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May 3rd, 2005 Trial Analysis: David Saunders, Jeff Klapakis, Craig Bonner, Paul Zelis, Steve Robel, John O’Bryan, John Duross, Rudy Provencio, Part 2 of 4

July 9, 2014

Before ending his direct examination, Sneddon questioned Robel about the Neverland gate logs that were seized 3 or 4 months before the start of the trial. You would think that such important evidence would have been seized much sooner in the investigation, but then again this is the Santa Barbara County Police Department that we’re talking about here!

16 Q. All right. I want to go on to another

17 subject. Excuse me just a second.

18 All right. Sergeant Robel, I’m handing you

19 the exhibit book. First of all, you recognize those

20 as being the Neverland Ranch logs, correct?

21 A. Yes, I do.

22 Q. Now, during the course of the search warrant

23 at the ranch on November 18th of 2003, were certain

24 logs seized from the ranch?

25 A. Yes, there were.

26 Q. You’re aware of that?

27 A. Yes, I am.

28 Q. And you reviewed those logs, as a matter of 8543

1 fact, have you not?

2 A. Yes, I have.

3 Q. And do any of the logs that you reviewed

4 that were seized from the ranch go beyond the date

5 of January 1st, 2003?

6 A. No.

7 Q. Now, there’s a medical report, one-page

8 medical report that does, but all the logs

9 themselves were before, correct?

10 A. That is correct.

11 Q. During the course of this investigation,

12 did, to your knowledge, the Santa Barbara Sheriff’s

13 Department in any other search warrant seize any

14 records or logs associated with the months of

15 January, February or March of 2003?

16 A. No.

17 Q. Now, in the exhibit book, towards the end,

18 there are logs for the months of February and March

19 of 2003, correct?

20 A. Yes.

21 Q. And what exhibit numbers, what two exhibit

22 numbers are those? They should be tabbed.

23 A. 335 and 334.

24 Q. And those logs are log entries from the year

25 2003, correct?

26 A. That is correct.

27 Q. And those have been described by Mr. Sanger

28 as being government documents. Do you know where 8544

1 they came from?

2 A. Yes, I do.

3 Q. Where did they come from?

4 A. It came from the defense.

5 Q. Do you recall when it was that we obtained

 

6 those records from the defense?

 

7 A. Yes.

 

8 Q. When?

 

9 A. To the best of my recollection, I believe it

 

10 was about three to four months prior to us starting

 

11 trial.

 

12 Q. Months?

 

13 A. Actually, excuse me. I’m sorry. Weeks.

 

14 Q. So they’ve been in the defense possession

 

15 for over a year?

 

16 A. That is correct.

 

17 MR. SNEDDON: Nothing further.

You guys are about to see just how sneaky and deceptive Sneddon really is! The reason that Debbie Rowe didn’t specifically mention Jackson’s parenting skills or caring personality is because SHE WASN’T ASKED!

19 CROSS-EXAMINATION

20 BY MR. MESEREAU:

21 Q. What is the date of your interview with

22 Debbie Rowe?

23 A. March the 3rd, 2004.

24 Q. Did you do an interview with her on

25 February 23rd, 2004?

26 A. Yes, that was a — I talked with her on the

27 phone.

28 Q. And that was recorded, correct? 8545

1 A. That was not recorded.

2 Q. The transcript — do you have a transcript

3 of the interview you’re referring to?

4 A. Yes, I do.

5 Q. And could I —

6 May I approach, Your Honor, just to take a

7 look at the transcript?

8 THE COURT: Yes.

9 Q. BY MR. MESEREAU: Okay. And you say you

10 just listened to the tape the other evening?

11 A. I listened to it yesterday.

12 Q. Do you ever ask the question, “Is Michael a

 

13 good parent?”

 

14 A. I don’t recall asking that.

 

15 Q. You never had a conversation with her about

 

16 his parenting skills at all, did you?

 

17 A. I don’t recall asking that question.

 

18 Q. Okay. In response to the prosecutor’s

 

19 question to you, you indicated that Ms. Rowe, during

 

20 your conversation, had not said some of the things

 

21 she said in open court, correct?

 

22 A. Correct.

 

23 Q. But there are things she said in open court

 

24 that you didn’t ask her about in your interview,

 

25 correct?

 

26 A. Correct.

 

27 Q. She said Michael Jackson was generous in

 

28 open court. Do you remember that? 8546

 

1 A. Yes.

 

2 Q. You never asked her if Michael Jackson was

 

3 generous, did you?

 

4 A. I don’t recall asking that.

5 Q. She said that Michael Jackson was her

6 friend, correct?

7 A. Correct.

8 Q. You never asked her in your interview if

9 Michael Jackson was her friend, right?

10 A. I don’t recall asking that.

11 Q. In fact, at one point in your interview, she

12 said she wasn’t really supposed to talk a lot about

13 Michael Jackson, because her lawyer had advised her

14 as such, right?

15 A. Correct.

16 Q. And when she said that to you, you didn’t

17 ask her a lot of questions about Michael Jackson as

18 a person after that, right?

19 A. She volunteered some of the stuff.

Next, Mesereau brought up the issue of the custody battle between Rowe and Jackson, and how this affected her feelings towards Jackson during that time period. Pay attention to what Rowe told her lawyers about their defense strategy!

20 Q. Now, at that particular point in time, did

21 you know when she had last seen Michael Jackson?

22 Excuse me, let me rephrase that better.

23 At the point in time when you interviewed

24 Debbie Rowe, did you know when she had last seen

25 Michael Jackson?

26 A. I believe that she had told us that it had

27 been two to three years.

28 Q. Now, at the particular point in time when 8547

1 you interviewed Debbie Rowe, she was rather upset

2 about their family law proceeding, true?

3 A. No, I don’t think that’s correct.

4 Q. Do you remember she said to you, “Officer,

 

5 I have Michael’s Achilles tendon, I have the kids.

 

6 I don’t have them, but I’m going to have them.” Do

 

7 you remember that?

 

8 A. I remember something to that effect.

9 Q. Isn’t that what she said to you?

10 A. She did, Mr. Mesereau, but I don’t believe

11 that her child custody issue was going on at that

12 time.

13 Q. Well, she told you she had a lawyer named

14 Iris Finsilver, did she not?

15 A. Yes, she did.

16 Q. Did you know why she had a lawyer named Iris

17 Finsilver?

18 A. At the time I knew she had her because of

19 the filming that she participated in where Iris was

20 present.

21 Q. She told you in that interview that she was

22 in a dispute with Mr. Jackson about the children,

23 right?

24 A. I don’t recall that.

25 Q. Did you know she was in a dispute with Mr.

26 Jackson about the children when you conducted that

27 discussion with Debbie Rowe?

28 A. To the best of my knowledge, I want to say 8548

1 that I did not.

2 Q. Do you recall in the first page of your

3 interview — and in my transcript it’s page one. I

4 don’t know what page it is in yours. It’s a

5 different transcript.

6 Do you recall she says — let me try and

7 restate that.

8 Look at the fourth quote down of Debbie

9 Rowe. It starts with, “Iris.” Do you see that?

10 A. It said, “Iris, I…”

11 Q. Yes, exactly.

12 A. Okay. I’m there.

13 Q. She says, “F-u-c-k his defense at this

 

14 point. I want the kids.” Do you see that?

 

15 A. Yes, I do.

 

16 Q. Did you think that might have some relevance

 

17 to a dispute between Mr. Jackson and Ms. Rowe when

 

18 you heard her say that?

 

19 A. By reading it, you could interpret that, but

 

20 at the time I did not.

21 Q. Okay. And this was the conversation where

22 she talked about Janet Arvizo’s history of

23 orchestrating lawsuits, correct?

24 MR. SNEDDON: Your Honor, I’m going to

25 object as beyond the scope of direct examination.

26 We were very pointed in our questions.

27 THE COURT: Sustained.

28 Q. BY MR. MESEREAU: This was a conversation 8549

1 where she said, “Michael is very easily

2 manipulated,” true?

3 MR. SNEDDON: Object. Same objection.

4 THE COURT: Sustained.

In this excerpt, Robel testified about some of Rowe’s other negative quotes about Jackson, such as the fact that she believed that he was too “unorganized” to keep a journal, and that he was “easily manipulated”. Mesereau’s cross examination ended after this line of questioning, and Sneddon declined to redirect examine Robel:

5 Q. BY MR. MESEREAU: Now, do you remember

6 Ms. Rowe in this conversation responding to your

7 question, “Is Michael the kind of person that would

8 keep a journal?” Do you remember that?

