS had overvalued the Mijac catalog by roughly $90 million and Jackson’s half-share of music publishing company Sony/ATV by $200 million. Jackson’s estate sold that share to Sony for $750 million last year.

On Thursday afternoon, the estate’s attorney Howard Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP cross-examined Tohme, asking him to name any actual licensing deals he knew Jackson had at the time of his death, with Tohme admitting only Jackson’s musical licensing deals with Sony and Warner/Chappell were in place.

On the claimed Cirque du Soleil plans, Weitzman also got Tohme to admit that he spoke only to a man named Jack Wishna, who claimed to know Cirque’s interests, before Jackson’s death, but never actually spoke to a confirmed Cirque du Soleil representative nor signed any deal for the performing troupe to use Jackson’s name, likeness or music.

After Jackson’s death, the estate did end up working with Cirque du Soleil to create two Jackson-themed shows that grossed hundreds of millions of dollars for the estate, according to testimony earlier in the trial by Jackson’s former attorney John Branca, who is the estate’s co-executor.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC, Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker APC, and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Musen and Denise Larson.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.



 Abuse Claims ‘Overblown’ In Jackson Tax Trial: IRS’ Expert
Los Angeles (February 23, 2017, 10:52 PM EST) — An intellectual property expert testified for the IRS on Thursday that the damage child molestation allegations did to Michael Jackson’s name and likeness rights has been “overblown” in the Los Angeles trial to determine if Jackson’s estate owes the IRS hundreds of millions of dollars for undervaluing its assets.

During the third and final week of the trial before visiting U.S. Tax Judge Mark Holmes, the IRS called to the stand intellectual property expert Weston Anson, chairman of Consor Intellectual Asset Management, to explain some of the details behind his report concluding Jackson’s publicity rights were worth $161 million at the time of his death. The value of those publicity rights, also known as name and likeness rights, has been hotly contested in the estate’s dispute with the IRS, with the estate’s own expert Jay Fishman saying the rights were worth only $3 million at the time of Jackson’s death in 2009.

Under examination by IRS attorney Sebastian Voth, Anson discussed a wide range of potential licensing opportunities he had considered available to Jackson’s estate when assembling his expert opinion, including video games, slot machines, a potential themed hotel or casino, and posthumous appearances — similar to the use of a “hologram” of deceased rapper Tupac Shakur at the music festival Coachella in 2012.

Anson then addressed what has been a key topic for the various name and likeness experts opining in the case: the allegations, first in 1993, and then in 2003, that Jackson had molested young boys, and the ultimate impact those allegations would have had on the value of Jackson’s name and likeness at the time of his death. The estate’s expert, Fishman, testified last week that the allegations put Jackson’s image in “nuclear winter,” saying that allegations involving harming children are anathema for the brands that might otherwise pay to use a celebrity’s image.

Anson, however, testified that while he wouldn’t have taken his son to a Michael Jackson-themed hotel in 1995, by 2009 the situation had changed, after Jackson was acquitted on all counts in a 2005 trial on the latter allegations, and said that testimony in the tax trial had shown that apparel and entertainment licensing opportunities were available for Jackson before his death. Anson added that the value of the rights would only have grown for the estate, noting that he was once told that “the greatest client in the world is a dead celebrity.”

“I think the child molestation issue is just frankly overblown,” he said. “In a way, Michael Jackson will forever be a young man with a great talent whose talent never degraded, and for that reason will always have a marketable name and likeness.”

Jackson’s estate had petitioned the tax court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

In the run-up to the trial, the IRS continued adjusting its proposed value of the estate, increasing the assessed value of Jackson’s Mijac music catalog — which held the singer’s own songwriting copyrights — by tens of millions of dollars, but revising its proposed value of Jackson’s name and likeness upon his death to $161 million.

During opening statements on Feb. 6, Avram Salkin of Hochman Salkin Rettig Toscher & Perez PC, representing the estate, said that at the time of Jackson’s death, his estate was burdened with over $400 million in debt and that the name and likeness rights were only worth $3 million. Salkin also said that the IRS had overvalued the Mijac catalog by roughly $90 million and Jackson’s half-share of music publishing company Sony/ATV by $200 million. Jackson’s estate sold that share to Sony for $750 million last year.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC; Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker APC; and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Musen and Denise Larson.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.



