It's a growing Hollywood trend ... tens of millions of dollars gone? Sue the guy who handled your finances! But, legally, who should shoulder the blame -- and more critically, pay the price -- when a celebrity once worth hundreds of millions sees most of it disappear? And what lessons are there for those of us whose net worth hasn't quite hit eight or nine figures?
Johnny Depp is the poster child for this dilemma after his reported net-worth of $200 million dwindled to a small fraction of what it once was. But Depp is far from alone. This summer, Alyssa Milano filed a $10 million lawsuit against her former business manager claiming financial ruin. And Lisa Marie Presley recently announced, through her attorney, that she is in the same boat, preparing to sue her former business manager for $100 million in losses.
The Depp lawsuit appears to be the most heated at the moment. Recently, Depp's former financial managers and advisors added a new lawyer to an already-ugly legal battle by filing to foreclose against two of Depp's houses, including his primary residence. The lawsuit alleges that when Depp was in deep financial trouble, his financial management company, TMG, came to his rescue with a five million dollar loan. TMG says it loaned the money on a short-term basis, to pay off another bank loan that was about to come due in late 2012. Depp agreed to sell off some his assets, including his beloved yacht (which he purchased for $10 million and spent another $8 million renovating) and repay TMG shortly thereafter, according to the lawsuit.
Depp never paid back most of the loan and instead fired TMG. In January of 2017, Johnny Depp sued TMG and its owners, asking for more than $25 million in damages and to rescind the $5 million loan. In that lawsuit, Depp claims that TMG engaged in gross mismanagement, fraud, self-dealing, and even lied to Depp to cause him to believe he was on solid financial footing when he wasn't. The suit also alleges that TMG took out massive loans without Depp's knowledge, for above-market interest rates, and doled out nearly $10 million to others who worked for or were close to Depp, but without the actor's knowledge or approval. Depp accused TMG of charging excessive fees and failing to pay his taxes and other debts. In the lawsuit, Depp points out that he has earned hundreds of millions of dollars in his career.TMG counter-sued and used the occasion to detail, in a public-filing, Depp's outrageous spending habits, including spending about $2 million per month. These monthly bills included costs to maintain 14 different residences, $30,000 per month on wine, and $3.6 million per year for wages to his 40-person staff. TMG asked a judge to declare that Johnny Depp alone was responsible for his financial troubles and sought unpaid management fees in return. That was before the recent filing to foreclose on Depp's homes to secure repayment of the $5 million loan.
TMG and its owners also deny Depp's allegations. They claim that they kept him informed of his finances and repeatedly warned him to control his spending habits. This culminated in what they describe as a "come to Jesus" meeting with Johnny Depp, which led to the $5 million loan that they made to save him from financial ruin and public embarrassment. Depp now claims he didn't even know about that loan until after he fired TMG. He says he was completely in the dark and merely signed documents when TMG asked him to, not even knowing what he was signing.
The story is similar with Lisa Marie Presley. She once had an 85% interest in Elvis Presley Estates, inherited from her famous father. She claims that her financial advisor, Berry Siegel, sold those holdings and invested the proceeds. Within 10 years, Presley claims $100 million was gone, the investments tanked, and she was left with $14,000 in cash and hundreds of thousands of dollars of credit card debt and millions in unpaid taxes. As with the Depp lawsuit, she blames her former financial manager for lying about her financial condition and charging excessive fees.
Siegel's position reportedly will be that Presley's spending habits are to blame, and did everything he could to try to get her to stop her excessive spending. He plans to file his own counter-suit for unpaid management fees.
Lisa Marie Presley already faces a legal battle with her estranged husband, Michael Lockwood. He seeks $40,000 per month in spousal support based on the parties post-nuptial agreement, but Presley says she cannot afford it.
Alyssa Milano's lawsuit echoes the claims in both the Depp and Presley cases, seeking $10 million against her former business manager for failing to pay her taxes and bills, inducing her to make poor investments, giving her false information about her finances, conflicts of interest, and other mismanagement. Following the same defensive playbook, her former advisor claims that Milano engaged in excessive spending and is to blame for her own financial mess.
The theme between all three is the same - either the celebrity's financial advisors lied and took advantage of them or they ignored advice and overspent themselves into ruin. In all three cases, only those directly involved know who is telling the truth and who isn't. But it should all come out in court. In each instance, if proper advice was being given and ignored, there will be a clear paper trail. When good financial advisors give advice -- especially important warnings to stop overspending -- that advice will be well-documented.
And certainly, in each case financial statements should have been sent to the clients regularly to keep them properly informed. Were they sent in these cases? And if so, were they accurate? The documents are the key to who will likely prevail in each case.
That's why it's so important for everyone to take responsibility for their own finances and investments. Certainly many wealthy people rely on advisors and experts to help with their money, but that doesn't mean they should turn a blind eye to what is happening. Everyone -- wealthy and modest investors alike -- need to review monthly or quarterly statements and make sure they understand what is happening with their money.
If the numbers don't add up, and if the bottom lines don't trend in the right direction year after year, it's time to seek a second opinion and look for help elsewhere. If you lose trust in your advisor, it's probably time to find someone new.
And financial advisors are smart to document their concerns to clients by confirming certain advice in writing. Many financial planners are blamed when clients are not happy when their bottom line isn't what it once was. A clear paper trail can be very important down the road. And if clients still don't follow important advice and appear headed towards certain disaster, that's when the advisor may want to end the relationship.
For Johnny Depp, Lisa Marie Presley, and Alyssa Milano, determining who was truly at fault will be expensive and difficult for everyone involved. Certainly both sides wish they could have done things differently in hindsight.
Danielle and Andy Mayoras are co-authors of Trial & Heirs: Famous Fortune Fights! and attorneys with the Michigan law firm, Barron, Rosenberg, Mayoras & Mayoras, P.C. Click here to subscribe to their e-newsletter, The Trial & Heirs Update and learn more about their book. You can reach them at [email protected]
