Latest / Financial Survival Network / From the IRS to Michael Jackson: A Lawyer's Journey - Charles Lubar #5842

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From the IRS to Michael Jackson: A Lawyer's Journey - Charles Lubar #5842 · Financial Survival Network

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And I got a call it today from one of the lawyers I work with
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out of California named John Brenka, quite a famous entertainment lawyer. Were asked
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me to help with Michael Jackson's concert in the UK, and you had to
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figure out how he was going to be taxed on his performance income. In
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those days, you could actually negotiate deals with the inn value, which made
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sense. So what's tougher today? For reasons I'm happy to get into if
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you want, you're listening to Kerry Letts's Financial Survival Network where you get valuable
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information you just can't find anywhere else to thrive in today's trying times. You
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need the Financial Survival Network now more than ever. Go to Financial Survival and
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Network dot com and get your free newsletter in gift Financial Survival Network now more
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than ever. And welcome. You are listening to the Financial Survival Network.
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I'm your host. Terry Letts got a special guest for you now. Well,
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I'm a recovering attorney. He's a semi recovered attorney. The name is
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Charles Lubar. Charles, you started out your illustrious career basically working for the
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irs for the chief Council's office. And from there your story is rather remarkable.
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We'll be talking about it, but your book is an improbable journey music,
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money and the law. And hey, from there, you were representing
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celebrities like Michael Jackson, Jim Henson. You had a little subspecialty there of
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the porn star tax issues. I mean, you knew everybody did everything.
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One of the most amazing things is you are actually representing people who knew or
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lived in the house that Wolfgang Mozart lived in. Ye, I don't know.
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I like the fact that that means something to you, because you know,
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if you ask most people interested in music today's world, who was Johann
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Nepo Muccumel, they would say, we never heard of him. Late eighteenth
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century, early nineteenth century. He was one of the great He was the
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only student of Mozart ever had in his house. He was a you played
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ten years old old invere Europe. He became a composer and a very famous
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character. And I mean I I and then I followed. I. I
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ended up looking after the fourth and fifth generations after Yo Hoppen Nepo Mucumel.
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Amazing. I can give you as much on this as you'd like to hear
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or you can, but it's a well let's talk. So, uh,
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you were working for the irs in Washington and the good sense to follow another
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path because if you were there today, you know they'd be you'd be up
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on Capitol Hill and they'd be asking you all sorts of nasty questions. So
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I think you got out at DC at exactly the right time. Well,
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I had fascinating experience in Chief Council's office. We used to field questions from
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all over the United States. And the division I was in, the interpretative
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Division of Chief Council, was kind of a scholarly place you were. Your
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job was to come up with the right answer, not necessarily be strongly pro
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government. They wanted the correct answers, and they decided what they do with
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the correct answers. And I did some great stuff. I mean I was
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involved in the taxation of the Reta, the taxation of Lloyd's of London,
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and they recharacterized them from being a an excise tax basis to an income tax
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basis, and I mean it was I learned a lot there and I had
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a lot of friends there. They just thought I was totally crazy when I
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decided to leave it. Yeah, I guess you got an offer you couldn't
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refuse. But yo to Africa. You mean, yeah, Well, I
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don't know what happened. How did you? Oh? Oh, oh,
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okay. I was there you normally I have a four year commitment. I
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was there two and a half, almost three years. I got fascinated by
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post independence Kenya because I was involved in the diplomatic program in Washington, d
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C, d C. Which is my hometown. My first wife was the
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co chairman of the Young Adults Program. This was a very good diplomatic program
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founded by the wife of John Foster Dallas to acquaint the diplomatic community with Washington,
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d C. So my first wife was chairman of the chairman I knew
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from because I knew the family. She was running the Young Adults program.
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And she was married to a Kikuyu from the subclan of Jomo Kenyata, the
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first president of Kenya, and he was a fascinating guy. His village had
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raised four thousand dollars in the auction of pigs and cattle and bananas and stuff
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and sent them to a university University of Gonzaga and Washington State. I met
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him seven years later. He was getting a PhD in political science at George
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Washington and Washington, and I really liked him, and we got on really
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well, and I got fascinated with what Kenya was going through. Not that
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I knew that much about African history or postcolonial British history, but I was
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excited about it. I was a little bored with the irs. And he
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said, I want to go into business. I don't. I don't want
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to go into the normal route back in my home country. So we talked
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about different alternative businesses and I ended up raising a little bit of money for
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him and decided, with a wife and a twelve week old daughter, why
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not take a risk and see where it led. And so I moved to
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Nairobi, Kenya in nineteen sixty nine with a wife and a twelve week old
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baby, in partnership with this Kenyon with a little bit of investment money,
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and we I mean it wasn't totally crapshoot. I mean I had worked out
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what I could afford to do and when I could, what experiences I could
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have I was willing to address. I spent a couple of years there.