9 A. I do remember that.

10 Q. And she said, “He doesn’t keep a journal.

11 He’s not organized enough to keep a journal.” Do

12 you remember that?

13 MR. SNEDDON: Object. Same objection.

14 MR. MESEREAU: I think it’s all in — they

15 opened the door on this conversation about Mr.

16 Jackson, Your Honor.

17 THE COURT: I’m having the same difficulty

18 with you as I’m having with the District Attorney.

19 I can’t really tell where you’re going from that

20 question, and it appears to be beyond the scope. So

21 I’ll sustain the objection. If you can rephrase it

22 so I can see it better, that’s fine.

23 Q. BY MR. MESEREAU: Ms. Arvizo — excuse me.

24 Ms. Rowe —

25 Let me start again. How did this

26 conversation originate? Did you call her?

27 A. For this particular interview?

28 Q. Yes. 8550

1 A. Yes. We had a phone discussion, and she

2 agreed to meet with me on a specific date and time.

3 Q. And where did she meet you?

4 A. In the Los Angeles area, Calabasas.

5 Q. Was her attorney there?

6 A. No.

7 Q. Okay. But you begin the conversation with

8 reference to her attorney, correct? Really on the

9 first page. The sentence we just discussed where it

10 starts by saying, “Iris….”

11 A. Correct.

12 Q. You discussed her attorney almost at the

13 very beginning of the interview, correct?

14 MR. SNEDDON: Your Honor, I object. Asked

15 and answered.

16 THE COURT: Sustained.

17 Q. BY MR. MESEREAU: And this was the interview

18 where she talked about Schaffel and Konitzer and

19 Dieter trying to steal from Mr. Jackson, correct?

20 MR. SNEDDON: Object, Your Honor, beyond the

21 scope.

22 THE COURT: Sustained.

23 MR. SNEDDON: Ask the Court to admonish

24 counsel. This —

25 THE COURT: Next question.

26 MR. MESEREAU: Yes. No further questions,

27 Your Honor.

28 MR. SNEDDON: Nothing further, Your Honor. 8551

1 THE COURT: You may step down.

2 MR. AUCHINCLOSS: Your Honor, we call as our

3 next witness Duross O’Bryan.

4 THE COURT: When you get to the witness

5 stand, remain standing.

6 Face the clerk here and raise your right

7 hand.

The next prosecution witness was John Duross O’Bryan, a Certified Public Accountant with an international financial consulting firm. One of his areas of expertise is forensic accounting investigations, which he describes in detail in this excerpt:

4 Q. Have you participated in financial

5 accounting investigations?

6 A. I have, yes, on several occasions.

7 Q. And as it relates to financial advisory

8 services – I think you mentioned that – what kind of

9 engagements have you worked?

10 A. Financial advisory services was one of the

11 divisions within The Big 4 firms. I was in charge

12 of that in both Los Angeles and in New York. That

13 division does dispute analysis and investigation,

14 work investigations that we’re talking about. It

15 also does due diligence work, mergers and

16 acquisitions, bankruptcy work valuation, et cetera.

17 I was involved in most of those practices of

18 being the partner in charge. But certainly

19 specifically as a partner responsible, I worked on

20 most of those engagements, those type of

21 engagements.

22 Q. Do those engagements include forensic

23 accounting investigations?

24 A. They do, yes. One of the — the title

25 “DA&I,” the “I” stands for investigation, which is

26 an accounting investigation of financial records.

27 Q. Okay. So tell us what specifically you mean

28 when you say “a forensic accounting investigation.” 8555

1 A. Well, if an audit is really looking at a

2 company’s financial statements and looking on a test

3 basis to be able to opine as to the accuracy and

4 conformity with those financial statements with

5 accounting principles, a forensic accounting

6 investigation is completely different. It basically

7 looks at all the records you can possibly get, all

8 of the information you can possibly get, and it

9 attempts to reconstruct what happened and what went

10 on in any period of time.

11 So the scope is completely different and the

12 type of procedures are completely different. It’s

13 much more invasive. It’s much more intrusive. And

14 it is really, in fact, an investigation, not a

15 sampling of documents like an audit is.

16 Q. So can you give us an idea of what kind of

17 forensic accounting investigation you have

18 participated in?

19 A. I’ve participated in dozens. Some of them

20 involving thousands of dollars at issue, some of

21 them involving billions of dollars at issue, and

22 companies small and large, public, private, and not

23 for profit.

24 Q. And are these investigations primarily for

25 the purposes of litigation, prelitigation,

26 testifying in court, that type of thing?

27 A. Some of them involve litigation. Probably

28 most of them do. But there’s a vast majority that 8556

1 could just be an investigation that the company has

2 authorized or the company is asking for or

3 individuals are asking for to ask what’s going on

4 within their company. So it may not be a litigation

5 or it may not be a civil or criminal matter. It

6 could simply be that the company is interested in

7 what’s going on in their business and asked to have

8 an investigation performed.

9 Q. Have you previously been asked to testify in

10 California courts or in courts around the country as

11 an expert in the area of a forensic accounting

12 investigation?

13 A. I have, yes, on several occasions.

Next, O’Bryan discloses his hourly rate, the amount of hours he’s put in to his expert investigative services for the prosecution, and the terms that he used throughout his PowerPoint presentation that he presented to the jury to summarize his findings.

By the way, did I mention that I have both a bachelor’s and master’s degree in accounting? (Ha ha ha! Just trying to bring a little levity to this boring testimony!)

14 Q. Do you have an accounting degree?

15 A. I do, yes. I have a Bachelor of Science

16 degree in accountancy from Northern Arizona

17 University.

18 Q. Presently what are your hourly rates at Alex

19 Partners?

20 A. My rate on this engagement is $385 an hour.

21 Q. Okay. I’ll try to be quick then.

22 How many hours have you put into this

23 investigation or into this particular task?

24 A. I’ve put in probably 20 to 30 hours

25 possibly.

26 Q. Okay. So tell us about your assignment in

27 this particular case, the case of People v. Jackson.

28 Specifically what were you asked to do in this 8557

1 matter?

2 A. I was asked to look at the financial

3 condition of Mr. Jackson leading up to February

4 2003.

5 Q. All right. And did you prepare a PowerPoint

6 presentation to assist the jury in describing just

7 exactly what you did in this case?

8 A. I did, yes.

9 Q. All right. Would you consider this to be a

10 forensic accounting investigation?

11 A. The work that we performed was absolutely a

12 forensic accounting investigation, yes.

13 Q. And have you ever performed other work that

14 entailed a similar task, looking at someone’s

15 personal finances for forensic purposes?

16 A. Absolutely, yes.

17 Q. Okay. So let’s talk about some terminology.

18 What does the term “financial condition” mean for

19 purposes of your testimony here today?

20 A. I’m defining “financial condition” as

21 basically an individual’s assets, their liabilities,

22 their net worth. One’s net worth is simply the

23 difference between their assets and liabilities. If

24 you have more assets than liabilities, you have

25 positive net worth. If you have more liabilities

26 than assets, you have negative net worth.

27 So we look at the assets and the

28 liabilities. We look at the income. We look at the 8558

1 expenditures. That’s how I would really define

2 one’s financial condition, and really how those all

3 interrelate and what kind of condition they’re in.

4 Can they afford to pay their bills, et cetera.

5 Q. You’re going to be, I’m sure, throwing these

6 words around, so I want to make sure everybody’s

7 clear on them.

8 Assets, would that just be — a simple way

9 of saying assets, would that be property that

10 someone owns?

11 A. Yeah, I’m sorry. Assets are really anything

12 that is an asset, which is your house, a car,

13 artwork, intangible things like maybe a copyright.

14 Anything that creates benefit to you is an asset.

15 And so that’s what I’m referring to as an asset.

16 A liability is just the opposite of that.

17 It is something that’s an obligation. You owe

18 something, somebody something, meaning a bank for

19 your mortgage on your house, a lease on your car,

20 a loan securing some of the copyright things that

21 you have. Any of those there becomes obligations,

22 things that you actually have to pay for.

23 And then the difference between the two is

24 simply a mathematical function of assets minus

25 liabilities equals net worth.

26 Q. Okay. And can a net worth be positive as

27 well as negative?

