Jacksons – AEG trial DAY 70. Dr.SLAVIT, INSURANCE and MURRAY as the TOUR cost in AEG EMAILS
While everyone seems to be following the lead of AEG in munching all those propofol stories let me continue to look into the heart of the matter which is absolutely not propofol irrespective of what they say. They are misplacing the focus intentionally.
Those who get easily bored are encouraged to skip the beginning and go straight to point 3 called “What animal is Tour expense?” while the rest will probably want the know some details.
1. ‘SLAVIT IS THE CORRECT MAN TO DO THAT’
After Debbie Rowe’s testimony on August 15 a video deposition of Dr. David Slavit was shown. No one paid attention to it which is an extremely deplorable fact – Dr. Slavit is connected with the AEG insurance issues and the AEG insurances issues are key to this case.
Unfortunately the transcript of his deposition is not available on TeamMJ as they managed to obtain only a sidebar discussion concerning something else, so we’ll have to limit ourselves to the ABC News tweets only.
Thursday August 15, 2013 DAY 70
Rowe was excused.
AEG called their next witness, Dr. David Hal Slavit, via video deposition. He’s a board certified otolaryngology.
He’s licensed to practice medicine in New York and New Jersey. He’s never been suspended.
Dr. Slavit performed physical exams in hundreds of patients. He has performed physical for purposes of insurance, he said.
He explained the difference of physicals: problem-focus, more complete and comprehensive.
Dr. Slavit has performed physical for performance cancellation insurance.
He said he checks vital signs, ear, nose, throat, neck, eyes, examination heart, lungs, abdomen and peripheral pulses.
Q: Who typically contact you for performance cancellation insurance?
Dr. Slavit said it’s usually insurance broker or artist management.
He said he’s done approximately 30 physicals for performance cancellation insurance, mostly for singers, but not all.
The majority of times, check comes from the insurance broker. He’s done physicals in hotels, rehearsal studios, artist’s home, office
Dr. Slavit said he’s done approximately 20 times for Robertson Taylor, insurance broker.
On Feb 4, 2009, Dr. Slavit conducted a physical on Michael Jackson in connection with a performance cancellation insurance.
Bob Taylor contacted Dr Slavit somewhere in the months prior to the physical. “He basically asked if I would agree to do the physical on MJ”
It was my understanding he was going to perform, Dr. Slavit said.
Yes, I requested to reviewed the prior 5 years of medical records, Dr. Slavit said. He wanted to be as accurate as possible.
I’d say it’s not typical, Dr. Slavit testified about getting 5 years prior of medical history, but he had done before other than MJ.
Dr. Slavit said this is done if there were prior questions of medical health.
There were questions that had been raised by the broker, Dr. Slavit said. He doesn’t know specifically what was asked.
Dr. Slavit said insurance broker questioned MJ’s breathing capacity, his pulmonary status and overall health.
Q: Nothing about prior drug abuse?
Dr. Slavit: Not that I recall.
The doctor did not ask anything else other than 5 years medical history. He said he was not limited in MJ’s examination at any time.
Dr. Slavit never received any MJ’s medical history, other than what the artist told him during examination.
Attorney showed documents doc prepared during and after the physical.
The physical was done at MJ’s house in Los Angeles, the doctor said.
Patient’s name on blood work request: Mark Jones. It’s an alias, Dr. Slavit said, just to protect Michael Jackson’s privacy.
Q: Did you find MJ to be in great physical condition?
A: Based on the informaiton I had, yes
Note on form says “today’s found Mr. Jackson to be in excellent condition.” It also says MJ had allergy and a bit of cold.
He was on short course of antibiotics, Dr. Slavit said, he’s not on any other medication.
Q: Did he tell you he was taking painkillers?
A: He told me he was not taking any painkillers.
He stated he was not taking any medications other than antibiotics, Dr. Slavit testified.
Dr. Slavit didn’t see anything that suggested MJ was not telling the truth. He didn’t find any typical signs of narcotic intoxication.
Dr. Conrad Murray follows Mr. Jackson on a regular basis, the form said.
Dr. Slavit explained Murray was identified by Mr. Jackson as his personal physician and reported seeing him as needed.
Dr. Slavit: He reported seeing him a couple of months prior to the physical just for check-up.
It was a routine check-up, Dr. Salvit said. MJ didn’t discuss the details of the visit.
Other than Dr. Kantor no one else was mentioned as providing care, Dr Slavit said.
Q: Did he tell you MJ said he liked Dr. Murray?
Q: Did he say he was a good doctor?
A: I don’t know if used that word
That he was caring for him, that he was satisfied with the care he was getting, that’s basically what he said, Dr. Slavit said.
Dr. Slavit’s form said MJ’s vital signs were normal. Heart sound was normal, no murmurs.
Dr. Slavit: I assessed his pulmonary status with stethoscope, no further pulmonary test done.
Q: Did you have difficulty drawing blood?