Michael Jackson Estate Says IRS Expert Committed Perjury About Whitney Houston Work
Los Angeles (April 18, 2017)

As tens of millions of American citizens file last-second returns on “Tax Day,” the Internal Revenue Service is dealing with an explosive development that has the potential of rocking the billion dollar case focused on pop superstar Michael Jackson.

In February, the Michael Jackson Estate and the IRS concluded a groundbreaking trial. The proceeding featured testimony from those close to Jackson as well as experts over whether money is owed in estate taxes from the singer’s death in 2009. Although part of the dispute deals with the value of Jackson’s interest in the Sony-ATV and MIJAC music catalogs, the issue that has captured attention through the entertainment industry pertains to the value of Jackson’s name and image upon death. If the IRS is successful in convincing U.S. Tax Court Judge Mark Holmes that administrators of Jackson’s estate undervalued his publicity rights by hundreds of millions of dollars, it will reshape how stars plan for their death.

With this in context, the Michael Jackson Estate is now looking to exclude the complete testimony of the IRS’ primary valuation expert, Weston Anson, asserting that perjury has tainted “his credibility, reliability, neutrality and objectivity.”

Specifically, the IRS’ reliance on Anson to establish the worth of Jackson’s name and image at time of death at $161 million — instead of just $2,105, as the other side contends — is now in danger, thanks to the expert’s testimony about Whitney Houston.

During the trial, Anson was cross-examined by attorney Howard Weitzman and asked whether he had ever worked for the IRS before.

Anson responded, “I’ve never worked for the Internal Revenue Service before.”

Weitzman would soon ask Anson about working for the IRS on the Whitney Houston case — the one where the tax agency claims Houston’s Estate undervalued her own publicity rights by $11.5 million.

“We’ve not yet begun any work on the case,” Anson testified.

Later, Weitzman would ask Anson if he had written an IP valuation of Whitney Houston.

Anson: “Absolutely not.”

Illustration By Sam Island

The Michael Jackson Estate is now seizing upon these words because Anson and CONSOR Intellectual Asset Management had in fact prepared and submitted a report dated June 8, 2015, titled, “Analysis of the Fair Market Value of the Intangible Property Rights Held by the Estate of Whitney E. Houston as of February 11, 2012 for Estate Tax Purposes.”

In addition, court papers say that CONSOR had a 2009 contract for $169,168 for services as an expert on the valuation of intangibles and that Anson’s firm has been awarded $2.64 million in funds since 2014. Despite this, Anson also testified that he had “no idea” whether there would be impact on him if the IRS prevailed in the Michael Jackson tax case.

“The context in which the lies began reveals Mr. Anson’s true intent in lying under oath was to disguise his bias in favor of the IRS and to hide the fact he had been awarded multiple contracts from the IRS for substantial sums of money,” writes the Michael Jackson’s Estate in a motion to strike his testimony.

The IRS, in turn, is seeking to limit the damage by arguing that Weitzman improperly asked questions pertaining to a taxpayer other than Michael Jackson and that Anson’s answers contained “confidential” information. The tax agency would prefer to strike the disputed sections of the trial transcript for that reason.

Besides responding that such an objection is untimely, and that the Houston case is a matter of public record, the Michael Jackson Estate writes to the judge that it “would be prejudiced if the [IRS] motion were granted and the Court would be unduly limited in its fact finding by not being able to consider that Anson repeatedly lied in open court in response to questions that went to the issue of bias.”

Judge Holmes will soon rule on this issue. His ultimate determination of tax liability won’t likely come for months.



IRS Asks To Add Penalty Form To MJ Estate Tax Court Record (June 29, 2017)

The IRS has asked to reopen the Tax Court record and add a supervisor’s form signing off on penalties assessed against Michael Jackson’s estate, months after the conclusion of a high-profile trial in Los Angeles with hundreds of millions of dollars at stake.

The penalty approval form’s introduction is necessary to show that the IRS met its legal requirements in imposing estate tax liability penalties, the agency said Tuesday, pointing to conflicting rulings in Tax Court and the Second Circuit about the need for the form’s presentation in court.

“In an effort to foreclose this issue in the instant case, respondent’s counsel reminded petitioner’s counsel that respondent had previously provided a penalty approval form as evidence of compliance with Section 6751(b)(1) to petitioner and requested that petitioner stipulate that the form constituted evidence of compliance,” the IRS said. “Counsel for petitioner declined to stipulate to the document.”

