Michael Jackson’s agreement with AEG: EVERYTHING HE HAD for a $6,2 mln. PROMISSORY NOTE. part 4

Part 4

The more I read the so-called ‘contract’ with AEG the more I realize that its middle pages are so alien to the first and last pages of it (made as a letter to Tohme) that the inside of this ‘contract’ produces the impression of a bright new denture among the decaying teeth.

Is THIS a contract? (click on the image to enlarge)

What I mean is that there is too big a contrast between one and the other. The opening in the form of “Dear Dr. Tohme Tohme” is too personaland lacks the minimally required formal elements of a contract, as well as such indispensable basic points like number of shows, duration of the tour, who pays for what, etc.

The strange impression the first page produces is enhanced by the enumeration by the Promoter of his relatively unimportant rights to sell merchandise, solicit sponsors, use of the Artist’s name, etc. in the place which is usually allotted to the main clauses of the contract.

In contrast to this absolute inaccuracy of the first page of the ‘contract’ its middle pages produce the opposite impression – here you see the highly professional language and an extremely intricate and winding manner of wording various clauses which reminds you of a chess game (one point depends on another and this other depends on the third, and this third depends on whether something else in another clause is fulfilled or not).

In short the middle pages of this document are the epitome of legal demagogue the sole goal of which is to deliberately make easy things difficult for the reader, and the whole of it is a terrible contrast to the personal and highly informal beginning of the ‘contract’.

Fake signature (on the left) for Michael Jackson as head of the company

The last page of this document is also a stark contrast to its middle pages – besides also being highly inaccurate it contains a statement that the final agreement will be still negotiated  “expeditiously and in good faith” while all pages prior to it are screaming finality in each of their words.

The outrageous fact that Michael Jackson’s signature on the last page is surely a fake not only makes the whole ‘contract’ invalid but points to some criminal aspects behind the façade of it. But when you look at the attachments to this document (which have numerous cross-references to the middle pages ) you see highly professional papers which carry genuine Michael’s signatures both for himself and his company. This does not make the ‘contract’ valid (as attachments cannot override the contract as one of our readers rightfully said) but makes you wonder why the attachment is done so thoroughly while the ‘contract’ is done so inaccurately? What can this riddle mean?

A lot more other questions arise when you look at these papers. If both the ‘contract’ and promissory note speak of advances to the Artist why did Michael sign the most important document – under which he could theoretically lose his assets because of the advances – but didn’t sign the contract itself which was to provide him with these advances? If we were in his place we would probably do the opposite, wouldn’t we?

We also know that if some papers are related to each other we either sign all of them or don’t sign them at all. So if that contract had some crucial ‘defect’ to it, Michael wouldn’t have probably put his signature in either of those papers – instead of signing the most important part and refraining from signing the rest.

I see that you also understand that something is terribly wrong here.

I’ve been thinking about the reason why all this mess is happening in these papers and the only reasonable explanation I can find is that this co-called contract is actually a compilation of different papers dealt with and partially signed at different points in time.

The Letter of Intent was probably read and signed by Michael Jackson (as an individual only) on January 26, 2009 but the attachments to it were most probably made later.

Since the attachments are in full accordance with the middle pages of the ‘contract’ it means that those parts of the ‘contract’ were most probably inserted into the Letter of Intent later too – which is the reason why they produce the impression of being alien to that ‘contract’.

Exhibit A with the main Definitions of the contract has no date or signature

Exhibit A (with its main Definitions) does not have a single date or signature on it at all – so it could be attached to the rest of the papers at any time, and since this is a key to the interpretation of the ‘contract’ text, its later insertion into the ‘contract’ could easily alter the whole meaning of it. This way the Artist could read one text at first but as soon as new definitions were attached to it, it could immediately transform into something totally different – we have earlier seen how a change in the definition of one term only can change the meaning of the whole text and make it more demanding on the Artist, less favorable for him and much graver in its consequences.

There is one good point about Exhibit A though – the absence of the date and any signatures on it makes the paper completely void and therefore this attachment may be totally disregarded in my opinion. It is no more an official document than the toilet paper in your bathroom on which you can write whatever you like but it won’t change anything no matter what definitions you specify there.

So the main documents we should be looking into are the ‘contract’ (or a Letter of intent to be more exact) and two attachments to it – Promissory Note and Inducement Letter, as these are the only documents bearing at least one Michael’s signature on them.

The fact that one the two Michael signatures on the last page of the ‘contract’ is forged gives us enough reason to suspect that there should be more criminality in these papers than we see at first sight. As our aim is not so much to analyze the totally inhuman terms of this document (which is a fact obvious to everyone),  but see the true intentions of those who worked on this document, our main goal is to find where the criminality (if any) is, and disclose the secrets which are thoroughly hidden in these documents.