A: I had a little difficulty drawing blood.
He used MJ’s left arm, and took the specimen himself to the laboratory. Blood work result was normal consistent with MJ being in good health
Q: Was he capable of making decisions?
Form notes MJ was mature, open and candid with Dr. Slavit.
Q: Capable of control of his health?
Q: Why candid?
A: That’s the perception I got
Q: Was he lucid?
Q: Speech slurred?
Q: Did he say he had trouble sleeping?
A: He didn’t say he had trouble sleeping, he didn’t say he had insomnia.
Dr. Slavit: He denied any prior medical problem except for the cold.
Dr. Slavit wrote MJ was in good health, good diet and exercise. He interacted with his doctor for routine check ups.
MJ visited his laryngologist for minor issues, seemed proactive and attune to his health.
There was an acknowledgment of the need for rest or avoidance of exhaustion.
Q: Did MJ ask you to prescribe any medication?
Michael Jackson signed the forms. Dr. Slavit said he saw MJ sign it.
At the time of the examination the form was filled out with Michael Jackson. We reviewed the form before he signed it.
There are questions on the form that were filled out during the physical. Dr. Slavit said MJ was the only source of the responses.
Q: Was there any significant change of weight?
The question regarding excessive use of drugs or alcohol was circled ‘no’.
MJ told Dr. Slavit he was last examined a couple of months prior for routine. Dr. Murray was identified as personal physician.
When asked if he felt in good physical condition, Dr. Slavit said MJ responded yes. “That was his answer.”
Temperature was 98 degrees.
Weight: 127 lbs – MJ told him that’s what he weighed.
Q: Based on your examination, it appeared accurate?
Height was self reported also. He told Dr. Slavit he was 5 foot 9. Dr. Slavit received full payment for the physical on Michael Jackson.
Q: Did you notice any track mark on MJ when you examined him?
A: There were none
Q: Did you look his arms?
Q: His legs?
In the course of reviewing his past medical history there were no surgeries reported, Dr. Slavit said.
Dr. Slavit gave copy of the record to the Coroner pursuant to legal subpoena. Feb 2009 was the only time Dr. Slavit talked to MJ.
Dr. Slavit charges:
$5,849 for travel and hotel
$3,000 lab and supply
$6,000 for service
Dr. Slavit: My understanding my job was to find out if he was able physically to perform.
I was never provided records, Dr. Slavit said. He never contacted Dr. Murray directly to get medical record.
I would require permission from MJ to do that (test for opiates or drugs), Dr. Slavit said. There was no need at the time to test him.
Dr. Slavit had been working with Bob Taylor for about 10 years prior to doing physical with MJ.
Q: Did Mr. Taylor tell you MJ was being badly mauled in the press in England and that it was getting difficult to obtain insurance?
Dr. Slavit did not know where the rumors came from.
Q: Was it clear to you that MJ had plastic surgery?
Dr. Slavit said he examined inside MJ’s nose and how it looked.
Q: And did it look ok?
Dr. Slavit was at MJ’s house between 2.5 and 3 hours for the physical.
Q: If you had any suspicion that MJ was using opioids or other drugs improperly, you’d you have tested him?
A: I may have
Q: Did Mr. Jackson deny anything you requested of him?
That ended the testimony. Court was adjourned and jurors ordered to return today at 9:30 am PT.
Basically Dr. Slavit’s deposition is the admission of a very perfunctory examination of Michael Jackson – he assessed his pulmonary condition with a stethoscope only, checked the breathing of his nose, made some blood tests which did not include a test for drugs because he did not see any indication of drug use (which is perfectly true as Michael was not taking anything) and what’s much more important, Dr. Slavit didn’t make any tests of Michael’s condition under a physical strain like checking his pulse and breathing when running or carrying some weights.
For these services Dr. Slavit was paid $5,849 for travel and hotel, $3,000 lab and supply, and $6,000 for the work proper. This made $14,849 in total for a couple of hours and no one seemed to question why so big a sum was charged for so superficial an examination.
This makes us look into the background of the check and see what events were accompanying it. Fortunately the exhibits on the website of Mr. Panish and Mr.Boyle provide us with this opportunity: http://www.psblaw.com/michael-jackson-wrongful-death-trial.html. These are various emails sent back and forth between AEG and their insurance brokers. And these emails are telling a lot more than you expected.
1. First please compare the physical done by Dr. Slavit with the second one planned in London on July 6, 2009 and see the difference:
From: Burns, Justin
Sent: 22 June 2009
To: Ian France
Subject: Mark Jones
Further to our discussions, wide of the basic examination and bloods, etc.
The specialist examinations are required in order to fully assess the medical risks of the performer whom you are insuring.
Clearly his performance is very physical and we would want an expert musculoskeletal orthopaedic surgeon to advise on his ability after so many years without being on stage to perform, the person who would be involved is the most expert orthopaedic surgeon in UK and advised many high performance athletes.