28 A. Yes. As I mentioned – 8559

1 Q. Go ahead.

2 A. — if you have more assets than liabilities,

3 conceptually, if you gain the value of all of those

4 assets at whatever is stated, say you have $100

5 worth of assets, and you can really get $100 for

6 those assets, and you have $50 worth of liabilities,

7 and you’re really only going to pay $50, then you

8 have a net worth of $50. At the end of the day, you

9 have $50 cash sitting in your hand.

10 On the other hand, you could have a

11 situation where your assets are $50, and you’ll only

12 get $50 for them. You really are going to pay $100

13 in liabilities, and therefore you have a negative

14 net worth. At the end of the day, you will be short

15 $50, or negative net worth.

16 Q. All right. Before we get into your

17 opinions, let’s talk generally about how you conduct

18 a forensic investigation of this type.

19 Typically how would you start a financial

20 forensic accounting investigation?

21 A. Well, you ask for as many documents as you

22 can get, because again, it’s not a sampling of

23 documents. It’s everything you can possibly look

24 at. And you get as much information as you possibly

25 can during that relevant period of time. And the

26 place we typically like to start with is a set of

27 financial statements, and those being a balance

28 sheet on an income statement, potentially to help us 8560

1 understand what’s going on within that company or

2 that individual’s financial condition position.

3 Q. Okay. I think maybe this would be a good

4 point to segue into your PowerPoint presentation.

5 MR. MESEREAU: Objection. Foundation;

6 relevance; Court ruling.

7 THE COURT: The PowerPoint presentation is —

8 what does it consist of?

9 MR. AUCHINCLOSS: It consists strictly of

10 some basic information about what Mr. O’Bryan does.

11 It also describes his expert opinions in this

12 matter, and it also includes the specific

13 information that he relied upon in forming those

14 opinions.

15 THE COURT: So it’s demonstrative of his

16 testimony?

17 MR. AUCHINCLOSS: Yes, it is, Your Honor.

18 THE COURT: Have you seen the presentation?

19 Have you seen the materials?

20 MR. MESEREAU: I was handed a couple of

21 documents that — I think that has it.

22 MR. AUCHINCLOSS: Yes, I provided it to

23 counsel yesterday. Actually, day before yesterday.

24 THE COURT: Generally, this is the kind of

25 thing that if the witness was given a piece of

26 chalk, he could go to the blackboard and, as he

27 testified, put this up.

28 MR. MESEREAU: He’s referencing select 8561

1 paragraphs from documents, one after another,

2 without showing the whole document, and that would

3 be one of our objections as well.

4 MR. AUCHINCLOSS: And if counsel wishes to

5 introduce those documents at the end of his

6 cross-examination, I don’t think we’ll have an

7 objection to that.

8 THE COURT: I’ll let you go forward with it

9 on my theory that it’s the type of help a witness

10 normally could do with a piece of chalk or a marker

11 and some butcher paper, but in these days we do it

12 with PowerPoint. If it appears to be something

13 beyond that type, I’ll have to reevaluate it.

14 MR. AUCHINCLOSS: Very well.

15 MR. MESEREAU: Thank you, Your Honor.

Next, Duross explained his findings from a June 30th, 2002 financial statement of Jackson in which he ascertained that Jackson had a negative net worth of -$285,000,000 dollars (two-hundred and eighty five million dollars). However, Duross was quick to point out (much to the chagrin of the prosecution and Jackson’s detractors in the media) that Jackson was NOT bankrupt because that net worth figure was based on a cash basis of his assets and liabilities, and not their fair market values:

16 MR. AUCHINCLOSS: All right. If we could

17 have “Input 1,” Your Honor.

18 All right. If I may approach, Your Honor,

19 and provide the laser pointer to the witness.

20 Q. I’ll give you this to use, if you wish.

21 If you could, Mr. O’Bryan, please take us

22 through the components of a financial statement.

23 A. The components of a financial statement, as

24 shown up on the board, are really made up of four

25 different components, the first being the balance

26 sheet. And all that is is a statement, part of the

27 financial statements that are typically referred to

28 in a set of financial statements, that lists out the 8562

1 assets and the liabilities, and then shows net

2 worth. And it literally does balance. That’s why

3 they call it a balance sheet, because the total of

4 assets will equal the total of liabilities plus net

5 worth, so it balances. So it’s simply a listing of

6 assets and liabilities, and then it shows net worth

7 as the difference.

8 Q. Before we —

9 THE COURT: I’m sorry, before you ask the

10 next question – I thought you were through with your

11 answer – I want to have Mr. Sneddon and Mr. Mesereau

12 approach for a moment.

13 (Discussion held off the record at sidebar.)

14 THE COURT: All right, Counsel. Go ahead.

15 MR. AUCHINCLOSS: All right. Thank you,

16 Your Honor.

17 Q. I think we were at income statement.

18 A. And the second set of — the second

19 statement within a set of financial statements is an

20 income statement, and that simply lists out all of

21 an individual’s or company’s income or revenues, and

22 it subtracts out all of the expenditures or

23 expenses. And the difference between those two is

24 either a net income or a net loss. So that’s the

25 income statement.

26 The third is what’s called a statement of

27 cash flows. It is simply a statement that shows

28 cash, and where cash came in and where cash goes 8563

1 out. And at the end of the year, it shows what the

2 ending cash balance is. Just cash.

3 And then the last component of a set of

4 financial statements is notes. And those notes are

5 a narrative addition to all of the numbers, and

6 they’re simply informative. They simply tell you

7 the basis that the financial statements are put

8 together and some of the different accounting

9 policies and principles used in accumulating the

10 financial statements.

11 Q. All right. Let’s look at the next slide.

12 What do you look for in these financial statements?

13 A. You first try to get an understanding of the

14 business, or the assets and liabilities. You then

15 look at the significant assets and liabilities and

16 try and understand what those are. You look for

17 unusual relationships, ones that you should do

18 additional information and/or additional research

19 on. And then lastly, you just look for unusual

20 issues that should be considered during your

21 investigation.

22 Q. All right. In this particular

23 investigation, were you able to find any financial

24 statements?

25 A. We did, yes. We found a June 30th, 2002,

26 financial statement.

27 Q. All right. What type of financial statement

28 was this? 8564

1 A. It was a balance sheet only. Just that

2 first statement, just the balance sheet showing

3 assets and liabilities.

4 Q. Okay.

5 A. And net worth.

6 Q. And that’s what you’ve described as being

7 balancing out. Subtract the liabilities from the

8 assets, you have a net worth?

9 A. That’s correct.

10 Q. Okay. So let’s talk about what this

11 particular June 30th, ‘02, balance sheet said about

12 Mr. Jackson’s assets and liabilities.

13 MR. MESEREAU: Your Honor, could we have the

14 exhibit marked?

15 THE COURT: Yes.

16 MR. AUCHINCLOSS: Certainly.

17 MR. MESEREAU: We’ll renew our objection

18 based on the Court’s ruling.

19 THE COURT: Yeah. The ruling that you’re

20 talking to me about is the ruling limiting the

21 financial presentation.

22 MR. MESEREAU: Yes, Your Honor.

23 THE COURT: He’s made an offer of proof in

24 his written materials that is within the scope of

25 what I anticipated him to do.

26 The problem and the reason I have blacked

27 out the screen is that if you’re relying on

28 documents that are evidentiary in nature in your 8565

1 presentation, they first must be introduced into

2 evidence. The witness wouldn’t be allowed to put

3 parts of a document in evidence that is not in

4 evidence. So….

5 MR. AUCHINCLOSS: I would just say that this

6 is offered as expert testimony. And expert

7 testimony may be based upon inadmissible evidence

8 that’s not normally admissible. And these are the

9 specific documents that he is basing his opinions

10 on, including hearsay and a variety of other — so

11 typically the —

12 THE COURT: But usually — all right. Go

13 ahead. The foundation for the figures is what I was

14 looking for.

15 MR. AUCHINCLOSS: All right.

16 THE COURT: The objection is overruled.

17 Q. BY MR. AUCHINCLOSS: All right. Going back

 

18 to your consideration of this particular balance

 

19 sheet, tell us what it said in terms of Mr.

 

20 Jackson’s assets versus liabilities at that

 

21 particular date.

 

22 A. This showed that as of June 30th, 2002,

 

23 there was $130,000,000 in assets, $415,000,000 in

 

24 liabilities, and a negative net worth of

 

25 $285,000,000.