Leonard Rowe’s book fortunately provides all the three papers we are interested in.

The first one you are already familiar with is a letter to “Dear Dr. Tohme Tohme” with middle pages looking like a real contract and signed by Michael as an individual only and the other signature being a complete joke (for which those responsible for it can even go to prison if experts take the trouble to analyze it).

The second paper is a Promissory Note saying that $6,2 mln. will be loaned to Michael if he guarantees its repayment by the assets of his company, and the third is the Inducement Letter which states that Michael guarantees the performance by Artistco of all its obligations to AEG Live LLC.

All the three refer to the same date – January 26, 2009. But if the date is the same how was it possible to make them at different points in time then?

Promissory Note, page 1

A closer look shows that the date of the Promissory Note is put in handwriting which (theoretically) can point to someone meddling with this document. The second time the date of January 26, 2009 is mentioned in this paper is as a reference to the ‘agreement’:

“… the principal amount (of the advances) shall be reduced by … the portions of … advances which are Earned by the Artist under the terms of the Tour Agreement dated January 26, 2009”

Inducement Letter carries Michaels signature but has no date

The Inducement Letter (Exhibit B) also refers to the ‘agreement’ dated January 26, 2009 but does not carry a date of its own at all:

Exhibit B

Inducement Letter – Michael Jackson

As a further inducement to AEG Live LLC (“Promoter”) to enter into the foregoing Artist Agreement with the Michael Jackson Company, LLC (“Artistco”) dated January 26, 2009 (such agreement including the exhibits thereto being referred to collectively as the “Agreement”), it being …. 

……signature…………………

Michael Jackson

(no date)

The goal of mentioning the date of the ‘contract’ within the attachment is not only to tie it to the text of the contract but to produce the impression that both documents were made on the same day – which may be critically important when the document does not have a date of its own. And this is absolutely not the same as putting the date under the signature in a document or somewhere in its headline.

As an example imagine that you are working on some paper, say in March, and then make a reference in it to a contract made in January – so will this reference mean that your paper was made in January too?

The above proves to us that :

• the attachments are not free from the inaccuracies found everywhere else in these papers,
• one date in handwriting and other being totally absent can speak to a possibility of AEG guys attaching these papers to the Letter of Intent later,
• since those attachments are closely related to the middle pages of the ‘contract’ these pages could be written and inserted into a ‘contract’ later too.

So the end result we are looking at can very well be a cut-and-paste job where the initial document was a Letter of Intent addressed to Tohme. It outlined the main directions for future negotiations and Michael signed it (as an individual only) as this document wasn’t binding him in any way at all.

At some other point in time the Inducement Letter and Promissory Note were prepared as separate documents and were also submitted for signature to the Artist after which they were attached to the Letter of Intent together with some middle pages which they had a close relation to.

Since these documents is all we have now it is apparent that when it came to signing the final contract the Artist read the suggested version but did not accept its slavery terms and refused to sign it  – so all AEG was left with was the compilation of papers we see now.

This was evidently the point when the relations between the parties went terribly sour. Leslie’s blog says that Michael began to feel hatred for his right-hand man Tohme (how awful should a person’s misdeeds be for Michael to feel hatred for him?) and witnesses said that they noticed Michael and Randy Phillips being on bad terms too.

However the project was already in full swing and was widely reported in the press. Michael thought he was more or less safe as the final contract had not yet been signed, and besides the financial difficulties and inability to return the advances also faced a psychological dilemma – he couldn’t disappoint his fans and produce the impression he was backing away from his promises as this would have immediately backfired at him and would have been interpreted as his inability to perform.

AEG as the other party to this deal was most probably never distraught by the absence of the final contract. Though no final agreement was signed it was a matter of sheer technicality for them to combine a couple of papers here and there and send them by fax from Michael’s company via dear Dr. Tohme Tohme. The cut-and-paste “contract” allowed for such form of communication, as a photocopy of Michael’s signature was considered to be as valid as the original and this small technical operation gave AEG the precious paper which finally suited all their needs.

It is very well known that Michael publicly complained at the time that he was kept in the dark as to his own business affairs and didn’t even know what his financial situation was. Sorting things out for him was most probably impossible at the time as Dr. Tohme was in full control of the situation while Michael had other things to attend to – create the show, get ready for the performances and do many other innumerable things connected with the tour.