In regard to his cardio and respiratory capacity the cpx measures heart lungs oxygen etc. and he would be wired up so that this can be performed with ecg leads and a mouth piece.
Further at this time the 2 specialists required for these tests are currently only available on the Monday morning, if the medical is to be any other time please advise URGENTLY.
Trust this helps
Then we go back half a year earlier to Shawn Trell’s email of January 9, 2009 (even before signing a contract with MJ) where Trell asks a perfectly legitimate question why $10,000 plus expenses should be paid for a doctor from New York if they can find one in Los Angeles and limit the cost:
From: Shawn Trell
Sent: 09 January 2009
To: Bob Taylor
Subject: Medical Exam
Bob… is it really necessary to incur $10K in expense to get his medical exam completed? I mean, we are in Los Angeles. Clearly there are reputable if not world renowned physicians here that have been used before for these purposes. Please advise. – ST
And the insurance broker explains why, answering with a sort of an encrypted text:
Yes there are people in LA but I do not want the insurers to have any doubt as the medical info provided. I feel that Slavit is key to this as the insurers really do trust him at the moment. If the cost is a problem I have already indicated that I would expect insurers to contribute as would RTIB.
I do not want to miss the window as if we get it wrong then the whole possibility of getting insurance could well be prejudiced. MJ is being badly mauled by the press here on the subject of his health and we have to refute that info which will not be easy. I believe that Slavit is the correct man to do that.
I am happy to try another LA based doctor but we have to both recognize the possible cost of that. If you decide on an LA man then he must be an independent with no past history with MJ. That in itself will not be easy.
Let me know what you want to do and if its not Slavit I will try to source someone in LA.
The hidden meaning of the above is not lost on Shawn Trell. His answer is:
“Got it. Please proceed”.
Let us check up whether we also got the meaning of the above text which sounds to me like it needs to be read between the lines very much so.
Both of them are unsure of the results of the test and are afraid that they may “get it wrong”. If something goes wrong the possibility of getting the insurance will be lost, so they don’t want to “miss the window” with Dr. Slavit who is the “correct man to do that”.
If they try a LA doctor it will be difficult to find one who has never heard of Michael’s health problems or has never come into contact with MJ, so in case of a LA doctor they “have to recognize the possible cost of that”.
Let’s translate it from English into English.
- So getting an insurance policy is a matter of so crucial importance for AEG that it even requires encrypted language. Therefore the question why it is so terribly important for AEG will have to be kept in mind until the very end of the AEG trial.
- The insurance is so important that they can’t get the medical examination required for it to go “wrong” and it should by all means be “right”.
- To make it “right” the LA doctors are out of the question, but in case they are approached the broker warns that they should “recognize the possible cost of it” which probably means that getting the “right” conclusion from a doctor of high repute will cost a good deal of money. The other interpretation is that it may cost them losing the chance to get the insurance.
- Therefore Dr. Slavit is suggested as the “correct” man to do the job. Actually the word “correct” is telling us all we need to know about the situation, isn’t it? And from the perfunctory way Dr. Slavit conducted his examination this doctor indeed proved that he can really be relied on in matters which require some “understanding”, didn’t he?
But here another question arises – why was there so much fear on the part of the insurance broker and Shawn Trell about the possible outcome of the test? The options are not many to choose from – they either thought that Michael was in poor health as they saw him that way, or they suspected him to be a secret addict who would not be able to pass the test unless the doctor closed his eyes on Michael’s “issues”.
But in order to think that he was a secret addict one needed to have at least some grounds for it – see him frail, ill or inadequate or at least know of Michael’s past problems, right? However this is exactly what now all AEG bosses categorically say they never saw or heard of. In fact if we listen to them Michael was in perfect health (this I don’t doubt, he really was) and the last time they heard of his problems with drug dependency was as long ago as 1993 only (this I doubt very much).
The reason for the doubt is that Bob Taylor rather cynically says to Shawn Trell that there is no doctor in LA who would not “have a past history” with Michael, and Trell agrees, and this betrays that both of them are perfectly familiar with some nasty gossip about MJ, possibly about drugs, and this is why they are determined not to allow a LA doctor to come near Michael Jackson.
All these hints perfectly coincide with the attitude to Michael displayed by Randy Phillips and all the rest of them during the several months of their tragic co-existence – they looked down on him as an addict who needed a “straight jacket” and “tough love” and on occasions had to be “scraped from the floor”, while Michael was absolutely not an addict and was simply suffering from lack of sleep which was a condition forced upon him by his AEG partners by the way.
2. The second point which attracts out attention about Dr. Slavit is the exorbitant cost of the lab analyses he billed for.
$3000 for a simple blood and possibly urine test which didn’t even involve a check for drugs? However the fact that he did not check for drugs is what Dr. Slavit says while another doctor – also speaking under oath – says something totally different.