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We built houses, we've gotten a small scale manufacturing built houses from middle class
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people because Robe was pretty much it's up pretty high. It's about nine thousand
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feet and it's close to the equator, but it's into garden and it really
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was art and even then, so I ran this business with him, and
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then after the houses were sold, we got into the small seal manufacturing through
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a monopoly program that the Candy government developed to provide a role for the African
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entrepreneur. As he was taking it over from the Indian. We had the
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exclusive monopoly on a mat on the manufacturing of shoe islets nod the shoe is
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I think that the shoe shoe lace goes through laces, and that's right.
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Nobody could import, Nobody else could compete with us. And the only problem
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was my partner ran for parliament even worse than that. He won and he
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lasted about two months and he was on a state. This Indian got ill
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back to Narrobe City Hospital and he died two days later stereous circumstances. But
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I can't address that in any way, but it was enough to say that
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we said to the government, okay, government, take back your Kenya,
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your shoe eyelid factory and just give us the money we put up. And
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they said, well, you gotta understand, it's the aerobe Industrial States where
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the property was located and the manufactory was located. It was only for Africans,
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so we have to distribute the assets to your your partners of state.
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Unfortunately it's hopelessly bankrupt, so we'll distribute the assets to the miscellaneous African creditors.
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A story. That's my story in Kenya, okay, which is why
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when you were a foreigner, every place in the world except perhaps the United
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States, and even there not always the case that you're better off. Yeah,
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sticking close to home, right, well, sticking close to home would
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have been much easier life, much less exciting life, for sure. You
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know who had been remunerative or not, who knows, But anyway, I
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didn't do that. And when I decided to leave kenyatt even then, I
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didn't really want to go back to the United States and go through the orthodoxy
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of joining a me firm and working my way up and righting something else.
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How'd you wind up in the entertainment field though, with all these celebs?
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How did you stumble upon I called Jackson? Well, okay, bit by
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bit. First, I wandered around Europe. I had about four different contacts
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and Rome's or Harris in London, and I happened to have an opportunity in
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London which I really couldn't turn down. There were two entrepreneurial American lawyers.
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One a famous entertainment lawyer named Irwin Margali's the former executive vice president of Warner
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Brothers. He partnered with a man named Barry Stirling, very fine corporate transactional
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lawyer, and they were sending up a little boutique firm in London as an
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American lawyers living in London, which it could do under the Lost Tighty rules
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at the time. They needed a tax lawyer and as I say to many
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of my friends, they hired me off the streets and they joined them in
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nineteen seventy one. As a result of joining them, I got acquainted with
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the whole issue of the foreign community living and working in the UK, many
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of who were in the entertainment industry. Was that a great time for the
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industry in the early seventies, but it was bustling and it had lots of
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people, everything from Canadian to French producers. The people who would escaped the
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McCarthy. You were in the United States. It was in fascinating where people
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and I got to know a lot of them. More importantly, I got
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to understand I was already reasonally trained as attack lawyer. I knew the American
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side, but I didn't really understand the UK side. But I had so
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much exposure to it, and had so many meetings with so many talented legal
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scholars or legal accountants or accountants in the tax world, that I learned a
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lot of the UK side biasmosis, and I had that instinct to be able
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to work both systems, both as a protection sometimes and sometimes offensively. So
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I represent a lot of people already who are the American community living in London,
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and reasonable number of entertainers if you call Maryland Chambers and Lovelace entertainers,
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you know, living and work a little, working a bit in London.
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So that's how I did. And then about three years after I was with
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this little boutique firm, the corporate lawyer went back to California, ended up
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owning a vineyard, became very successful business man, leaving the entertainment lawyer on
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his own with a few associates. But it was not a world that I
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wanted to stay. Well, I felt I would take the risk and opened
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up my own practice. I had developed some pretty good relationships with different people,
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and I had two, if you read from the book, I mean
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two opportunities. One was to represent the European side of a big US shopping
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center developer, and the other was doing work for the fourth and fifth generations
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of a very famous German composer and pianist who most of the audience you have
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probably never heard of. The Johann Nepomo Clomblum had been a student of Mozart,
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lived in Mozart's house, became very famous as a composer and a pianist,
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and four generations down the line, I got involved with some fascinating stuff
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which I'm happy to talk about. If you want me to go that route,
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if you'd rather have me talk about Michael Jackson, I can do that.
