With money, Michael Jackson was King of the Dunces

He may have been the King of Pop but when it came to money Michael Jackson was the King of the Dunces.

He recorded the best selling album in history, could earn $US50 million a year, and was reportedly worth as much as $US750 million.

Yet when he died, Jackson was deeply in debt – as high as $US500 million, according to the Wall Street Journal – and will leave a much-reduced estate for his raft of inheritors, who are already fighting over his fortune, if the debts are repaid in full.

At the time of his death, Jackson was planning the comeback of the century: 50 concerts in London that would boost his cashflow and make millions for his Los Angeles-based promoter, AEG Live, which operates the huge 02 Arena.

AEG is owned by Denver billionaire Philip Anschutz, who has backed some large entertainment ventures.

Refunds of the more than $US85 million in prepaid tickets will have to be made and the venue has 50 free nights. AEG Live has already paid Jackson $US20 million and spent $US10 million more getting ready for the planned July 13 premiere. It may have to recoup this from Jackson’s estate.

Jackson’s profligacy, legal costs from a series of lawsuits resulting from his bizarre behaviour, and the demands of his many hangers-on, brought him close to bankruptcy.

Reports of Jackson's financial troubles began to surface in 2005. He was accused by an accountant during his trial on child molestation charges of spending $US20-30 million more than he was bringing in each year.

Cashing up

Last November had to hand over the title on his Neverland estate in California to a company made up of himself and a Los Angeles-based real estate investment trust, Colony Capital, which holds his $US23 million loan on the property.

Colony Capital has been sprucing up the ranch and planned to sell it, according to the Wall Street Journal. The firm’s boss, Tom Barrack, told the newspaper last month the estate could fetch $US70-80 million, or more if Jackson’s career were revitalised.

Jackson closed the main house of Neverland ranch, his lavish California estate, as a cost-cutting measure, but repeatedly failed to pay interest on the $US24.5 million he owed on the property. A last-minute re-financing agreement narrowly saved Neverland from public auction in 2008.

In April, Jackson abruptly cancelled an auction of his personal memorabilia, including the crystal-covered glove he wore in the hit music video for Billie Jean and numerous musical awards. Auctioneers estimated that the more than 1400 items could have raised $US10-20 million to help pay down the debt on Neverland.

"There was no planning in terms of allocations of how much he should spend," Alvin Malnik, a lawyer and former financial adviser to Jackson, told the New York Times in 2006. "Millions of dollars annually were spent on plane charters, purchases of antiques and paintings."

Jackson did make one very shrewd business decision: in 1985 he paid $US47.5 million to acquire ATV Music, which owned the rights to 251 songs John Lennon and Paul McCartney wrote with The Beatles.

In 1995, he sold half of this interest to Sony for $US150 million, but both halves remained under joint management by Sony/ATV, including Jackson's own music.

This stake has an estimated value between $US500 million and $US1 billion. Certainly, the extra sales after his death will boost royalties, if only temporarily, and continue to provide a revenue stream.

Insurance headache

Bermuda-based insurer Validus Holdings says a group of insurers are covering the concert series through the Lloyd's but Validus says it has less than $US3 million at risk.

Validus also says it is not the lead insurer. Total coverage is said to be $US18 million, $US12 million less than what AEG has been paid out so far.

It has been reported this policy was dependent on a health check that had not been carried out, raising the possibility the policy doesn't apply.

Associated Press reports attorney Jerry Reisman, who represented the Hit Factory in New York when Jackson recorded there, as saying Jackson desperately needed the money from the proposed concerts.

"He had substantial debt to creditors throughout the world, and he hoped to use the tour to repay them and create a cash flow for himself," Reisman says. "He had a very high standard of living. He lived like a prince, like royalty, travelling by private jets with a huge entourage. His debt was tremendous, exorbitant."

Joey Scoleri, a promoter with the North American music division of Live Nation, says Jackson's death has created complex legal and logistical problems for the promoters. Not since Elvis Presley died in 1977 had there been a case of an artist of Jackson's magnitude dying just before a major tour.

[Updated 30/6/2009 with more insurance cover detail.]