The one who contradicts Slavit is Dr. Finkelstein. He was invited by Paul Gongaware to the This Is It tour and was assured by Gongaware that Michael was clean. Gongaware said that he was told about it by the doctor who conducted the test and the doctor who conducted the test was Dr. Slavit.
In the deposition aired on July 8th Finkelstein said:
A. I remember asking if he thought Michael was clean.
Q. You asked Mr. Gongaware that?
Q. Ok, and what did Mr. Gongaware say?
A. He thought yes.
Q. You asked Mr. Gongaware if he thought Michael was clean. Mr. Gongaware said he thought he was.
A. He was clean.
Q. Ok, Tell me what else you remember about the conversations.
A. I wanted to know why he thought that. He said because he had a pre- — a physical from an insurance company and that he had passed it. I guess he was in contact with the physician that was currently with Michael, and that physician was telling him that everything was good and Michael was strong and ready to go.
And Dr.Slavit tells us that he didn’t even make those tests! He said that he required Michael’s consent to it, but didn’t even ask for it as he saw no indication of any drug taking. However the truth is that testing for drugs was Slavit’s specific task from AEG which is why AEG and the insurers were so fearful of the results, and the answer Dr. Slavit gave them was that Michael was clean and he indeed absolutely was.
Everything is twisted in this crooked AEG kingdom and everyone around them is lying like crazy now. At the trial AEG is pouring a lot of mud on Michael and paints him as a terrible addict which they pretend they “never knew”. And the truth of the matter is that they did know of Michael past dependency on Demerol perfectly well which is why they specifically tested him for drugs, but found that he was clean. And this last fact is all we need to remember from AEG’s pile of lies – when Michael was tested in February 2009 he was absolutely clean of any substances, same as he was found clean of Demerol when he died.
In February there was none and in June 2009 there was none either, and this is all we need to know about Michael. Within this half a year his blood was tested twice and both times it showed no traces of drugs, and all talk from AEG’s experts about what they “think” is simple nastiness.
2. AEG’S EMAILS
Okay, so on February 4, 2009 Dr. Slavit did his physical for the insurance and what comes next? And next comes a series of AEG emails about obtaining this very insurance which set the scene for the tragic events that happened.
The first chain of emails is dated March 17-22, 2009. Two thirds of this correspondence is redacted but from the rest we gather that on March 22 the insurance was still not there. This was the time immediately after announcing the 50 shows and selling out almost one million tickets. And though all the time prior to that Randy Phillips kept saying they had the insurance for 10 shows, when it came to 50 dates AEG hit rough waters, and from the March emails you get the impression that they had to start afresh because the terms, sum and even type of the insurance were still undecided.
The insurance broker John Silcock working with Bob Taylor wrote on March 17, 2009 that they had some offers for $11,5mln requested by Timm Woolley as the sum of the insurance:
From: John Silcock
Sent: 17 March 2009
To: Paul Gongaware
CC: Timm Woolley, Shawn Trell, Bob Taylor, Deniz Dervizh
Subject: Tour Insurance
We have some terms from insurers which potentially look interesting, but we need to clarify a couple of points. We will aim to get back to you tomorrow. This will be on basis of covering the $11,5m per Timm’s email yesterday.
Why was the matter still not decided though previously Randy Phillips announced to the whole world that the insurance was in their pocket? Because not only the show grew in size but AEG also increased the number of dates, thus increasing the cost of the tour, and all this required a bigger insurance.
This way even from the sum of the insurance requested we find that on March 17 the estimated budget of the show was supposed to be around $11,5mln – we know it simply because the insurance was meant to be equal to the sum of the budget and was to cover it.
The email of March 20 2009 is stating the terms of one of the proposed variants to insure 30 shows. Yes, the maximum number of the shows mentioned is only 30, which makes us think that there were problems with arranging the insurance for 50 shows. I suspect that the first thing the insurers would require for that was a written confirmation that the artist agreed to those 50 shows, however this is exactly what AEG was missing as they had to admit during the trial.
The insurance was offered on condition of cancellation only, but not rescheduling – so if some shows were cancelled the insurers would pay, but if the show were rescheduled they would not, and this could have serious implications for Michael. Rescheduling involved additional expenses and this was not to be tolerated by AEG, and this could well be the reason why once AEG set the dates they looked at them as those carved in stone with no remonstrations from the Artist accepted.
And the Artist did remonstrate because out of 50 shows 34 were set with only one day between the shows!
On March 20 the sum of the insurance requested by AEG was already $14,5mln, and this points to the budget increasing too.
In his email the broker said that the insurance policy for MJ was a complicated matter and this was almost entirely due to the negative portrayal of Michael by the press. So tabloids and the media can congratulate themselves that they put a hand to Michael’s final tragedy too – it was due to their lies and irresponsible gossip that AEG could not obtain that damned insurance.
John Silcock of the insurance company is writing to Paul Gongaware and is copying to the same crowd of Timm Woolley, Shawn Trell, Bob Taylor, Deniz Dervizh:
March 20, 2009
Sorry for the delay, have just got to NY.