Knowing that AEG didn’t have the final contract from him I can easily imagine Michael thinking that there would still be time to sort out the problems later – when it came to mutual settlements. At the moment the only real thing he was worried about was the number of shows (which suddenly increased) and the progress of the show (which was extremely slow as auditions for dancers started only some time in May 2009 according to Leslie’s blog).

If this reconstruction of the events is more or less correct and all of us agree that Michael never accepted the terms of this ‘contract’ the next question arising will be why he was reckless enough to sign the Promissory Note under which he was giving all his assets as collateral for some advances paid?

Well, firstly, most probably he needed some cash. He also knew that he was fully entitled to an advance as any other performer is (please see information provided earlier about standard live performance contracts).

Those advances could cover some of his most urgent needs and signing the Promissory Note and Inducement letter were the only conditions on which he could obtain them. Setting those conditions on the part of AEG were understandable to a certain extent – the producer of the show cannot give away millions without first having a written confirmation that one day he will receive the money back, can he? And in the circumstances when the final contract is not signed this point can become even more important than ever (and since there was no contract Michael knew that AEG needed at least some confirmation from him).

AEG specified both documents as a condition for obtaining the advances and made special stress on the fact that the promissory was not to be secured by the property belonging to the Artist – but by the property of his company only. This should have put Michael on his guard but on the other hand he knew it too well that all his assets belonged to the company, so what else could he offer to AEG?

The middle pages inserted into that cut-and-paste contract later stated these two documents as a condition for the advance of $5mln:

 4.2.1 Initial Artist Advance. Conditioned upon the execution and delivery of the inducement letter attached hereto as Exhibit B, the promissory note attached hereto as Exhibit C (which promissory note shall not be secured by any property belonging to Artist, but shall be secured by property owned by Artistco), by Artistco and Artist, Promoter shall loan Artist and Artistco the sum of Five Million United States dollars (US $5,000,000)  (the “Initial Artist Advance”) as an advance against Artistco’s future entitlement to Contingent Compensation.

This advance given to the Artist was to be spent in a somewhat strange way – the distribution of it was just too much regulated on the part of AEG. For some reason AEG was terribly worried about Michael’s relations with a certain company to which he owed $3mln and the worry went to the extent that they specified payment to this company as another condition for providing the money.

The reason why I say that the cut-and-paste job was made on the contract later is because the Promissory Note (probably signed earlier) did not set such a condition yet:

“4.2.1 Such payment shall be made within four (4) business days of the satisfaction of the foregoing conditions by wire transferring (a) Three Million United States Dollars (US $3,000,000) pursuant to written wiring instructions provided by 2 Seas Records LLC as payment made on behalf of Artist and/or his affiliates(s) in connection with Artist’s settlement with 2 Seas Records LLC, and (b) Two Million United States Dollars (US $2,000,000) to Artistco pursuant to written wiring instructions provided by Artistco.”

In my opinion it was none of AEG’s business to what use the Artist would put his advance, however over here we clearly see that AEG is forcing Michael Jackson into paying this company. This impression is enhanced by one of the follow-up clauses of the ‘contract’ which says that no other advances will be given to the Artist unless he proves he has paid 2 Seas Records LLC.

This unusual condition comes among several others which include the need for the Artist to obtain:

• a cancellation insurance naming AEG as a loss payee (or the party which will receive the money),
• another cancellation insurance in favor of Promoter to cover the risk of AEG’s Pool expenses – which we’ve already discussed and which, by the way, is named in Exhibit A as AEG’s obligation (when people do cut-and-paste jobs such unpleasant inconsistencies may occur),
• give approval for the details of the leg of the Tour
• and provide written proof that the Artist settled his dispute with 2 Seas Records, LLC.

The cut-and-paste contract (not accepted by the Artist) says that no other advances (except the Initial Advance) will be paid to the Artist unless he settles the dispute with the 2 Seas Records company:

16.4 Conditions to Advances.

16.4.1 …”with the exception of the Initial Artist Advance, Promoter shall have no obligation to pay any Advances until such times as…. (c) Artistco delivers to Promoter evidence satisfactory to Promoter that the dispute with 2 Seas Records LLC has been settled and Artisto abides by all terms and conditions of such settlement”

But the very next paragraph demands that Michael’s company submits proof of its intention to pay (or that they have already paid) to that company or otherwise there will be no Initial Advance at all (while the Promissory Note does not say anything of this kind):

16.4.2  Notwithstanding any other provision of this Agreement…  Promoter shall have no obligation to pay the Initial Advance until such time as Artistco delivers to Promoter evidence satisfactory to Promoter that the dispute with 2 Seas Records LLC has been settled and that Artistco has either paid the amounts owing to 2 Seas Records LLC under such settlement agreement or will pay such amounts (including by permitting some or all of the Initial Advance to be paid to 2 Seas Records LLC).

