The AEG Contract - good or bad?

08 November 2007

The AEG contract was for a maximum of 31 concerts between July 26 and September 30 2009, and the first leg had to be a minimum of 18 shows. A greater number of shows could be agreed, but the initial contract was as stated above, UNLESS AEG could prove that more shows were needed in order to recoup the advances it paid to Michael.

We now know from the cancellation policy that the Specified Costs, Expenses and Commitments estimated to have been spent by AEG and/or The Michael Jackson Company before the shows began, were $17.5m. After 13 shows (estimated income of $18,643,040) this money would have been recouped, and the concerts would be in profit.

So this means that the minimum of 18 shows in the contract were more than enough to cover the costs estimated to be spent before the shows began.

This Is It had sold out 50 concerts.

Where is the written contract for the additional 19 shows, making it up to 50? I certainly have not seen or heard of one, so to my mind that suggests that either the agreement was verbal, or the contract for the 19 shows is being kept under wraps for now.

The other fact that seems to have gone unnoticed by a lot of fans, is that the cancellation policy covered costs spent by AEG and/or The Michael Jackson Company, which means that both AEG and The Michael Jackson Company benefit from the policy, not just AEG.

The AEG contract ran until 31 December 2011. Yes you read that right December 2011. Which means, if AEG could prove that more shows were needed to recoup advances, they could keep Michael performing for 2 and a half years. And the contract also allowed for AEG to extend beyond 31 December 2011, if there was a World Tour or if the advances had not been paid.

The contract also agreed to pay Dr Tohme Tohme $100,000 per month, under an agreement with Tohme’s company TT international LLC.  Tohme’s salary was part of the advances agreement, that was paid out of Michael’s 90% of the profits. If Tohme had not been looking out for Michael’s best interests when the contract was being discussed, he could have kept other promoters offers from reaching Michael. Leonard Rowe says he knew of other concert offers which were for $10-15m PER PERFORMANCE, and would have solved Michael’s financial problems, and Michael would not have had to sign with AEG at all. So was Tohme working against Michael, and was Michael unknowingly paying for the deception financially? We know that one company, Allgood Entertainment, did manage to get their contract in front of Michael, via Frank DiLeo. The meeting between Frank and Allgood was in November 2008, when Tohme was Michael’s manager, not DiLeo. This suggests to me that Allgood were unable to make the offer to Michael directly, so they tried to go via DiLeo. Michael was negotiating with AEG in earnest from around October 2008, and did not sign until January 2009, so perhaps someone was stopping him seeing other offers, in order to ensure the AEG contract was the one that got signed? The Allgood contract was for a Jackson5 reunion for one night in July 2010 – Michael was to get $12-15m for one night. In my other blog here, I calculated that 50 shows for AEG would net Michael approximately $53m, that’s just over $1m per show NOT $12-15m per show! Michael was talking to Allgood about their contract in May 2009, that’s AFTER he’d signed the AEG contract and when he was in the middle of rehearsals for This Is It. The story goes that he rejected the idea, because Allgood wanted pay-per-view and Michael didn’t like pay-per-view. I think Michael wanted to cancel or postpone some or all of the This Is It concerts, until after the Allgood concert, but he was told ‘No’ by AEG.

Another company, Citadel Limited, were also in negotiations with DiLeo in the first quarter of 2009, for a musical event in Trinidad and Tobago, featuring Michael,  to take place in the last quarter of 2009. The first leg of the This Is It concerts would have finished in September, so this is feasible. DiLeo had signed a Binder Agreement, and Citadel had wired him a total of $300,000 as part of this agreement. After 25 June 2009, Citadel wanted their money back, and filed a lawsuit against DiLeo to recoup it. It is not clear exactly when DiLeo started to work for Michael again, but I would guess maybe March 2009.

So could Michael have gotten himself out of the AEG contract? Leonard Rowe says that even if Michael had filed for bankruptcy, if his liabilities were greater than his assets, he would have lost his entire fortune to AEG. Personally, I don’t think that is true. Michael could have cancelled the concerts, because he was covered by the cancellation policy, under specific terms. But the problem with cancelling was that, after years of attack by the media, Michael’s professional image was already badly damaged, and I believe that cancelling the concerts would have destroyed him. Michael would have walked away with no money to show for months of preparation, or even made a loss.