We’ve got some indicative terms, but there will be more information required before we are able to firm these up. This will however give you some idea of likely costs, subject to the additional information. We are also working on some other options, such as Death/Disability only, but I will come on to these later.
As I am sure you will appreciate, this is a far from straightforward and somewhat more complicated placement, almost entirely due to how this particular artist is portrayed in the media. Consequently there are a lot of pre-conceived ideas about him, some of which have been very difficult to overcome, simply due to the overwhelming amount of negative publicity, despite the good medical report.
To insure 30 shows with a sum insured of $14,5M (per Timm’s email) on the basis of insuring only those shows cancelled and not rescheduled. Subject to a 3 show deductible (shows lost). There will be no cover for the costs to reschedule any shows.
NOTE: The offer was for the Premium Non-appearance package which was eventually rejected by AEG:
Premium: $797,500 (Rate: 5,5%)
As I have said, this is an indication only and is subject to more detailed information – for example:
- Due to the specific nature of this risk, insurers will require a further medical examination to be carried out by their nominated doctor. This will be very similar to the previous examination. They may restrict illness cover or death from illness cover until this examination has taken place.
- Full review of past 5 year medical history by nominated doctor.
- No catastrophe non-appearance coverage of bands, dancers or backing singers will be granted until all names and ages of performers seen and agreed by underwriters.
- Full details of the stage to be provided. No cover for losses arising from the staging will be covered until information seen and accepted by underwriters.
- Full details of weekly fitness programme.
- Full details of any pre-existing conditions or illnesses suffered by the children along with a signed release granting access to their full medical records in the events of a related loss hereunder.
- Journey details (time allowed for travel + number of vehicles, etc.) to the venue to be advised to underwriters.
- Full details of any promotional work that will be undertaken during the policy period.
- Limit of Indemnity of $14,5M (or final figure) is amortised over the 30 shows.
- A full budget showing anticipated revenues and costs.
- How many songs will be performed (is there a contractual minimum or maximum)? The show not to be longer than 90 minutes (we may be able to negotiate on this, but will need to know how long the show will be including any encores).
Though this offer was rejected by AEG I am still mentioning it here because in contained one condition which could very well be specified in the cheaper insurance policy for Accident and Sickness which AEG settled on, and this condition is that the show was not to be more than 90 minutes (1 hour and 30 minutes) and not 2 hours or more as it eventually grew into. From further correspondence we will learn that out of that hour and a half the 50-year old Jackson was supposed to be on stage on insurers’ insistence for no more than one hour and 20 minutes.
From the discussion of that Premium Non-appearance insurance we also get that the insurers required additional information about all proposed shows until the end of 2010 (so there were to be shows until the end of 2010 though AEG now denies it) as well as confirmation of the date when a new insurance was to be purchased for the already set shows until February 2010.
So AEG did promise to the insurers to obtain from them a new policy for 20 more shows in addition to the first 30, and we can only guess why they did not cover all 50 shows in one insurance policy. They did not want to? Or could not as they had no written confirmation from MJ for the 50 of them?
Another reason why I am mentioning the Non-appearance policy (eventually not chosen by AEG) is because while discussing it the insurers asked AEG whether a medical practitioner would accompany Michael Jackson on the tour – so having a doctor by Michael’s side could very well be even their requirement. The insurers actually didn’t even doubt that there would be a doctor and it was simply details of the medical arrangement that they were asking for.
The email started above continues with the additional information the insurers might need:
Additional information which will be required prior to binding:
- Comprehensive list of ALL proposed shows not already announced up to the end of 2010.
- Confirmation of when cover will be purchased for the 2010 shows (up to February) and on estimation of the level of cover that will be required.
- Details of any coverage that artistco will require on the 30 shows to be covered hereunder.
- Will the artist have a medical practitioner travelling with the tour party or will one be retained in London? If so, (either scenario) please provide their names.
- Confirmation from the mother’s doctor as to her current state of health and any medical conditions from which suffers (or has suffered).
- Details of the mother’s living arrangements, e.g. private residence, care home, and is there any retained dedicated care staff?
The point about Michael’s mother is an indication that care for her was so important for Michael that potentially it could be a reason for cancellation of the shows (tour), so the insurers wanted to assess that risk as well.
The same day March 20, 2009 another email from John Silcock was sent to AEG which explained different variants of the insurances available. Out of all the variants AEG eventually selected the one covering Accident and Sickness. The sum or premium to be paid was $435,000 plus taxes:
March 20, 2009
Just to let you know that I’ve now got some indications of cost for Death/Disability.
To provide cover for Death (any cause) and Permanent Total Disablement due to Accident or Sickness for a limit of $14,5mln the premium would be $435,000.
To provide cover for Accidental Death and Permanent Total Disablement due to Accident only (in other words excluding sickness or disease or natural causes) the premium would be $145,000.