26 Q. Okay. Now, as far as this balance sheet

 

27 goes, does it mean that Mr. Jackson is, by virtue of

 

28 that balance sheet, bankrupt? 8566

 

1 A. No, it doesn’t.

 

2 Q. Why do you say that?

 

3 A. Because the balance sheet is prepared on

 

4 what’s called a cash basis, or an income tax basis.

 

5 And that means that the assets are actually listed

 

6 at their cost, not necessarily their fair market

 

7 value. So those assets could have higher values,

 

8 and they could have lower values. The liabilities

 

9 could have higher values; they could have lower

 

10 values. It’s just a cash basis. In other words,

 

11 what was paid for the assets. So, no, it does not

 

12 mean that. You have to look at it more from a fair

 

13 market value.

 

14 Q. So this does not mean Mr. Jackson has

 

15 $285,000,000 more liabilities than assets at this

 

16 time?

 

17 A. The statement shows that. However, you

 

18 know, it’s on a cash basis, which means if you want

 

19 to get into the real world, you have to look at it

 

20 more from a fair market value perspective.

21 Q. Okay. So as a beginning point to your

22 investigation, would a balance sheet like that be a

23 cause of any concern?

24 A. You certainly look at it and question as to

25 why there’s a negative $285,000,000 net worth. I

26 mean, that’s certainly a concern and a

27 consideration. But it simply means that more

28 investigation needs to take place. 8567

In this excerpt, Duross describes his personal assessment of Jackson’s finances:

1 Q. Were there other documents that you were

2 able to review to give you a better picture of Mr.

3 Jackson’s financial condition?

4 A. Yes. I mean, we weren’t — we asked for

5 things such as bank statements and general ledgers,

6 which is a group of transactions that gets

7 accumulated to become the financial statements.

8 We asked for those types of things. We were

9 not given those. We have not seen those. However,

10 we did see about four to five boxes of other

11 documents that were principally correspondence

12 between Mr. Jackson’s financial advisors and some of

13 his advisors and/or himself.

14 So where he actually had hired financial

15 advisors to take care of his money and his assets

16 and pay his bills, that correspondence was made

17 available to us, or some of that. So we actually

18 looked at those to try and get a better

19 understanding of his financial condition during that

20 period of time.

21 Q. And in a forensic investigation such as

22 this, do you typically have all the documents you

23 want?

24 A. No. You might have more than we had, but

25 you don’t typically get all the documents you want.

26 Q. Based upon what you were able to look at and

27 consider in this case, were you able to form some

28 opinions with regards to Mr. Jackson’s financial 8568

1 condition leading up to February of 2003?

2 A. Yes, we were.

3 Q. Okay. I’d like you to take us through your

4 opinions in this case that were based upon these

5 documents.

6 MR. MESEREAU: Objection; foundation.

7 THE COURT: Overruled.

8 You may proceed.

9 MR. AUCHINCLOSS: All right.

10 Q. If you would, please tell us about the

11 opinions you formed based upon your review of all

12 the financial documents you’ve described that were

13 in these boxes that you reviewed.

14 A. Based on the information we saw, Mr.

15 Jackson’s financial condition had been deteriorating

16 up and leading into February 2003, evidenced

17 principally by a significant amount of

18 overexpenditure over what was being made. In other

19 words, expenditures exceeded income.

20 Secondly, that the liabilities, the

21 obligations side of things, the obligations and

22 liabilities were increasing steadily and fairly

23 significantly.

24 And lastly, there appears to be an ongoing

25 cash crisis. You’ll see a number of the memos that

26 we looked at that talked about cash crisis. Not

27 enough cash to pay bills, et cetera.

28 And then lastly, I believe that information, 8569

1 based on the documents that I’ve seen, was certainly

2 known as of February of 2003.

3 Q. All right. Have you prepared a diagram of

4 this particular slide, Mr. O’Bryan, that you brought

5 with you?

6 A. I think there was a blow-up of that made,

7 yes.

8 MR. AUCHINCLOSS: If I may approach, Your

9 Honor. And I’ve shown this to counsel. And I’d

10 like to just place it on the easel so Mr. O’Bryan

11 can refer to it during his testimony.

12 MR. MESEREAU: Your Honor, we’re going to

13 object just to the comment on their seeking

14 documents and their not finding them, to the extent

15 it suggests that the defense didn’t produce

16 something, and move to strike.

17 THE COURT: I’ll strike that comment.

18 MR. AUCHINCLOSS: All right.

19 THE COURT: Go ahead.

20 Q. BY MR. AUCHINCLOSS: Okay. I’d like you

21 to —

22 THE COURT: Have you seen the chart that

23 he —

24 MR. MESEREAU: Yes, I did. I did receive a

25 copy, Your Honor.

26 Q. BY MR. AUCHINCLOSS: Okay. So let’s talk

27 about the first opinion that you’ve expressed about

28 Mr. Jackson’s financial condition deteriorating. 8570

1 If you could, tell us why you — how you

2 arrived at that particular conclusion.

3 A. Well, as I mentioned, it was principally the

4 documents that we reviewed, and principally in this

5 matter some of the correspondence received from Mr.

6 Jackson’s financial advisors to either him or his

7 other advisors about his cash position.

8 Q. Okay. And referring to Slide No. 5, if

9 you’d take us through that.

10 A. Yes. Through some of these correspondence,

11 it’s apparent that there was —

12 THE COURT: Just a moment. The jurors can’t

13 see.

14 JUROR NO. 8: Can’t see.

15 MR. AUCHINCLOSS: Oh, I’m sorry. I’m sorry.

16 My apologies.

17 If I may place this down in the well or —

18 let me just try and adjust it here.

19 No, that’s not going to work.

20 Is that all right? Okay.

21 Q. All right. If you’d please —

22 A. We came to that conclusion based on

23 reviewing a number of different documents. It

24 seemed to point to the following three things fairly

25 consistently: One, that there was approximately 20

26 to 30 million dollars per year overspending. In

27 other words, spending over what was being made.

28 That has a tendency — going back to that balance 8571

1 sheet, if you’re not increasing your assets, and

2 you’re not — you don’t have the income to support

3 that kind of expenditure, your debt goes up. And

4 when your debt goes up and your assets don’t go up,

5 back to the balance sheet, your net worth goes down.

6 So that is a tendency to look at that talks

7 about deteriorating financial condition, first and

8 most importantly, an overspending of that nature and

9 that number. And, two, then, a decreasing net

10 worth. And that was caused by the third bullet

11 point, which is the fact that the debt increased

12 almost $70,000,000 between 1999 and 2003.

13 Q. All right. So let’s talk about the first

14 thing you mentioned, his overspending habits, then

15 how you come to your conclusions based on that.

16 First of all, you mention these primary

17 assets, two main — two music publishing catalogs?

18 A. Well, I believe that, based on my review of

19 the balance sheet, there are really three main

20 assets, certainly one of them being the MIJAC

21 catalog, which is publishing rights to certain of

22 Mr. Jackson’s personal performances and songs.

23 And second is a Sony/ATV catalog, which is a

24 library of copyrighted songs and performances by

25 both Sony and Mr. Jackson — Jackson other than the

26 MIJAC catalog. Those would be two main assets. And

27 those are income-producing, because they produce

28 royalties and create income to Mr. Jackson. 8572

1 The third main asset would also be

2 Neverland, Neverland Ranch, which is a fairly

3 substantial and significant asset.

4 Q. So what documents did you rely upon to come

5 to the conclusion that he was overspending?

6 A. That was correspondence from his financial

7 advisors.

In this excerpt, Duross describes the correspondence that he received from Jackson’s financial advisors, and goes into extensive details about Jackson’s assets and liabilities:

8 Q. Okay. I’d like to start by going back to

9 1999 and then take us up to 2003 and ‘4.

10 In 1999, did you consider any correspondence

11 from Mr. Jackson’s financial advisors in your

12 forensic investigation?

13 A. We did, yes.

14 Q. Did you recall a letter dated October 13th,

15 1999, from Holthouse?

16 A. Yes, it was Holthouse Kaitlyn & Von Tropp

17 (sic), or something like that.

18 Q. Okay. Who is — can you determine from the

19 correspondence who is Holthouse Kaitlyn & Von Tropp

20 (sic)?

21 A. That is a CPA firm in Los Angeles that

22 appeared to be acting as Mr. Jackson’s financial

23 advisors, business managers. They literally paid

24 the bills, they kept track of the assets. And they

25 reported back to Mr. Jackson or his advisors as it

26 relates to financial condition and status of bills,

27 et cetera.