There is another large flaw in Rowe’s assumptions. He assumes that all Michael’s assets were part of his estate, and therefore AEG could force Michael into bankruptcy in order to get hold of the assets. But I have done some research and found that Michael’s major assets were all in bankruptcy remote trusts, which fall outside of the estate. Once in a trust, the assets no longer belong to Michael Jackson, and Michael cannot be forced to hand them over to creditors. I don’t know if AEG were aware of this, but Michael surely was.

Leonard says in his book that the AEG contract was despicable, and that it wouldn’t have happened on his watch. He claims the reason he was fired was that Randy Phillips was afraid he would expose the nature of the contract. Leonard has a letter showing that Michael wanted him to oversee the finances of the O2 shows. This was 25^th March 2009, 3 months AFTER the contract was signed. So why did Leonard not get hold of the contract and start addressing his concerns to Michael? If he was overseeing the O2 finances, surely the starting point would be to understand the contract? Without understanding that, how could he understand Michael’s finances? He says he had found out about AEGs ticket scalping and brought it up at a meeting with AEG in May. So why did Leonard do nothing about the contract between being hired in March and May? Well, perhaps Michael didn’t want Leonard to have anything to do with the concert finances. Perhaps the 15 May meeting was about the problems with the concert scheduling? Perhaps Michael realised that Leonard wasn’t able to negotiate effectively with AEG, and so replaced him with Frank DiLeo?

Was the AEG contract good or bad? Financially, I think the AEG contract was good for Michael. AEG don’t seem to be profiting hugely at Michael’s expense.

But I do think Michael had problems with AEG, and I think those problems were to do with mounting the concerts. I have heard rumblings that the costume designer, the choreographer and the producer were planning the show without Michael’s input. Michael didn’t have the control he had had over his other concerts. This must have added to the huge pressure already on Michael, who as a solo artist, was the only person who could oversee the music, the songs and the choreography, and who in addition had to prepare his own performance.  I also believe that some of the people working on This Is It, who had worked with Michael before, knew that he was not well in the last few weeks. I think they are afraid to speak the truth for fear of being landed with a wrongful death lawsuit, or of being blackballed. I think that explains the inconsistencies in the stories these people have told in interviews since June 25 2009, and is why so many people have lied about so many things. I think the Jackson family know, hence the AEG lawsuit.

The Three Managers

During  6 months in 2009, Michael Jackson had three different managers. The fact that his manager changed that often within a such short space of time, tells me that something was wrong.