This is incredible… Why is AEG so terribly worried about this payment? 

Leslie’s blog says that 2 Seas Records LLC is a company owned by the Bahrain sheikh:

• 12/05/2010  MJ worked with a Bahrain company named 2 Seas Records in 2006. They planned to release new music and other joint ventures. Back then MJ’s involvement was a frequent question. I just found some documents, according to them MJ never owned the company, he simply had an agreement with its owner the Bahrain sheikh. The company has been dismissed on August 19, 2009. http://lesliemjhu.blogspot.com/2010/12/2-seas-records.html

Since usually the other party’s debts are absolutely no business of the other side it is my guess that the obligations Michael had towards this company were standing in the way of AEG’s plans. One of the suppositions is that they were probably unwilling to go into a lawsuit with the sheikh of Bahrain in case they successfully obtained Michael’s assets, so the demand to pay to the royal prince could be a preventive measure on their part to avoid possible complications in the future.

But another explanation is probably even more reasonable than the first one – it seems that AEG wanted Michael very much to spend the advances in such a way that the money could not be easily retrieved and returned to AEG in case they demanded the advances immediately back.

Whatever the case is with the $3mln. for the 2 Seas Records company the deduction of this sum from the Initial Advance of $5mln. was leaving Michael with $2mln. only.

The future of the remaining sum was also interesting. The way AEG worded it (“wire transferring US $2,000,000 to Artistco pursuant to written wiring instructions provided by Artistco.”) it seems that AEG was not going to transfer the remaining $2 mln. money directly to Michael Jackson’s company or his individual account but was to wait for the company’s instructions to transfer the money elsewhere.

I may have become too suspicious over this AEG/Tohme business but remembering that the company was fully run by Michael’s “big friend” Dr. Tohme at the time I cannot find the above statement as very encouraging either… If everything had been clean and straight here AEG could have stated they would remit the money directly to Michael’s account and he could transfer it later to anyone he was willing to – however AEG was going to wait for some reason for the written instructions from the Artist’s company? Meaning Dr. Tohme?

In addition to the above $5mln. the other advance covered by the Promissory Note for $6,2mln. is an advance for the Artist’s home rental: 

4.2.2 Advances to Cover Home Rental. Conditioned upon the execution and delivery of the inducement letter attached hereto as Exhibit B and the promissory note attached hereto as Exhibit C, Promoter shall pay the monthly rent on Artist’s home located in Bel Air, California for a period of twelve (12) months at the rate of $100,000 per month (totaling not more than US $1,200,000) as an additional advance (“Home Rental Advances”) against Artistco’s future entitlement to Contingent Compensation….

The above makes it absolutely clear that despite everything we’ve heard from the media about AEG’s generosity and provision of Michael with a luxurious mansion all of it was a complete lie as the rent for the house was to be paid solely by the Artist. However what surprised me most in the above clause is that the rent was calculated for 12 months ahead. Am I mistaken to think that Michael was supposed to go on a tour to Europe for a long time or was he supposed to live in a house at Bel Air California and for a year too?

As regards the period AEG expected Michael to stay in London Randy Phillips made a joke about it which most probably contains a grain of truth in it and speaks to their plans to keep Michael Jackson there for a very long time:

Randy Phillips told BBC Radio 1’s Newsbeat: “Mike asked me how long he would be in the United Kingdom for and I told him ‘Probably long enough to get a British passport’.

http://www.telegraph.co.uk/culture/music/michael-jackson/4987783/Michael-Jackson-O2-tickets-hottest-on-planet.html

Besides the 12 months period of the rent another surprising thing is the rate at which the rent was to be paid. For the sum of $1,2 mln Michael could have surely bought a house, couldn’t he? Why waste money on useless renting when he could buy some real property instead? But if I remember it right Leonard Rowe said that this costly house was found for Michael by AEG too and I can bet it almost on anything that it was Randy Phillips who convinced Michael that renting a luxurious house was a better option for him than buying a ‘modest’ house for $1,2 mln – image is everything when it comes to promoting the show!

Besides getting Michael into more debt this way AEG had another added advantage from such an arrangement – a rented house cannot be sold and the money spent on it cannot be retrieved either, so the chances that the Artist will be able to pay the advances back immediately upon AEG’s demand are quickly diminishing with every new step they are taking….

There is one more point about this Home rental business which I would like to explain here. The thing is that it would be wrong to assume that Michael was to get the $1,2 mln.  for the home rental in cash or as ready money on his bank account.