28 Q. So they were actually cutting the checks to 8573

 

1 the vendors and people that Mr. Jackson owes money

 

2 to?

 

3 A. Apparently so, yes.

4 Q. Okay. Back to this ‘99 memo. Does it make

5 any reference to unpaid bills?

6 A. It does, yes.

7 Q. All right. Let’s look at the next slide.

8 MR. MESEREAU: Objection. Relevance; Court

9 ruling.

10 THE COURT: Overruled.

11 Q. BY MR. AUCHINCLOSS: Specifically, what does

 

12 it tell you about Mr. Jackson’s unpaid bills?

 

13 A. It says that Holthouse was short

 

14 approximately $780,000 to meet “our outstanding

 

15 liabilities,” meaning at that point in time there

 

16 was — they were short in cash $780,000 to pay

 

17 outstanding invoices or obligations due by Mr.

 

18 Jackson and/or his entities.

19 Q. In this letter does Holthouse offer any

20 suggestions or concerns?

21 A. They do, yes.

22 Q. What do they say?

23 A. They go on to say —

24 MR. MESEREAU: Objection; hearsay.

25 MR. AUCHINCLOSS: It’s relied upon for his

26 opinion.

27 THE COURT: I’ll sustain the objection to the

28 hearsay. He’s allowed to form his opinion on that 8574

1 type of material, but he isn’t necessarily allowed

2 to repeat it, the material he forms his opinion on.

3 MR. AUCHINCLOSS: Okay.

4 Q. All right. So they expressed concerns about

5 Mr. Jackson’s overspending?

6 A. That’s correct.

7 MR. AUCHINCLOSS: Your Honor, am I permitted

8 to continue the PowerPoint presentation?

9 THE COURT: Well, you can’t show that

10 material. You’re quoting hearsay quotes from other

11 people that have to have limiting instructions, and

12 that’s exactly what I asked you at the beginning,

13 what the material was about. I wouldn’t allow a

14 witness to go to the blackboard and write down what

15 someone else told him. You’ve got that in the

16 PowerPoint presentation?

17 MR. AUCHINCLOSS: This is the specific

18 statement that he relied upon to form his opinion,

19 from the defendant’s —

20 THE COURT: I understand that. He’s given

21 his opinion.

22 MR. AUCHINCLOSS: Okay.

23 Q. So looking at the records, going through the

24 records, did Mr. Jackson appear to heed the concerns

25 of the Holthouse accountants, of his Holthouse

26 accountants?

27 A. No. The expenditure levels seemed to

28 continue throughout 1999, as evidenced by comments 8575

1 made within the Holthouse memos.

2 Q. Okay.

3 MR. MESEREAU: Same objection. Excuse me.

4 I’m going to object to relevance; 1999.

5 MR. AUCHINCLOSS: I’ll be happy to make an

6 offer of proof as to why we’re starting here.

7 THE COURT: The objection is overruled.

8 Q. BY MR. AUCHINCLOSS: Is there an indication,

9 during this period, from Holthouse as to how much

10 Mr. Jackson is receiving in income versus how much

11 his expenditures are?

12 A. Yes. In one of the memos, it stated that

13 Mr. Jackson was receiving —

14 MR. MESEREAU: Objection; hearsay.

15 THE COURT: The problem we’re having here —

16 I’m going to talk to the jury a second about this.

17 (To the jury) The expert is allowed to use

18 this type of material to form an opinion on. But

19 you, as a jury, are not allowed to accept that

20 material for the truth of the matter asserted. It

21 is hearsay, and it is only being presented to show

22 you what he relied on.

23 So with that limiting instruction, I will

24 allow him to state — to answer your question.

25 MR. AUCHINCLOSS: Okay. Would you like the

26 question repeated?

27 THE WITNESS: No, I have the question in

28 mind. 8576

1 MR. AUCHINCLOSS: Okay.

2 THE WITNESS: In fact, in 1999, there was a

3 memo, it was actually in 2000, which summarized the

4 1999 income statement, and basically said that there

5 was approximately 11 —

6 MR. MESEREAU: Objection; hearsay.

7 THE COURT: Overruled.

8 Go ahead. With the same limitation.

9 THE WITNESS: Stated that there was

10 approximately $11.5 million received on the MIJAC

11 catalog and the Sony/ATV catalog; five million on

12 the MIJAC, 6.5 million on the Sony catalog, for a

13 total revenue of about $11.5 million, if my math’s

14 correct.

15 At the same point in time, there was

16 expenditures of over $20 million, made up of

17 approximately $5 million in legal and professional

18 fees, $5 million in security and ranch expenditures,

19 seven and a half million dollars in personal

20 expenditures, and $2.5 million of other

21 miscellaneous, which was principally insurance. So

22 total income of 11.5 million and expenditures of

23 over $20 million.

24 Q. BY MR. AUCHINCLOSS: All right. Now, you’ve

25 mentioned previously this MIJAC catalog and the

26 Sony/ATV catalog. Does it appear, based on these

27 records that you have reviewed, that these are his

28 two main assets? You mentioned Neverland, but are 8577

1 these the main assets over and above Neverland?

2 A. Well, those are the main income-producing

3 assets. I mean, as I said, I think there’s three

4 main assets, the two catalogs and Neverland. But

5 the MIJAC catalog and the Sony/ATV catalog are the

6 two income-producing assets which generate royalties

7 off of those copyrighted performances.

8 Q. What is a music publishing catalog?

9 A. It’s really a library of copyrighted songs

10 or performances which a manager or an administrator

11 sells into the commercial market. Either they sell

12 it by playing it on the radio, they sell it by

13 allowing a movie to use the song, a T.V. show to use

14 the song, advertisements to use the song, or they

15 might sell sheet music.

16 Each and every time that song is played or

17 those — that sheet music is used, you get a royalty

18 off of it. So that generates money, which is

19 captured by a royalty capture device, and then that

20 is sent to MIJAC catalogs for all of the MIJAC

21 songs, which again principally were Mr. Jackson’s

22 personal compendium of performances, or for the

23 Sony/ATV, which was that catalog. That generates

24 revenue.

25 Q. Okay. Now, the MIJAC catalog consists of

26 what?

27 A. As I mentioned, that was principally Mr.

28 Jackson’s personal compendium of copyrighted songs 8578

1 and performances. That’s what the MIJAC catalog is.

2 Q. And the Sony/ATV catalog?

3 A. The Sony/ATV was a joint venture or a

4 partnership between Sony, who contributed a number

5 of their copyrighted songs. I think it started out

6 principally as country-western, and Mr. Jackson

7 contributed his copyrighted performances of songs,

8 other than MIJAC, which at the time there were a

9 number of different performances, but some of them

10 were The Beatles’ hits.

11 Q. And is Mr. Jackson’s interest in the Sony

12 catalog a part interest?

13 A. Yes, it is.

14 MR. MESEREAU: Objection; foundation.

15 THE COURT: Sustained.

16 Q. BY MR. AUCHINCLOSS: Is Mr. Jackson the sole

17 owner of the Sony catalog?

18 MR. MESEREAU: Objection; foundation.

19 THE COURT: Sustained.

20 Q. BY MR. AUCHINCLOSS: Do the records that

21 you’ve reviewed indicate whether or not Mr. Jackson

22 is the sole owner of the Sony catalog?

23 MR. MESEREAU: Objection; foundation.

24 THE COURT: Overruled.

25 You may answer that question.

26 THE WITNESS: Yes, the records indicate that

27 Mr. Jackson is a part owner of that catalog with

28 Sony as the other partner. 8579

1 Q. BY MR. AUCHINCLOSS: Okay. Now, you’ve

2 given us a breakdown of the 20 million in expenses.

3 MR. MESEREAU: Objection; misstates the

4 evidence.

5 THE COURT: Sustained.

6 Q. BY MR. AUCHINCLOSS: Did you give us a

7 breakdown of the 20 million in expenses that —

8 for the ‘99 period in that March Holthouse letter?

9 A. I did, yes.

10 Q. Okay. Was there — were there any

11 additional liabilities over and above the $20

12 million, that Mr. Jackson accrued during the

13 previous year based on that letter?

14 A. Yes, there were.

15 Q. What are we talking about?

16 A. It’s about $11 million of interest expense

17 on the two loans. There’s two loans with B of A

18 that are secured by — one by the MIJAC catalog.