The first manager was Tohme Tohme. He came onto the scene when Michael was refinancing in early 2008, and he states that he came in to sort of the mess that was Michael’s finances at that time. By September 2008, Michael was having problems with this manager. There is a recorded ‘phone conversation with June Gatlin where Michael says he was afraid of Tohme, that Tohme was signing checks and was keeping Michael from talking to his own lawyer and accountant. Michael did not know what was going on with his business at this time. By March 2009, I believe that things had come to a head. In August 2008, Julien’s Auction House had been tasked with clearing all the items from Neverland and cataloguing them. This took 3 months. Allegedly, they were told to take anything that wasn’t bolted down and even to remove the famous Neverland sign over the front gates. So this would include many personal items belonging to Michael and his children. After leaving Neverland in 2005, Michael did not have permanent home, and so would be limited as to the amount of items he could take with him. He had been moving around a lot, living in Bahrain, Ireland and Las Vegas in the 4 years since 2005. The story is that at some point (date unknown) Michael came in and took all the personal items he wanted, and that the agreement was that the rest could go into auction. By February 2009 there are reports that an associate of Tohme threatened Julien’s to stop the auction. Julien’s seemed to believe that they had got the go ahead from Michael, so later in the month the auction is announced, and Julien’s displayed the items in an empty department store (yes, they filled an empty department store). I later read a post on Facebook from someone who purported to be an ex-Michael employee, that said that they saw Fathers’ Day gifts from Michael’s children in the Julien’s pre-auction display. If that is true, I cannot believe that Michael would have knowingly agreed to these items being sold at auction. Fast forward to March, and Michael makes the O2 concert announcement. The same Facebook person says that they thought Michael looked angry that day. I can imagine why: he just had to file a lawsuit against Julien’s because ‘his manager’ had agreed to auction off all his possessions! Michael announces 10 shows. 6 days later, another 20 shows are added, and then another 20, totalling 50. Michael is later reported to say he went to bed knowing he was doing 10 shows, and woke up to find he was doing 50. So who authorised the increase? The AEG contract for the This Is IT concerts (if genuine) has been circulated on the internet, and states a maximum of 31 shows. I speculate that Tohme agreed to the first increase of 20 shows, because, as we know from the taped telephone conversation mentioned earlier, Tohme had the authority to do this. Do I think he checked with Michael first? No, I don’t. I think he saw the opportunity to make big bucks out of Michael Jackson. When those shows sold out in hours, Randy Philips of AEG rang Michael to ask if he could add a further 20 shows. So am I surprised that Tohme was sacked later that month? Reading between the lines, I’m speculating that Tohme (who was president of MJJ Productions) orchestrated the initial AEG contract, and did not make sure that Michael understood the implications,  and when Tohme handled the Juliens’s arrangements, again the implications weren’t explained to Michael. When Michael realised what was happening, he filed a lawsuit against Julien’s and Tohme was fired.

Leonard Rowe took over as manager on 25^th March 2009. Leonard had managed the Jackson 5 in 1979, so he had worked with Michael before. Things don’t start off well. Michael asks Rowe to re-schedule some of the concert dates for This Is It with AEG – Rowe speaks to Randy Philips who flatly refuses. Michael comes to an undisclosed financial agreement with Julien’s on April 14, and the auction of the items from Neverland is cancelled, and the items are put into storage. Interestingly, Tohme is named in the joint statement about this,  not Rowe. So at this point he may still be president for MJJ Productions. A letter dated 5^th May is sent to Tohme, preventing him from representing Michael Jackson. Tohme denies receiving the letter. By 15th May, Michael may have become aware of the lawsuits taken out against Rowe by R Kelly and Ne-Yo in 2008, and Michael asks his old manager Frank DiLeo to fire Rowe. The letter is dated 20^th May , but Rowe denies receiving the letter (I’m seeing a pattern here).

So when did Frank DiLeo come back on board? We don’t know the exact date at this point, but DiLeo says Michael asked him back, and apparently he came on board but worked in the background, so I speculate this was around April/May. DiLeo had been Michael’s manager during the Golden Years of the ‘Bad’ tour and ‘Moonwalker’ film, but was fired in 1989. As soon as he replaced Rowe, DiLeo negotiated moving some This Is It concert dates into 2010, and put a call into John Branca, a lawyer that Michael employed for many years until 2006 (or 2003, depending which article you read!) .

So I think Michael was getting his dream team back together. In my second post Reading between The Lines I have already gone into detail as to why I think this was.

But if I had been Michael, and had had to change my manager this often after the AEG contract was signed, I would be feeling pretty fed up.  After everything Michael had been through in the past 9 years with the dispute against Tommy Mottola, the Bashir fiasco, the trial, he was now finally on the cusp of reigniting his career, and he cannot even rely on his own managers. If I had been Michael I would have thought ‘Why am I bothering?’.  It must have been hard enough when people outside his camp attacked him and tried to benefit from him, but when the people inside his group started to do the same, he must have felt completely betrayed. Added to that, Raymone Bain, another former manager, was suing him for $44 million in May 2009. If he was having problems with AEG, as I speculated in my previous post, it must have felt like everything was imploding in on him. Hardly a joyous comeback. Hardly an atmosphere in which to engage with dancers and musicians and work on a spectacular show.

It’s enough to make anyone want to jack the whole lot in and walk away.