Both quotations will exclude suicide or intentional self-injury.
…The cover/indicated cost options all based on 30 shows and a limit of $14,5 mln are therefore
3 shows deductible
Cancellation/Failure to Recoup
Death /Disability (Accident and Sickness)
Death/Disability (Accident only)
The most comprehensive coverage is the Non-Appearance. The Failure to Recoup is more competitive and will provide cover in the event you fail to recoup of course, BUT in this context recoupment means out of net revenue from day one, not amortization over the course of the 30 shows. Both are subject to more information.
Given the very good medical, the Accidental Death/Disability is a good option, and is by far and away the most competitive/ However, this is only basic cover and would not included coverage for situations such as damage/unavailability of the venue, life threatening illness of family members, etc. The Death /Disability cover is not subject to the same requirement regarding further information.
It may even be worth considering a combination of the Failure to Recoup and the Accidental Death/Disability, as the latter can continue to provide some protection after recoupment.
We would strongly recommend that the Terrorism cover is purchased as a stand alone policy irrespective as to which of the other options you decide upon.
Look forward to hearing from you once you’ve had an opportunity to review, and if you have any questions please do not hesitate to contact us.
Let us note the whole idea of the insurance is revolving around the idea of recoupment of the costs of the show and this was why AEG was so terribly keen on it.
The above offer was followed by several emails which are fully redacted now revealing only one email sent by Timm Wolley on March 22, 2009. What’s good about it is that it explained the breakdown of expenses for the first 30 and second 20 shows. And while the email chain started with a request for $11,5mln now Shawn Trell is talking about $17,5 mln.
You remember that in his testimony Shawn Trell said that they chose Lloyds as they were the only one who would agree to provide $17,5 mln (for an “unreliable” guy like MJ), however even these emails show that AEG were getting to this sum gradually, depending on the anticipated costs. Within some 5 days or so their anticipation of the expenses rose from $11,5 mln to $17,5 mln, so the latter sum must have been the one they were putting into their budget around March 22, 2009.
Timm Woolley’s email of March 22 is addressed to the same crowd – the insurance brokers John Silcock, Bob Taylor and Deniz Dervish with copies to Paul Gongaware and Shawn Trell.
In this email Timm Woolley explains very interesting things we won’t be able to find anywhere else – for example, the fact that they wanted to get as much as $400,000 per show from agencies like Viagogo for secondary tickets alone. For 50 shows that would make extra $20mln on top of the regular tickets sold:
I haven’t walked through this with PaulG yet, but am expecting to later today. There will be individual line-item changes in expenses, probably, but income won’t change as they have been previously discussed with PaulG by Gorg Berg.
Format: There are two sections to the budget: first 30 shows, second tranche of 20 shows. Within the former there’s the pre-tour and rehearsal section and then the 30-show run. Within the latter, there’s the break cost (three months at 25% – policy as yet unresolved, but ballpark) and then the run of 20 shows. Please ignore all sheets except “Production”.
Income: Ticket sales are estimated as sell-out at a pre-stage-design cap of 14992, but sighlines are expected to improve to allow another 500 tickets to go on sale when the stage and stage-design is complete. The ticket income is shown as being subject to 15% VAT and the combined expenses of the 50 shows is reflected in ‘Show%’ on line 99 – i.e. approx. 15% is comprised of local expenses including AEG rent, stagehands, catering, support, pl insurance, etc. Merchandising is not expected to contribute more than approx $2,6m over the entire run.
But secondary ticketing (premium sales through ViaGoGo, for example) plus boat-ferry packages plus VIP packages, plus outlet commissions are expected to contribute $200,000 per show. Note: this might improve to $400,000 per show. Exchange rates were taken as GBP1=$1,4 but the recent Fed actions have already caused the GBP to increase to $1.46 and the trend is likely to increase to between $1.5 and $1.6 by summer.
NOTE: Since the tickets were sold in pounds and given the above trends in the exchange rate, the overall sums in dollars were to eventually grow.
Expense: 7 weeks of casting/choreographing and arranging/rehearsals will take place for dancers and vocalists/musicians respectively. The production may then go into Sony Studios rehearsal space of (less likely) LA Forum for 3.5 weeks of sound, lights, video, staging, fx rehearsals. After airfreight to UK, there will be approx 1 week of full UK rehearsals in EC or Wembley, former being preferable, prior to the first O2 show.
Please note that there are columns that have been ‘hidden’ that include cash flow analyses I didn’t get to yesterday and a division between costs arising in GBP –v –US$ to inform internal decisions on remitting cash to AEG corporate. This doesn’t affect what you are looking for.
NOTE: 7 weeks of casting/choreographing finally explained to me the difference in the dates reported by AEG and other sources – AEG said the casting was done in April while the media reported it as May 2009, and both were right as the casting was followed by a period of choreography when the dancers didn’t join Michael and there were no general rehearsals.