“At the Artist’s request” the whole sum of $1,2 was to be reserved in the landlord’s bank account out of which the landlord was to receive his payments (most probably on a monthly basis) so that the Artist was never able to lay his hands on that money. This was another of those methods to make the money irretrievable – especially if we talk about the Letter of Credit manner of payment chosen by AEG.

Payment by a Letter of Credit means that the sum of $1,2 mln. is “frozen” in the bank by AEG and the party to whom the money is due (the landlord in this case) can receive it bit by bit if he submits documents proving he has the right to each new portion of the money.

If the Letter of Credit is irrevocable (this type of L/C is also mentioned by the ‘contract’ in another connection) it also means that AEG cannot revoke the money or take it back. Usually this manner of payment is presented to the other party as a great advantage and as a guarantee of payment to it – however in Michael’s situation it clearly turned into a big disadvantage. If, for example, he said he didn’t need the house for a whole year or wanted to return the advance received from AEG for this purpose I doubt very much he could ever do it.

June 23, 2009

Please remember that we are talking of a cut-and-paste contract which Michael never signed.

So everything in the way those advances were to be paid to the Artist showed that AEG didn’t want him to have an opportunity to repay them back – especially if this had to be done quickly.

This opportunity was in direct relation to the Artist’s assets – if he could repay the advances the assets remained his property, but if he couldn’t he could easily lose them.

Please compare it with a more normal situation when all the money is put into the Artist’s bank account directly and he returns the whole sum (or part of it) to AEG at their first demand – and you will see that it was absolutely not in AEG’s interests to give Michael a slight chance to keep that money intact.

Randy Phillips realized that Michael was far from broke (otherwise they wouldn’t have launched that hunt for his valuable assets) but he was also fully aware that Michael had problems with cash. This is what he said about Michael’s situation in an article which – in addition to the money issue – provides other details which are worthy of note:

By Rowena Mason

14 Mar 2009

“He’s 50 but he’s going to dance his ass off,” says the confident, quick-talking Randy Phillips. [what a disrespectful way of talking of the greatest performer in the world]

This precise, organisational mastermind has kicked up a global ticketing storm just four months after a high-pitched “yes” was uttered from Jackson’s pinched lips. The pair go back 15 years – they lost touch, but after the promoter joined AEG he made a “hit list” of acts to entice. Jackson was at the top.

“We finally made Mohammed come to the mountain of the O2,” Phillips grins. Jackson refused twice, but several months ago, the idea arose as the superstar was putting together a restructuring plan for his finances.

“They make out Michael’s finances are much more dire than they are,” Phillips assures me. But he needed the cash, right? “I asked him straight off: why say yes to the tour now? Was it the money? He said: you know what, my kids are old enough now.”

Jackson agreed to do 10 dates for AEG, before relenting to 40 more.

So how much is AEG getting out of this? Phillips laughs. “We’re not in this for the money. We’re taking a huge risk on Michael”.

“If Mike gets too nervous to go on, I’ll throw him over my shoulder and carry him on stage. He’s light enough.”  Jackson’s nerves aside, the deal could have been off if Phil Anschutz, the billionaire behind AEG had not taken to him.

“Phil had to give me permission to spend all this money. I joke that I’m going to make him a millionaire – from a billionaire.” Anschutz has been described as prickly, but Phillips says he is “respectful, a good listener and brilliant”.

AEG is certainly putting its all into making the tour superlative. Hiring Kenny Ortega, the man behind High School Musical, booking superstar guest appearances, putting money into a new 3D film of Thriller and developing new technology to make it a historical spectacle.

http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/4987420/Randy-Phillips-profile-Michael-Jacksons-promoter-is-making-all-the-right-moves.html

Besides Randy Phillips being fully aware of Michael’s cash flow situation and AEG’s customary lies that “they are not in this for money” and that it is them who finance the show (and not Jackson), we learn with some surprise here that Randy Phillips and Michael Jackson met each other 15 years ago, since then lost touch but for the past several years Michael was on AEG Live’s hit list.

We also got a confirmation straight from Randy Phillips that it was AEG who wanted the deal and that Michael did initially agree to do 10 shows only.  

It is time however to see what the the Promissory Note said about conditions for Michael to obtain the advances mentioned above.

Surprisingly, but after reading all the harsh language AEG later used in the ‘contract’ the Promissory Note strikes you by an incredibly nice and all-attentive attitude towards the Artist.  If it weren’t for the detailed description of what was put up as collateral for those $6,2 mln. this Promissory Note would make an absolutely charming read.

Almost everything is fine with this paper. This shouldn’t surprise us if we remember that at that moment AEG was only laying a trap for the Artist – so they are going out of their way to show him that the document suggested for signing is a mere formality full of incredible benefits for the Artist.