The form — required before the IRS can impose these penalties — wouldn’t be improperly “cumulative” because no other evidence showing penalty approval is in evidence, the IRS said, further arguing that it’s not “impeaching” material since it simply shows that the requirements of the Internal Revenue Code have been met.

Entry could even alter the case’s outcome, the IRS said, if the court follows the March 20 Second Circuit holding that found against the tax agency after noting its failure to submit evidence showing compliance after the matter was brought up in that case.

The motion noted that the estate’s counsel objects to reopening the record in a case that has been beset by accusations from the estate that the IRS’ intellectual property expert lied under oath at trial. Counsel for the estate did not immediately respond to a press inquiry Thursday, and the IRS does not comment on pending litigation.

Jackson’s estate petitioned the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS had adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC; Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker APC; and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented in-house by William M. Paul, Donna F. Herbert, Bruce K. Meneely, Sherri Spradley Wilder and Jordan Musen.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.



Michael Jackson’s Estate Moves To Seal Tax Court Records (July 25, 2017)

Michael Jackson’s estate has asked a U.S. Tax Court judge to seal “confidential information” contained in various exhibits presented in the case, where hundreds of millions of dollars are at stake.

The motion to seal — filed Saturday, months after the high-profile February trial concluded in Los Angeles — specifically seeks to keep under wraps exhibits contained in the first and third stipulation of facts agreed to both by the estate and the IRS.

“This motion is brought on the grounds that the information petitioner is seeking to seal contains trade secrets and other confidential competitive business information, constitutionally protected private personal and financial information of the taxpayer and third parties, and private tax return information that is not material to this proceeding,” the estate said in the 251-page filing.

Information contained in the first stipulation, as well as the third — which the parties submitted in mid-July after being unable to finish it during trial — would “cause undue harm” if they were made publicly available, the estate said, thus overriding the preference to keep court records open.

Among the information that could be compromised, the estate said, are trade secrets, competitive and proprietary business details, personal and private financial information for both parties as well as nonparties, and “information that might cause public scandal.”

The estate noted that it’s not trying to seal any expert reports except for portions of one that it’s previously asked to be placed under wraps. That should ensure the public interest, the estate said, “in safeguarding and understanding the judicial process is protected.” The estate also noted that much of the information it wants protected has already been ordered sealed by a California Probate Court.

The information the estate wants sealed, according to the brief, doesn’t compromise the public interest in open proceedings because the documents generally are not relevant to the matter before the court or that information is discussed in the expert reports. Among the details sought to be protected, according to the brief, are “extensive contracts” between Jackson and others that include confidential terms.

“Any request by the public for the extensive confidential raw economic data, contracts and other private information not included in and relied on in the expert’s reports would instead be for some improper private gain,” the estate said.

That improper private gain, the estate continued, could be “to create or further a public scandal relating to the estate or Mr. Jackson’s children, especially in light of the public salacious interest in Michael Jackson and his family and the extensive press coverage recent matters relating to the estate have been receiving, or to gain competitive advantage against the Michael Jackson business or third parties.”

Among the information sought to be sealed: the name of Jackson’s “minor child” named in his will, an employer identification number, merchandising license agreements between Sony Signatures Inc. and Triumph International Inc. — which contain both sensitive information and a confidentiality provision — along with agreements for feature film development, dispute settlements, various financing and other material that include business dealings Jackson had and Probate Court details and deposition transcripts from other proceedings.

“Petitioner’s requests to seal documents are narrowly tailored to address the above countervailing interests that provide compelling reasons for sealing the records,” the estate said. “Petitioner does not request that the court seal the entire trial record; rather, petitioner requests that specific documents or portions of documents be sealed only to the extent necessary to protect the confidential information, the disclosure of which would cause harm to petitioner or a third party to this proceeding.”

Counsel for the estate declined to comment Tuesday. The IRS does not comment on litigation.

Jackson’s estate petitioned the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS had adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC; Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker APC; and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented in-house by William M. Paul, Donna F. Herbert, Bruce K. Meneely, Sherri Spradley Wilder and Jordan Musen.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.



Michael Jackson Estate Opposes Reopening Tax Court Record (August 4, 2017)

Michael Jackson’s estate urged a Tax Court judge on Thursday not to reopen the record, months after the conclusion of a high-profile trial in Los Angeles with hundreds of millions of dollars at stake, so the IRS can add a supervisor’s form signing off on penalties assessed against the estate.

