Prosecutor Says Jackson Is on the Brink of Bankruptcy

Prosecutors said Friday that Michael Jackson was nearly broke and so desperate for cash in 2003 that he allegedly held a teenager and his family hostage until they could be taped in a video tribute to him.

The video was sold to the Fox network for $3 million, according to Santa Barbara County prosecutor Gordon Auchincloss. For reasons that have yet to be publicly explained, the footage of the boy and his family making glowing statements about Jackson was not used.

In a nonjury hearing at the singer’s child-molestation trial, Auchincloss claimed that Jackson was on “the precipice of bankruptcy,” with a debt of $300 million and an additional $150 million in tax liabilities.

He said Jackson’s finances would “all come crashing down” in December. Auchincloss alluded to a Bank of America loan but was cut off by Santa Barbara County Superior Court Judge Rodney S. Melville, who said the discussion was irrelevant to the issue at hand.

Jackson attorney Robert M. Sanger agreed, adding that an estimate of Jackson’s worth today may not reflect his worth two years ago. In any event, he disputed the prosecution’s estimates and offered none himself.

Lawyers on both sides were wrangling over the attempt by prosecutors to subpoena information about Jackson’s finances from banks and accounting firms.

Melville, who said he didn’t want the trial bogged down by arcane financial testimony, set another hearing on the issue for Thursday.

If prosecutors can prove that Jackson was struggling financially in 2003, they want jurors to believe that he was plunged into panic by a damaging British TV documentary.

In “Living With Michael Jackson,” a show produced by journalist Martin Bashir, Jackson admitted that he enjoyed sharing his bed with young boys, although he insisted that nothing sexual occurred.

One of those boys, shown holding hands with Jackson in the documentary, is at the center of the current case. The boy and his family claim that Jackson and his employees isolated them at the singer’s Neverland ranch to secure their help in the rebuttal video that was sold to Fox.

In addition to child molestation, Jackson, 46, is charged with conspiring to hold the family against its will. If convicted, he could face 20 years in prison.

Jackson’s finances have prompted speculation for years.

In court Friday, Auchincloss called the singer a “spendaholic” who chalks up annual expenses of $35 million but brings in an annual income of $11 million. He pointed to a pending lawsuit in which the owner of a Los Angeles antique store claims that Jackson still owes him $450,000 for candelabras and other items.

About $270 million in loans from Bank of America Corp., backed by Jackson’s two major song catalogs, will come due over the next few years, The Times reported last year. A Bank of America spokeswoman declined comment Friday.

Jackson found some breathing room in early 2004, when he refinanced his debts to the bank with an assist from lower interest rates.

The debts to Bank of America are secured by Jackson’s publishing firm, Mijac, which sources told The Times last year is worth at least $75 million, and his 50% stake in Sony/ATV Music Publishing, a company whose holdings include the Beatles’ publishing rights, which would fetch several times more.

In addition to rights to his personal hits, Mijac has rights to the Sly and the Family Stone catalog, Curtis Mayfield’s “People Get Ready” and other songs. The Times reported last year that the firm returns profit to Jackson of $6 million or more a year.

Sony/ATV, for its part, generates profit for Jackson in the same range. Jackson paid $47.5 million in 1985 to acquire the Beatles’ song catalogs, one of the richest in music.

Ten years later, he merged those rights with Sony’s publishing unit, creating Sony/ATV and earning him $100 million.