Actually all the Promissory note is is a promise to pay – the dictionary defines is as:

•  “a written, dated and signed two-party instrument containing an unconditional promise by the maker to pay a definite sum of money to a payee on demand or at a specified future date”. http://www.answers.com/topic/promissory-note

However this Promissory Note looks more like an inducement to enter into a deal. It is so pleasant a document that it is almost impossible to reject the money offered by it – the sum of$6,2 mln. will be provided at no interest to the Artist,  the date when it is supposed to be paid back will be only six months after the last show in the first leg of the Tour (or March 2010) or alternatively six months after AEG makes awritten request to the Artist to pay the sum back.

Only after that the interest will accrue, but the Artist should not worry about it at all as it will be no more than 10% per annum. If God forbid, the Artist ever receives from the Holder [AEG] of this promissory note a demand for an interest exceeding the highest lawful rate the total sum of the loan will be immediately reduced by that unlawful sum. Moreover, the date of expiration of this note can be extended and the term may be renewed by a simple signing of a written modification of it.

Special emphasis is made on the fact that the sum of the advances will be reduced by the portions Earned by the Artist (“Earned” marked by a capital letter in the original).

They are even ready to cancel the Letter of Credit opened in favor of the landlord (for $1,2 mln.) if the Artist pays to the landlord directly (for example from those $2mln. which are left to him after a settlement with the 2 Seas Records company) – only the Artist doesn’t yet know that he will be later ordered by AEG to pay this company as this condition it is not yet stated in this beautiful document.

In short this Promissory Note seems to be an absolute marvel and looks like a complete godsend to the Artist from the exceptionally kind, considerate and generous guys from AEG Live…

Indeed, if you compare the terms of this $6,2 mln. advance with the terms of a usual bank loan the above terms will look decidedly better than anything any bank would ever offer – because if the Artist takes this advance from AEG, say in January 2009, the earliest he will be required to pay the full sum of it will be only in March next year, and all this time there will be no interest on it!

SO WHAT if AEG wants a collateral for it? It is nothing unusual as even the dictionary says that a collateral is an indispensable element of a promissory note:

• “A promissory note is a formal commitment between two parties that is usually necessary when money is borrowed and lent between them. All business loans secured from a bank or other lending institution have some sort of promissory note, but they are also recommended for loans between two individuals (even if the loan is between family member or close friends) to avoid any misunderstandings or possible legal troubles. A promissory note should have several essential elements, including the amount of the loan, the date by which it is to be paid back, the interest rate, and a record of any collateral that is being used to secure the loan”.

Well, even a bank requires a collateral or otherwise they don’t give a loan, so why should AEG be any different? Looking at how nice the terms of this promissory note are no one would never expect these charming people – who provide you with $6,2 mln. asking absolutely nothing for it except some guarantees in the form of your assets – to be capable of any malicious intent, especially since they’ve been following you with their offers and courting you for two years now…

And what danger can leaving the assets as collateral present to the Artist? No danger at all. Randy Phillips calculated each concert to bring approximately $1,5 mln. each, so the first four shows some time in July will be enough to cover all the advances while the actual term of the note will expire only in March next year – so there will be plenty of opportunities to repay that.

Even if the tour does not bring much profit to the Artist he will surely get the minimal sum of $6,2 mln. by the end of its first leg on September 30, 2009 while the note will mature only six months after that and the maturity date can be extended further by signing a written modification of the note…

Do you see how easy-going it looks? Do you realize that it isn’t naïve to believe that such an arrangement is indeed workable and may be even beneficial for the Artist? And that it is very easy to trap the Artist into accepting these terms? Not to mention the fact that this sum could come in handy at the time when he needed cash most?

What I mean is that though all of us were extremely shocked by the fact that Michael agreed to give away his assets as collateral for the advance money from AEG, when you look into the seemingly favorable terms of the note and realize that it is common practice to secure collateral for obtaining a loan (which it actually was) you start thinking there was nothing usual about it and that the Artist could think that way too – especially since he had already used his assets as collateral several years before that (double use of it is possible as I’ve learned) when obtaining a multi-million loan from the bank and nothing terrible happened because of that. The assets were still his …. so why reject this beneficial offer from AEG?

Now that I am writing it, I can say in all honesty that if I had been in Michael’s place and had to balance between the need to pay some urgent sums and accept AEG’s offer of money I would have probably signed that paper too. Since he most probably didn’t see the final contract yet he surely didn’t know that later AEG would condition that loan by the requirement to immediately remit more than half of it to 2 Seas Records …

How on earth could he imagine that the intentions of the company, which gave him this extremely favorable no-interest loan, could go far beyond the range of a usual promoter/artist contract? How could he in any way envisage that it were his assets which were their main goal?