19 The royalties in the MIJAC catalog are used as

20 collateral against — first it’s a $15 million loan,

21 and then a $20 million loan, and it continues to go

22 up.

23 And then there’s the — the Sony/ATV catalog

24 is used as collateral for approximately $140 million

25 of loans from B of A. And those two loans in 1999

26 incurred about $11 million of expenditures — excuse

27 me, $11 million of interest that would be added to

28 the 20 million to come up to a total expenditure. 8580

1 Q. Okay. So let me see if — paraphrase and

2 see if I have this right.

3 In 1999, before this letter was written,

4 Mr. Jackson had $31 million in liabilities; is that

5 correct, approximately?

6 A. $31 million of expenditures.

7 Q. I’m sorry, $31 million in expenditures?

8 A. That’s correct.

9 Q. And he had $11.5 million in income?

10 A. That’s the income coming off of the two

11 catalogs, yes.

12 Q. So he’s spending millions more than he’s

13 making?

14 A. The evidence shows that he’s spending about

15 $20 to $30 million more than he’s making.

16 Q. Now, is that an annualized issue? Are you

17 saying — I mean, he’s making 20 or 30 — or

18 spending 20 or 30 more than he’s making per year?

19 A. That’s correct.

20 Q. Is that what we’re talking about?

21 A. That’s annually, yes.

22 Q. Okay. So, you’ve mentioned some loans that

23 he has accrued, some debts. Who was the lender in

24 those loans?

25 A. Bank of America.

26 Q. Can you tell at this stage what types of

27 loans those are?

28 A. Well, one is what’s called a line of credit, 8581

1 which means you can borrow from zero to the total

2 amount of the loan possible. And the other was just

3 a set loan. Started at $140 million, and it’s grown

4 to $200 million.

5 Q. Okay. So we’re still looking at the

6 Holthouse memo of 2000. At that stage, what was

7 that loan?

8 A. In 2000 —

9 Q. In March.

10 A. In March of 2000, I believe that loan was

11 $24 million.

12 Q. Okay. And then was there — were there any

13 other loans at that point?

14 A. Well, there was the B of A loan for 140

15 million. There was the $24 million B of A loan on

16 the MIJAC catalog. And there was an additional $26

17 million owed to Sony.

18 Q. Okay. And what is the Sony loan related to,

19 if you could tell us?

20 A. It appeared to be some 1994 transaction

21 where 26 million dollars was owed.

22 Q. So the previous Holthouse letter you talked

23 about said that he had I think around $800,000 in

24 accounts payable.

25 A. Okay.

26 Q. Is that right?

27 A. Well, it said that there was — there was

28 not cash available to pay approximately $800,000 of 8582

1 outstanding obligations.

2 Q. So those are bills that he has that he

3 didn’t have the money to pay?

4 A. Correct.

5 Q. How does his outstanding obligations versus

6 cash — look at the point where we’re at now, at

7 the — in March of 2000. Does the letter reflect

8 his ability to pay his obligations at that point?

9 A. As I recall, the memo from Holthouse said

10 that at that point in time —

11 MR. MESEREAU: Objection; hearsay.

12 THE COURT: Overruled.

13 You may answer, with the same limitation

14 that I instructed the jury on earlier.

15 Go ahead.

16 THE WITNESS: Approximately $3.5 million of

17 outstanding obligations as of that date in 2000.

18 Q. BY MR. AUCHINCLOSS: Does Holthouse express

19 any additional concerns about his assets, the

20 vitality of, or the risk that’s being presented by

21 this overspending concerning his assets?

22 MR. MESEREAU: Objection. Leading and

23 hearsay.

24 THE COURT: Sustained.

25 Q. BY MR. AUCHINCLOSS: Are there any other

26 concerns that are expressed by Holthouse in this

27 memo?

28 MR. MESEREAU: Objection. Leading and 8583

1 hearsay.

2 THE COURT: Sustained. Calls for a

3 narrative.

4 Q. BY MR. AUCHINCLOSS: Okay. Does Holthouse

5 talk about any possible tax liabilities in this

6 letter?

7 MR. MESEREAU: Objection; hearsay.

8 THE COURT: Overruled.

9 You may answer.

10 THE WITNESS: They do, yes. What’s talked

11 about is, they mention in the letter that if Mr.

12 Jackson and his entities continue to overspend by

13 $20 to $30 million a year, that the collateral for

14 those loans is the catalogs. That’s what secures

15 the catalogs. Just like your car secures your car

16 loan, those catalogs secure those loans, or your

17 house secures your mortgage.

18 And their concern is that if that rate of

19 spending continues, that those catalogs could be in

20 jeopardy. In other words, he may have to sell

21 those, even if he could sell them. And if, in fact,

22 you sell those catalogs, there’s a substantial tax

23 liability. So you not only have to pay the debt,

24 but you also have to pay the taxes on the sale of

25 those catalogs. And it talks about that issue and

26 that being a concern of Holthouse.

27 Q. BY MR. AUCHINCLOSS: Does Holthouse write an

28 additional letter expressing their concerns in June 8584

1 of 2000?

2 MR. MESEREAU: Objection. Hearsay; leading;

3 foundation.

4 THE COURT: Overruled.

5 You may answer.

6 THE WITNESS: They do, yes.

7 Q. BY MR. AUCHINCLOSS: And do they discuss the

8 issue of how much available cash or remaining debt

9 on these loans Mr. Jackson has to fund his current

10 obligations?

11 A. They do, yes.

12 Q. What do they say?

13 A. At that point in time, there was the $20

14 million line of credit that was basically —

15 Holthouse even says in the memo that it’s really —

16 that line of credit and the other debt is funding

17 his living expenses.

18 And the memo goes on to say that at that

19 point in time, $9.2 million has been lent or drawn

20 on the line of credit. Meaning that there’s only

21 another $800,000 available on that line to fund

22 living expenses for an indefinite period of time.

23 Q. Do they describe any spending restrictions

24 on Mr. Jackson that need to go into effect?

25 A. They do. Concerned over that cash situation

26 or that cash crisis, they immediately state that

27 they will no longer pay any bills unless authorized

28 by the client, and – 8585

1 MR. MESEREAU: Objection. Hearsay;

2 foundation.

3 THE COURT: Sustained.

4 Q. BY MR. AUCHINCLOSS: All right. Moving on

5 to June 14th, just a few days later, did they send

6 another memorandum? Did Holthouse send another

7 letter to Mr. Jackson?

8 A. They did, yes.

9 Q. Do they talk about Mr. Jackson’s rate of

10 spending specifically in that letter?

11 A. Um —

12 MR. MESEREAU: Objection. Hearsay;

13 foundation.

14 THE COURT: Overruled.

15 You may answer.

16 THE WITNESS: Yes, they do.

17 Q. BY MR. AUCHINCLOSS: What do they say?

18 A. They continue to act — or they continue to

19 say they are concerned about Mr. Jackson’s rate of

20 spending. And again, he is spending approximately

21 $20 to $30 million more than he’s making per year.

22 Q. BY MR. AUCHINCLOSS: Did they specifically

23 say that?

24 A. Yes.

25 Q. What is Mr. Jackson’s debt at this

26 particular juncture? Is it mentioned in these

27 documents?

28 MR. MESEREAU: Objection. Foundation and 8586

1 hearsay.

2 THE COURT: It’s —

3 MR. AUCHINCLOSS: It’s compound.

4 THE COURT: — compound.

5 MR. AUCHINCLOSS: I’ll go ahead and withdraw

6 the question.

7 Q. Does — do these documents that you’ve

8 described so far say anything about Mr. Jackson’s

9 debt that he is now servicing at this point in time,

10 on June 13th or June 14th of 2000?

11 A. They do, yes.

12 Q. What do they tell you about his debt at that

13 point?

14 MR. MESEREAU: Objection; hearsay.

15 THE COURT: Overruled.

16 You may answer.

17 THE WITNESS: As I recall, they mention that

18 the Bank of America debt is a $200,000 — excuse me,

19 $200 million, which is securing the ATV catalog.

20 And as I recall, the line of credit is up to $35

21 million at that point in time.

22 Q. BY MR. AUCHINCLOSS: Okay. And do they talk

23 about his ability to pay unpaid vendors or bills in

24 that letter?

25 A. Yes. It goes on to state that Holthouse is

26 unable to pay vendors; that vendors continue —

27 MR. MESEREAU: Objection; hearsay.

28 THE COURT: Overruled. 8587

1 Go ahead.

2 THE WITNESS: And that vendors are

3 continuing to threaten alternative action if they

4 are not paid.