Central to this exercise:
- Pre-production and rehearsal expenses are now expected to be $10,5m, so the sum insured goes up to $17,5m. These costs will be recouped in the 30 show run, together with the artist advance and the pre-tour layout in rent and ‘production supervision’.
- Break costs, representing upfront expenses prior to the second tranche of 20 shows will probably not represent an additional, later line-item to insure.
- Pre-tour costs and advances are recouped on a straight-line amortised 30-show basis with the artist, with staged-settlements taking place each few shows and a further payment being made to artist taking into account also the current costs of the shows taking place in the time period. If, due to a postponement, costs were incurred without concomitant revenue, the next staged-settlement would take these into account and the artist payment resulting would be reduced by those expenses.
Please call for explanations.
After reading this email the idea of who was to pay for what, including pre-tour production costs which were later placed on Michael, and how those expenses were to be recouped and what the insurance has to do with it was finally beginning to acquire some clarity.
3. WHAT ANIMAL IS “TOUR EXPENSE”?
The general idea of the deal as I see it now was that AEG was indeed to invest some money in the show and insure those expenses to be able to get them back in case of cancellations. As the tour began each show was to recoup them a certain portion of the costs spent and by the end of 30 shows all those expenses were to be recouped.
The money spent was to be covered by the insurance. If everything went well the insurance sum was not to be paid out as the money made by the tour was to recoup it all, but if a cancellation occurred the insurance was meant to cover the losses. Each successful show made the insurance sum smaller and this process was called “amortization”.
The 30 shows were to bring back to AEG not only the pre-production expenses for $17,5mln but also the artist advance of $5mln as well as payment for the rent of houses for the whole company same as some mysterious expenses called by AEG ‘production supervision’ and put by AEG in quotes for some reason.
Let us make a mental note of this mysterious ‘production supervision’ before we proceed.
Another mysterious phrase appearing in those emails is ‘tour expenses’ and one of the emails that followed finally explained that tour expenses and AEG expenses are one and the same thing. There is an equal mark between the two and this means that the tour expenses including all those production costs were to be borne by AEG – just as I always thought. Moreover they were clearly differentiated from Michael Jackson’s expenses by AEG themselves.
And in this respect the email dated June 18th from Timm Woolley is absolutely invaluable. The email is about only one detail in AEG/MJ cooperation – a split of housing, security and transportation costs in London between the parties, but it explains to us the general pattern of splitting expenses between Michael Jackson and AEG, and this email explicitly says that everything that is Tour expense is actually AEG’s responsibility.
And this has a direct bearing upon Conrad Murray and in whose employment he was.
4. CONRAD MURRAY WAS THEIR “TOUR” EXPENSE
Read this email carefully please, paying attention to the encircled words – they are all related to each other:
The email says that the housing of Michael Bush (wardrobe), Karen Faye (make up artist) and – attention please – Conrad Murray (personal physician) was to be paid for by AEG, while Michael was to pay only for the furniture in his own house in London, food supplies, etc.
The expenses on those three people’s housing were “Tour expenses” and were to be recouped from the money made by the show, or were to be alternately compensated for by the insurance in case of cancellation of the tour.
It is absolutely sensational that the expenses on Conrad Murray’s house are clearly stated in this email as Tour expenses which are the expenses covered by AEG. In fact AEG themselves are putting an equal mark between the two!
Other things listed among the “tour” costs (another name for it is “show” costs) were security and transportation, and even a special remark is made about these expenses that they “continue” to be show costs.
Continue to be show costs? But if the arrangement about transportation continues to be the same in London as it was in the US doesn’t it mean that all other transportation expenses, shifted to Michael after his death, were also the show costs, were AEG’s responsibility and absolutely not Michael’s?
It seems that it does, because the same email even makes a differentiation between the tour transportation expenses and the expenses on the local transport for which Michael was to pay personally as it was meant for his family.
This MJ’s spending on the local transport was to be charged back to Michael while all other costs were not, and this means that the transportation to the place of their work for him and the company (for example, Karen Faye, Michael Bush and Conrad Murray) was none of MJ’s business either and was the tour cost again, and this in addition to the housing for all the three for which payment was to be made by AEG too.
What’s also extremely good about this June 18th email from Timm Woolley is that the split of expenses was fully approved by Paul Gongaware, so the information that the Tour expenses and expenses on Murray’s house were solely AEG’s responsibility comes straight from the horse’s mouth:
June 18, 2009
From Timm Woolley:
I have prepared what I think is an equitable division of expense between MJ and the Tour.
Pays for entertainment arcade & bowling alley because they were a precondition in terms of facilities he needed at the house and part of the bargain.
Pays for 3 of the local houses –Bush, Faye and Murray (wardrobe dresser, make-up/hair & personal physician).
Pays for the additional furniture because we are providing a fully-furnished house. MJ’s stylistic additions are added at his discretion.