After all AEG is a well-established company with an excellent reputation and Prince also gave 21 concerts in London in 2007 and nothing bad happened to him, so why should Michael worry? Since the resumption of their business relations Randy Phillips was extremely charming to Michael and promised him a great restart of his career describing to him AEG’s truly gigantic opportunities… And how could the Artist expect any dirty tricks from this company the head of which he personally met and and who is by the way universally known as a devout Christian?

Michael’s signing the Promissory Note means that after a long period of doubt he finally decided to enter into cooperation with AEG and was ready to do at least those first 10 shows he was speaking about. From the moment of signing that Note he couldn’t back away from the project (unless he returned the advances of course) but not doing the concerts was clearly not on his mind as otherwise he wouldn’t have gone into this deal at all. Even if later he realized that he had got into a trap laid for him by AEG,  since that moment he was doing his best to honor his obligations – at least for fear of losing everything he had.

And what exactly was he losing in case something went wrong in his agreement with AEG?

The Promissory Note enumerates all of it on page 2 under a headline made in capital letters which stresses that the collateral will be pledged by Michael’s company only, but not the Artist as an individual:

The COLLATERAL wanted by AEG in exchange for $6,2mln. advances

I am really terrified to type everything AEG wanted from Michael Jackson for their miserable $6,2 mln. advance – the assets included everything Michael ever had, would have and could potentially have even in the future as head of his Michael Jackson Company LLC.

This part of the Promissory note opens with a covert attempt by AEG to try and bind the Artist – even before their final agreement is signed – by certain “secured obligations” which will make him fulfill everything they will state in the not-yet-signed future contract. It is disputable whether it is possible to bind the Artist that much about something which has not yet been signed but such an attempt is being made here:

SECURITY AGREEMENT — COLLATERAL OWNED BY ARTISTCO ONLY — ARTIST IS NOT PLEDGING ANY COLLATERAL.

To secure the faithful and timely performance of each Maker’s obligations hereunder and each Maker’s obligations under the Artist Agreement, and all extensions, modifications, substitutions, replacements, and renewals of all such obligations (collectively, the “Secured Obligations”), Artistco hereby assigns and grants to Holder [AEG], a security interest in Artistco’s right, title and interest in, to, and under the following properties, assets and rights, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof (all of the same being hereinafter referred to collectively as, the “Collateral”), contract rights, the right to the payment of money in which Artistco has an interest, insurance claims and proceeds, commercial tort claims, securities and all other investment, property and all general intangibles (including all accounts receivable and payment intangibles).

Did Michael have the first inkling that something was wrong with this paper when he read this horrible enumeration of everything AEG was entitled to in case he didn’t repay the advances?

Or was he more or less used to the procedure as he had signed a similar document before with the Barclays (or whatever bank it was) and knew that it was a standard form demanded by almost everyone who was giving a big loan?

Or did he think that the events of Default specified in the next point would never take place? Most probably he realized all that at once, but what I think he didn’t notice is the danger of one point which is also stated in this Promissory note:

DEFAULT/ACCELARATION

If any one or more of the following events shall occur (hereinafter called an “Event of Default”), namely:

(i)              default shall be made in the payment of any installment hereunder when due, and such default is not cured within five (5) business days after written notices thereof by Holder to Maker [by AEG to MJ]

(ii)            default in any other obligations contained herein, which default is not cured within five (5) business days after written notice of such default has been given to Holder to Maker, or

(iii)          if Maker shall make a general assignment for the benefit of creditors, or shall file or have filed against it a petition for relief under any chapter or provision of the Bankruptcy laws of the United States, as amended from time to time (and in the case of any involuntary proceeding the same is not dismissed within sixty (60) days thereof),

THEN, upon the occurrence of any such Event of Default, or upon the expiration of the term of this Note, Holder at its election, and without presentment, demand, notice of any kind, all of which are expressly waived by Maker, may declare the entire outstanding balance of principal and interest thereon immediately due and payable, together with all costs of collection, including attorney’s fees, and/or may exercise upon or enforce its rights to its Collateral, as are set forth in this Agreement.

This point is called ACCELERATION for a reason. What it essentially means is that in case at least one of the above events occurred AEG could demand from the Artist immediate payment of whatever sum of the advances remained and (or) this gave them the right to immediately enforce their rights to the Artist’s Collateral.