5 Q. BY MR. AUCHINCLOSS: Does Holthouse warn Mr.

6 Jackson of an impending problem?

7 MR. MESEREAU: Objection. Leading; hearsay.

8 THE COURT: Overruled.

9 THE WITNESS: Yes. It goes on to say, back

10 when — it said back three months earlier —

11 MR. MESEREAU: Objection; nonresponsive.

12 THE COURT: Sustained.

13 Q. BY MR. AUCHINCLOSS: Could you just confine

14 your answer to any warnings that are given in the

15 June 14th, 2000, Holthouse letter?

16 A. Yes. The warnings are that, again, that the

17 catalogs are now at risk. And that’s the MIJAC

18 catalog and the Sony/ATV catalog, because again,

19 they are securing those loans, and those loans

20 continue to increase.

In this excerpt, Duross mentions reading correspondence that was sent to Myung Ho Lee, one of Jackson’s financial advisors. He was fired by Jackson in 2002 and filed a lawsuit against Jackson, accusing him of breach of contract for failure to pay $13 million dollars. After Jackson’s arrest, he provided tabloid journalist Maureen Orth with negative information about Jackson, including some nonsense about Jackson ordering the slaughter of 42 cows in a voodoo ceremony to curse his enemies (that lie was debunked in this post), and the lie that he plied a young boy named Richard Matsuura with alcohol during a trip to Japan in 1998. After Orth’s Vanity Fair article “Losing His Grip” was published in March 2004, the young boy vehemently denied the allegation, and although Orth initially stood by her story, she quietly removed that particular lie from the online version of her article.

 

I was browsing through that article one day in order to find Lee’s quotes about that alleged incident, and became highly suspicious when I noticed that it had been removed, so I ordered the original March 2004 print issue of Vanity Fair and scanned the article, and the highlighted excerpt in the photo below is what was removed from the online version. For more information on this issue, please read this post.

21 Q. Did you consider a memorandum from So Young

22 Lee to Myung Ho Lee?

23 A. I did, yes.

24 Q. And who is Myung Ho Lee?

25 A. Apparently he was a financial advisor to Mr.

26 Jackson.

27 Q. And the date of this letter was — do you

28 recall it? 8588

1 A. I think it was October of ‘00. ‘01,

2 possibly.

3 Q. And in this letter, does Miss Lee forecast

4 future spending for the period — 16-month period of

5 September 2000 through December 2001?

6 A. Yes, she does.

7 Q. How much spending is forecast?

8 MR. MESEREAU: Objection. Hearsay;

9 foundation.

10 THE COURT: Overruled.

11 You may answer.

12 THE WITNESS: A little over $31 million for

13 that 16-month period of time.

14 Q. BY MR. AUCHINCLOSS: So what does that equal

15 on an annualized basis in terms of spending?

16 A. If my math is right, about $23, $24 million

17 per year.

18 Q. All right. So has that been an increase

19 from the previous documentation that you reviewed

20 concerning Mr. Jackson’s expenditures when he was

21 warned back in, I think it was, March of 2000?

22 A. Yes. The 1999 expenditures were $20

23 million, plus approximately $11 million of interest.

24 The projection by Ms. Lee was $23 million for that

25 year, and that did not include the $11 or $12

26 million of interest expense. So those expenditures

27 are continuing to increase.

28 Q. Were you able to determine whether or not 8589

1 these forecasts were accurate as far as future

2 spending?

3 A. No, we did not see those documents as to

4 actual expenditures in 2001.

5 Q. Did you ultimately look at documents from

6 2004 that showed his level of debt during that

7 period?

8 A. Yeah, we saw how the debt increased 2001 —

9 or 2000 through 2004.

10 Q. And was the increase in debt commensurate

11 with these predictions of excessive spending by So

12 Young Lee?

13 A. Yes. As I mentioned earlier, the debt

14 increased approximately $70 million over a

15 three-year period of time. And that would tend you

16 to believe that it was about $20 to $30 million per

17 year increase. The debt was increasing because the

18 expenditures increased over the income levels.

19 Q. Did you consider a February 13th, 2003,

20 memorandum from International Business Management?

21 A. I did, yes.

22 Q. And who is International Business

23 Management?

24 A. They appear to be another financial

25 consulting firm that was assisting Mr. Jackson

26 and/or his advisors.

27 Q. Okay. Does this letter mention anything

28 about Mr. Jackson’s rate of spending? 8590

1 A. It does.

2 Q. What does it say?

3 MR. MESEREAU: Objection; hearsay.

4 THE COURT: Overruled.

5 THE WITNESS: It says that they are concerned

6 about his excess spending habits, his continued

7 excess spending habits over his income.

8 Q. BY MR. AUCHINCLOSS: Do they cite any

9 specific figures?

10 A. I think it was $20 to $30 million again.

11 Q. Okay. Does that letter talk about how

12 many — how much money is building up in the unpaid

13 vendors category?

14 A. It does, yes.

15 Q. What does it say?

16 MR. MESEREAU: Objection. Relevance; Court

17 ruling.

18 THE COURT: Sustained.

19 Q. BY MR. AUCHINCLOSS: Does it say how much

20 cash is left to pay these vendors?

21 MR. MESEREAU: Objection; Court ruling.

22 THE COURT: Sustained.

23 Q. BY MR. AUCHINCLOSS: Does it say anything

24 about the status of his current loan balances in

25 February of 2003?

26 MR. MESEREAU: Objection; hearsay.

27 THE COURT: Overruled.

28 You may answer. 8591

1 THE WITNESS: It does, yes.

2 Q. BY MR. AUCHINCLOSS: What is that?

3 A. At that point in time, it mentions that the

4 MIJAC loans are approximately $70 million. And the

5 B of A loan on the Sony/ATV catalog is approximately

6 $200 million.

7 Q. Does it say whether or not he has any — has

8 sufficient cash to pay his bills?

9 MR. MESEREAU: Objection.

10 Q. BY MR. AUCHINCLOSS: In that month, February

11 of 2003.

12 MR. MESEREAU: Leading; hearsay; foundation;

13 Court ruling.

14 THE COURT: Overruled.

15 You may answer

16 THE WITNESS: Yes. It states that at that

17 point in time there are $10.5 million of unpaid

18 vendor invoices. And there’s only $38,000 of cash

19 in the bank.

20 Q. BY MR. AUCHINCLOSS: Okay. So if we can

21 summarize what has happened to his debt since 1999,

22 what was his debt with the Bank of America as of

23 2000?

24 A. Well, in 2000, the debt was approximately

25 $155 million.

26 Q. And let’s go now to February of 2003.

27 A. That debt has grown to $224 million.

28 Q. 70 $million in three years increase? 8592

1 A. That’s correct.

2 Q. Have you reviewed loan documents, these loan

3 documents for the two loans that you’re — or for

4 the loans on these music catalogs that you’ve talked

5 about?

6 A. I did, yes.

7 Q. Do they have any covenants or conditions?

8 A. They do, yes.

9 Q. Any covenants regarding accruing additional

10 debt?

11 MR. MESEREAU: Objection. Foundation,

12 hearsay, and leading.

13 THE COURT: Overruled.

14 You may answer.

15 THE WITNESS: Yes, there is a covenant.

16 Covenants — well, there is a covenant that says

17 that there’s no additional debt allowed unless

18 approved by Bank of America.

19 Q. BY MR. AUCHINCLOSS: Is there a covenant

20 against — any covenant regarding, I should say,

21 further encumbering these two assets? In other

22 words, getting more — mortgaging them further with

23 another agency?

24 A. Yes. There is also a covenant that says

25 that Mr. Jackson and/or his businesses are not

26 allowed to further encumber these two catalogs. In

27 other words, the only loan that can be on these two

28 catalogs is the two B of A loans. 8593

1 Q. So —

2 THE COURT: We’ll take our break.

3 MR. MESEREAU: Your Honor, we have a motion

4 to make.

5 THE COURT: Not now.

6 (Recess taken.)

After the recess, but before the jury was seated, Judge Melville clarified to the attorneys and to Duross that this financial analysis of Jackson’s net worth cannot be used by the jury to infer that Jackson had a financial motive to commit the crimes that he was accused of. Melville was also uncomfortable with the constant references to letters written by Jackson’s financial advisors, and wouldn’t allow the prosecution to continue to bring this up.