Pays for 5/8 of the staffing housing: security, nanny, miko. And the initial food stocking. Food & and supplies will continue to be an MJ expense and the security people have credit cards of their own for that, but we’ll eventually credit the MJ account with a notional per diem allowance.
Costs of security detail and transport continue to be show costs. Former because we’d have had to secure any London hotel he would stay at. The latter only to the extent that the family local transport is a chargeback to MJ.
If anyone has other thoughts to offer, I hope we can agree that this is fair. If there is agreement, then PG to give approval.
And what a marvel Paul Gongaware is for approving the above split on June 19th!
From: Paul Gongaware
Sent: 19 June 2009
To: Timm Woolley
Cc: Brigitte Segal, Rick Webking, Julie Hollander, Colin Chapple, Luke Flynn
Subject: Re: estimated costs for MJ in London
I agree with Timm’s allocation and the charges. Approved.
Now we know for sure that at least the house in London for Conrad Murray was included into the Tour cost and was NOT to be charged back to Michael Jackson as it was not considered to be his responsibility. Further emails will show that the salary of Conrad Murray was also included into AEG’s budget, but since the subject is big I will leave it until the next post.
What I need to say now is that this kind of an arrangement would have been perfectly fair had it been realized that way – however after Michael’s death AEG presented the case in exactly the opposite variant.
5. HYSTERIA, FRAUD AND GREED
Now they say that all the money spent on Conrad Murray (including his house in London) was Michael’s responsibility, same as all transportation, production and other costs, though in reality all of it was the so-called “Tour cost” which was to be recouped from the money made by the show and covered by the insurance.
This Tour cost was not exactly Michael’s responsibility because on the one hand it was to be deducted from the money he earned for the show but on the other hand he was not directly to pay it, especially if the tour was cancelled (the cancellation was to be covered by the insurance).
Similarly it was not exactly AEG’s responsibility as their expense was temporary and was to be recouped by them either from the money made by the tour or from the insurance. It was the investment made and recouped, and the recoupment was meant to be safeguarded by the insurance.
And this is where the problem arose. While the expenses were rising the insurance was not obtained – through no fault of MJ’s, but actually AEG’s as it was them who increased the number of the shows.
At some point the absence of the insurance sent AEG into a total hysteria, after which they started setting Michael ultimatums about the high cost of the tour and arranging him riot meetings, most probably accusing him of faking illness and indulging himself in drugs in order to escape the shows and thus leave AEG with no insurance and no recouped costs.
They were safeguarded against any losses by Michael’s assets anyway, but over here they were probably not sure how much he “cost”, so the hysteria continued.
They were indeed in the danger of not getting that damned insurance of $17,5mln if they had made Michael’s condition public, but it was still absolutely no reason for denying him help. If they had helped him then he would have repaid them in full measure – he would have done those concerts for sure as he was the first person interested in doing them and they would have recouped all their expenses even without any insurance.
In fact even in the very worst but unlikely case they had not recouped their expenses, for someone with billions in their pocket this wouldn’t have been a catastrophe either. They would have sold the concert footage for great sums anyway, and would have gone into history as the last “saviors” of MJ crowning themselves with fame forever after …
However losing money for a flimsy thing like good repute and people’s gratitude was never AEG’s choice. In fact even after Michael’s death they chose only money again. They used his death to their great advantage all around and for this end engaged themselves in an outright fraud – the Tour costs were turned into solely Michael’s responsibility through those fake statements from Tohme and Dileo, and were submitted for payment to Michael’s Estate.
By shifting Tour expenses onto Michael they were killing two birds with one stone – they recouped all their money as the costs were compensated for by Michael’s estate (initially AEG tried to include even Murray into those sums too) and they declared themselves not responsible for Murray and his actions, as according to their new strategy Murray was no longer the Tour expense and was solely Michael’s business.
In addition to full recoupment of their expenses they also sold the rehearsal footage for $65mln to Sony (the additional $5mln were charged for making the film) and partook of the profit the film made worldwide which brought them totally astronomical sums.
They also retained part of the $85 mln for the ordinary tickets sold for This Is It because at least 40% of fans decided to keep those tickets as memorabilia, and only God knows how much they retained as a result of not recompensing secondary tickets sold at thousands of dollars each.
And in addition to all that they also wanted to get the insurance money, and fought for those $17,5 mln tooth and nail for several years until the insurers found out that AEG had actually not suffered any losses, recouped all their money from the Estate and therefore didn’t even have a reason for claiming the insurance at all.
Now AEG is terribly busy again – they are pouring tons of dirt on the man who earned him all that money. Indeed, greed is the root of all evil.
* * *
The next part of this post will continue with AEG’s emails which will hopefully explain the situation with Murray further and occasionally make a totally fantastic read.
For example, one of the emails will explain the meaning of the mysterious “production supervision”. It was also part of the Tour cost to be recouped from the money made by the tour and to be covered by the insurance and it means the services of Tohme Tohme….