Let us go over these events of default once again (you probably didn’t find them dangerous enough when you read them for the first time – same as I realized their true worth much later and somewhat by accident too).

The events of default include:

•         non-payment of at least one installment (only at this point we realize that the advances are to be paid back in parts) at an agreed moment in time, and this situation isn’t corrected within a week’s time,
•         non-fulfillment of the obligations contained in this promissory note, and this isn’t corrected within a week,
•         filing bankruptcy by MJ.

Let me repeat that in all these events AEG could demand immediate payment of all the sums due to them and (or) they could exercise their rights on the Collateral.

Out of these three events of default the first one worries me most of all. All of a suddent it turns out that the advances are to be paid back in parts and on a regular monthly basis (a short paragraph in the follow-up text confirms it). These terms make a definite change from the initial terms stated on page 1 of this promissory note.

Page 1 specified it clearly that the whole sum was to be paid when the term of the Note expired:

• “Principal shall be due and payable in full on the Maturity Date”

And now on page 4 we suddenly learn that the Artist is to pay every month? Let us make some hasty calculations and see that this provision changes the situation dramatically as it means that the Artist will have to pay back some $440, 000 per month (or $6,2 mln. divided by 14 months if the term is calculated from January 2009 until March 2010).

Such an installment will be just too big for the Artist who will have only $2mln. on his hands after all those deductions are made and if he doesn’t make payment within 5 days from the “event of default” the Collateral will go to AEG.

Oh, I forget that at the time of reading this Promissory Note the Artist doesn’t know yet that he will have to pay those $3mln. to 2 Seas Records LLC because this Promissory note does not say a single word about the conditions which will be later set on provision of those advances…

I think it is absolutely no chance occurrence that this crucial point about the demand to repay the advances in monthly installments is hidden by AEG in a clause which is called “Prepayment”:

PREPAYMENT text is the art of hiding the most crucial points in the most innocent texts….

We have seen it before from AEG – they tend to mention the most crucial points of the agreement not in a separate clause (as they should) but somewhat in passing, so it is no problem at all not to notice them when reading the document.

Michael might have easily overlooked that point when he was studying the document – I didn’t notice it either though I read the document several times and with a magnifying glass too as I knew that something was wrong there and I was  specially looking for the trap AEG set for Michael in this paper.

However even I noticed it somewhat by accident – these AEG people are extremely devilish in hiding the most crucial issues in most innocent texts. They probably knew that Michael would not be reading the clause called “prepayment” as paying the advances earlier than he should was not in his plans. I didn’t read it either and for the same reason too.

Wait, and can we be sure that this Promissory Note signed by Michael contained this crucial point at the time Michael was reading it? The clauses are not numbered so that AEG could have inserted any number of clauses and even sheets in between them and …. what’s this? Oh my God, why didn’t I notice it earlier? Michael’s signatures under the Promissory Note come on a separate page again!

And this means that they could have inserted as many pages as they wanted into the Promissory note after it had been signed by the Artist.

What is going on here? The more you look the more inaccuracies you find even in the documents which seemed completely okay at first sight! The date is put in handwriting here, the clauses are not numbered, the signatures come on a separate page, the terms on page 1 contradict the terms on page 4, the crucial points are hidden in texts which have no relation to them and in addition to all that “all notices, approvals and consents required or permitted to be given hereunder” are to be sent by a fax machine again…

The signatures come on a separate sheet of paper AGAIN?

I cannot say whether Michael really overlooked all those ‘inaccuracies’ in this Promissory Note (the same way I did it) or they were simply missing at the time he was signing it as they could appear later due to someone meddling with the paper (which I don’t rule out at all).

All I can say is that now I am absolutely sure that in order to get access to Michael’s precious assets AEG was capable of any dirty trick to make him sign that crucial Promissory note. 

The people he was dealing with are really devilish racketeers who are exceptionally sophisticated in the art of swindle, deceit and setting incredible traps for their partners.

This isn’t business.

All businesses look for more beneficial terms for themselves, but not all of them cheat.

This is fraud – from the very beginning to the very end of it.

These ‘businessmen’ are simple predators who lure people into their lair and devour them live after that. With ‘businessmen’ like these you need to have a squadron of lawyers by your side to safeguard you from the numerous traps they set for you at each of your steps – the good, honest and capable lawyers whom Michael so rarely had and who were not standing by him at this crucial moment of his life…

No matter where this ‘contract’ takes us further, we can already see it as a monument to the utterly shameful, fraudulent and horrendous methods AEG employed in their business deal with Michael Jackson.

If this is the way they do business with everyone it is no wonder they accumulated all those billions. However something tells me that it was Michael Jackson they specially reserved this treatment for.