The IRS says the penalty approval form’s introduction is necessary to show that the agency met its legal requirements in imposing estate tax liability penalties, but the estate countered that it would be prejudiced by a reopening backed by “serious anomalies” and that the time to include the form has long since passed.

“It doesn’t prove their case for the statutory requirement,” Steven Richard Toscher, an attorney for the estate with Hochman Salkin Rettig Toscher & Perez PC, told Law360 on Friday.

The estate pointed to its June 2013 Freedom of Information Act request for the estate tax examination file, soon after the IRS issued a deficiency notice. While the IRS provided some materials, the estate said, the agency left out the approval form and other items, so the estate made another request three years later to which the IRS objected in July 2016, contending that the request “seeks to go behind the notice of deficiency.” The IRS ultimately relented in September of that year, according to the brief.

“As the foregoing demonstrates, respondent’s assertion in paragraph 11 of its motion, suggesting that petitioner’s request for the penalty form was first made on Sept. 29, 2016, and that the penalty form was promptly turned over Sept. 30, 2016, is inaccurate,” the estate said.

The estate further warned of “serious anomalies” in a declaration from IRS supervisor Ann Harper asserting that she signed off on the initial findings to propose penalties from estate tax attorneys examining the estate. The estate argued that where Harper asserts she was signing off on an initial determination from an estate tax attorney named Mojgan Abrishami, the penalty approval form itself only shows the finding of another attorney, Anna K. Soliman, as being approved.

Additionally, the penalty approval form is dated just 11 days prior to when the deficiency notice was mailed out in May of 2013, the estate said, raising doubts that the supervisor could have signed off on the initial determination so close to when the deficiency notice was issued, considering that the two actions came from different branches of the IRS’ examination division.

Nor does Harper’s declaration “affirmatively state” that the penalty form the IRS wants to submit is the actual form Harper signed, according to the estate, contending that Harper appears to be asserting that she has “no personal knowledge” if the form in question is the one she signed. And if the record were to be reopened, the estate wouldn’t be able to cross-examine Harper or present rebuttal evidence.

“Something is amiss here. Any reopening of the record would require further discovery on these issues and trial testimony of Ms. Harper and others who have personal knowledge of the initial penalty determination and asserted supervisory approval,” the estate said.

The burden to reopen the record is on the IRS, the estate said, and it argued that the agency hasn’t met that burden because it hasn’t shown “diligence and justification” for failing to show the evidence at trial, and it hasn’t shown a strong likelihood that reopening the record would alter the outcome of the case, with the IRS only contending the outcome “might” be changed. The estate instead contended that there’s no doubt the executor had a “reasonable cause and good faith reliance” on estate tax return valuations.

The IRS was aware of the issues relating to the need for the form but left it out either as a mistake “or a strategic decision” the agency regrets in hindsight, and neither of those reasons creates the diligence or justification allowing for the record to be reopened, the estate argued.

The IRS had asked to reopen the record in late June, pointing to a March 20 Second Circuit holding that found against the tax agency after noting its failure to submit evidence showing compliance after the matter was brought up in that case.

The IRS does not comment on litigation.

Jackson’s estate petitioned the Tax Court in July 2013, challenging a lengthy notice of deficiency the IRS mailed to the estate that month. The notice contested the estate’s reported valuation of a litany of items, including a 2001 Bentley Arnage and rights to the master recordings of the Jackson 5.

According to the notice, the IRS had adjusted the value of the estate from $7 million to $1.32 billion. As a result, the agency demanded $702 million, including $505.1 million in deficiencies and $196.9 million in accuracy-related penalties.

The most notable discrepancy between the valuations of the parties as highlighted in the notice included the right to Jackson’s image and likeness. The IRS originally pegged that asset at $434.3 million, whereas the estate had claimed the right was worth only $2,105.

Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, Robert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Salkin Rettig Toscher & Perez PC; Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker APC; and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

The IRS is represented in-house by William M. Paul, Donna F. Herbert, Bruce K. Meneely, Sherri Spradley Wilder and Jordan Musen.

The case is Estate of Michael J. Jackson et al. v. Commissioner of Internal Revenue, case number 17152-13, in the U.S. Tax Court.


SOURCE: Law360 / Hollywood Reporter