8 (The following proceedings were held in

9 open court outside the presence and hearing of the

10 jury:)

11

12 THE BAILIFF: You can have a seat, Mr.

13 O’Bryan.

14 THE COURT: The reason I’ve come in before we

15 bring the jury in is that I want to make a ruling

16 here that helps clarify what you’re trying to do,

17 both of you.

18 Initially I made an order that the District

19 Attorney was permitted to bring in general financial

20 information to provide evidence from which the jury

21 may or may not infer that the defendant was — had

22 financial problems, from which they may or may not

23 infer that that gives him some motive to commit the

24 crimes the D.A. alleges he’s committed.

25 The offer of proof that was made in the

26 memorandum that you submitted, your trial

27 memorandum, was within what I perceived.

28 The thing that I’m uncomfortable with, and 8594

1 have been for a few minutes, is the constant having

2 your expert refer to, you know, letter after letter

3 from his advisors about his financial condition.

4 The expert has testified that he relied on the

5 balance sheet and income expenditure statements,

6 which is basically what you expect an expert to rely

7 on. And to some extent certainly he would rely on

8 other people’s opinions, financial advisors of Mr.

9 Jackson. But it’s not the kind of evidence that I’m

10 going to allow you to continue to bring up.

11 So you can — my ruling is that his quotes

12 from — that he wants to make or you want him to put

13 into evidence from Michael Jackson’s advisors are to

14 stop at this point.

15 I have advised them that those have limited

16 value to them, since they can’t accept those for the

17 truth of the matter asserted, but I think if we

18 continue in that vein, it’s not the right way to

19 present the evidence.

20 MR. AUCHINCLOSS: May I just tell the Court

21 how I intend to finish up, just so we’re —

22 THE COURT: They can’t hear you.

23 MR. AUCHINCLOSS: May I just tell the Court

24 how I intend to finish up?

25 THE COURT: You may.

26 MR. AUCHINCLOSS: Basically, just so you

27 know, Your Honor, we wanted to do this with balance

28 sheets. And as you know, we weren’t – 8595

1 THE COURT: I don’t want to hear that. What

2 do you want to tell me?

3 MR. AUCHINCLOSS: At the end of the — we’re

4 at the end of his testimony. And we’re going to

5 finish with the two summaries that were provided by

6 the Bank of America. Now, these are actual letters

7 that were SDT’d from Bank of America to

8 representatives. And just so you know, the

9 testimony is book-ended by the statement, balance

10 statement, and these letters.

11 THE COURT: Let me see the letters.

12 MR. AUCHINCLOSS: Okay. Well, I have a

13 copy, but —

14 THE COURT: Have you seen the letters,

15 Counsel?

16 MR. MESEREAU: I’m not sure what he’s

17 talking about.

18 MR. AUCHINCLOSS: This would be the Jane

19 Heller letter and the Maiorella letter from the Bank

20 of America indicating the status of the loan

21 balances as of 2004.

22 THE WITNESS: I have them here, if you want.

23 MR. MESEREAU: May I take a look, Your

24 Honor?

25 THE COURT: Well, after me.

26 MR. MESEREAU: Okay. Excuse me.

27 MR. AUCHINCLOSS: Jane Heller and Maiorella.

28 THE COURT: So these are the status of the 8596

1 loans in 2004?

2 MR. AUCHINCLOSS: Yes. And these provide

3 conclusive evidence that everything that was

4 predicted, everything that was stated by all of the

5 letters that we have indicated, was borne out in the

6 resulting accumulation of debt and of what the —

7 THE COURT: Yeah, but the issue isn’t what

8 his financial status is today or whether you were

9 right or wrong.

10 MR. AUCHINCLOSS: I know, the issue is —

11 THE COURT: The issue is what was his frame

12 of mind in 2000 — late 2002 and 2003.

13 MR. AUCHINCLOSS: And that’s what —

14 THE COURT: And not whether he was even

15 right. He could have been absolutely wrong. So —

16 MR. AUCHINCLOSS: That’s true.

17 THE COURT: So his financial statement today

18 isn’t at issue.

19 MR. AUCHINCLOSS: Well, I’m just saying

20 that’s why the letters are so important, because

21 they impute knowledge of the defendant.

22 THE COURT: Today.

23 MR. AUCHINCLOSS: No, the ones that we’ve

24 introduced so far. And this basically confirms that

25 the letters were all correct, and that they also

26 further show what was going on in 2003.

27 THE COURT: What they show is, in hindsight,

28 he was in trouble. But that’s not the issue. 8597

1 MR. AUCHINCLOSS: All right. So —

2 THE COURT: Did you look at the letters, Mr.

3 Mesereau?

4 MR. MESEREAU: I’ve looked at them, Your

5 Honor. And I would object based on what the Court

6 just said. The point of their presentation is not

7 to talk about —

8 THE COURT: They can’t hear you.

9 MR. MESEREAU: I’m sorry, Your Honor.

10 The point they’re trying to prove is not

11 what is his financial status today. They’re

12 allegedly trying to suggest there was a motive in

13 2003 to conspire to do criminal acts because of

14 financial concerns, which of course we vigorously

15 dispute.

16 But nevertheless, the issue is what is

17 relevant to a possible motive in 2003, specifically

18 between January and March. Nothing after that date

19 would have any relevance to what they claim they’re

20 trying to prove.

21 MR. AUCHINCLOSS: Our point is that these

22 letters tell what happened in 2003, tell what was

23 going on at that time. Our —

24 THE COURT: I must have misread them. Do you

25 want to give them back to me? I thought they were

26 talking about right now.

27 MR. AUCHINCLOSS: Well, they’re talking

28 about how the debt has accumulated. 8598

1 THE COURT: They’re talking about right now,

2 aren’t they?

3 MR. AUCHINCLOSS: Yes, they are.

4 THE COURT: All right. Give them back to

5 him.

6 MR. AUCHINCLOSS: But it’s the genesis of

7 those problems that exist in 2003.

8 THE COURT: Do you understand what I’m

9 saying, Counsel?

10 MR. AUCHINCLOSS: I do. I do.

11 THE COURT: Do you understand the limitations

12 that I gave you on the financial material?

13 MR. AUCHINCLOSS: That it was to be concise —

14 THE COURT: I think now the limitation is

15 this: That I don’t want you asking him any more

16 quotes from any of his advisors. You are apparently

17 not going to do that.

18 MR. AUCHINCLOSS: All right.

19 THE COURT: And I don’t think it’s — and I

20 will rule that an opinion as to his present

21 financial status would be improper.

22 MR. AUCHINCLOSS: Very good. I’ll just

23 finish up with his opinions about the defendant’s

24 financial status in 2003.

25 THE COURT: At that time. All right.

26 MR. AUCHINCLOSS: All right. Thank you.

27 THE COURT: Thank you.

28 You can bring in the jury. 8599

1 (The following proceedings were held in

2 open court in the presence and hearing of the

3 jury:)

Auchincloss ended his direct examination by questioning Duross about his professional opinion about Jackson’s financial condition in February and March 2003:

5 THE COURT: Counsel?

6 MR. AUCHINCLOSS: Thank you, Your Honor.

7 Q. Mr. O’Bryan, where we left off, I was

 

8 drawing your attention back to the summary of your

 

9 opinions, and I’m going to ask you at this time,

 

10 based upon your review of all the records in this

 

11 case, including the records you’ve testified about,

 

12 can you walk us through your opinions about Mr.

 

13 Jackson’s financial condition as of the

 

14 February-March period of 2003? What are your

 

15 opinions, sir?

 

16 A. Again, they are that Mr. Jackson’s financial

 

17 condition has deteriorated, up and leading to that

 

18 point of time, February of 2003. The expenditures

 

19 have exceeded income. The liabilities have

 

20 increased. And there is a liquidity crisis or a

 

21 cash crisis which looms and has been ongoing. And I

 

22 believe those conditions were known as of February

 

23 2003.

24 MR. AUCHINCLOSS: All right. Thank you very

25 much, Mr. O’Bryan.

26 THE COURT: Cross-examine?

27 MR. MESEREAU: Yes, please, Your Honor.

28 // 8600

To be continued: https://michaeljacksonvindication2.wordpress.com/2014/07/13/may-3rd-2005-trial-analysis-david-saunders-jeff-klapakis-craig-bonner-paul-zelis-steve-robel-john-obryan-john-duross-rudy-provencio-part-3-of-4/

 

 

 

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