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Let's let's talk about Michael Jackson. How'd you wind up with him?
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Okay? I was doing work for a lot of foreign entertainers. Many American
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come over to perform and I would speak, And by that time I'd been
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speaking and writing and editing various text journals, and so forth. So I
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got to know people in the industry be entertainment and was called upon to act
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for many of the artists who did performances, not always not always in London.
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I mean I did some work for Santana all over Europe and a bit
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for Harrison Ford, but basically it was London based unt practice. And I
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got a call today from one of the lawyers I worked with out of California
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named John Brinka, quite a famous entertain lawyer. Were asked me to help
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with Michael Jackson's concert in the UK and we had to figure out how he
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was going to be taxed on his performance income. In those days, you
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could actually negotiate deals with the inn revenue, which made sense. So what's
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tougher today for reasons I'm happy to get into if you want. But anyway,
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I guess two or three years later, John Branker called me and said,
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listen, we've got something really serious, Sir Michael. He looks like
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he wants to buy the ATV Music Catalog Group, which about five or six
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catalogs, including Beatles catalog. Right. I remember, yeah, bought a
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little bit of he bought some stuff, but he really was excited about this
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one. Of course, I wanted to buy his copyrights back. Obviously he
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had the writers share of the publishing income, but he didn't have the right,
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you know, but he didn't have the publishing interests right owned by this
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ATV Music Group, which had at one time been owned by or controlled by
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Sue lou Grade, but just at this point the juncture mid eighties, it
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was owned by Robert Holmes, the Court, Australian buccaneer entrepreneur, and so
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John Branco asked me to figure out how the hell we could buy all those
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catalogs and make sense out of it. Michael being a US citizen resident in
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the US, the catalogs being fully depreciated shell companies owning nothing but very valuable
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copyrights. Figure out how to do that to make it sensible for Robert Holmes,
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the Court, who really needed to get his money back to Australia because
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he had his own financial issues back there, and to make it sensible for
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Michael took a lot of work, and I didn't pop out of my head
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right away. I mean I spent a lot of time on it, and
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spent it with a lot of time with some very talented people putting together the
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program and figured out a way. We're basically Michael to buy the entire catalog
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group of catalogs, including the Beatles catalog, with pre tax money, whereas
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Paul McCartney would have had to buy it with post tax money. And I'm
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happy to get into a god you don't need to know that if you want
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to need about the technical side. And I think the International Financial War Reviews,
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but sometime in nineteen eighty six when it described the transaction, but wild
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line was we took six companies outside the UK, random in the Bahamas for
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six months liquidated the league copyrights up to Michael's personal hands. The result was
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he got a step up in basis to the full fair market value of the
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copyrights and the catalog which he could depreciate against the income going forward. And
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I mean that was something too was not available to Paul McCartney period and made
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Michael's able. I wouldn't say made much easier for him to spend more money
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to buy the catalogs, but in terms of competition, you could imagine how
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attractive it would have been for him. For sure. Yes, that's what
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I did for him. And then after two years A couple of years later,
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he put his catalogs into a joint venture with Sony, which is where
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it is today. And I did some of the foreign side, trying to
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create partnership structures which worked a lot better than corporate structures for Americans who are
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doing business outside of the United States. All right, So so you kind
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of got these celebrities you're right, in their weakest moments when they're talking about
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right, member John Lennon's song attacks Man. Yeah, that's right. Well,
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that's what they were facing, and that's why they sold their Capri rights.
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They sold rights to a TV music group because that way they could at
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least get a capital gain. At a time the ordinary income rates in the
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UK were catastrophic. I mean they're really high. I guess they didn't know
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about intellectual property trusts back then. Well they knew something of it, but
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the US law was a little more sophisticated, and you know, and the
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rates were very high in the U in UK for individuals. Sure, all
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right, so it was the last interesting client you ever had, well with
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truth ins. I mean, you'd like to say the Muppets or albert City
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or you know, other people in the entertainment world, and they were very
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interesting stories. But the most interest in client I really had was this Johann
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Nepo Locomo, the student of Mozart, who lived in Mozart's house, and
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I represented the fourth and fifth generations, and I'll give you I'll give you
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the first story and you can tell me whether you want to go beyond that.
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But it's it's It was basically the history of the twentieth century on the
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back of hatings of the second generation. But we'll get to that in a
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minute. The five job when I came on the scene was to deal with
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a woman who was a sister of my direct client, about the fourth generation
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down. She had lived in Weimar and moved to Italy to Florence. With
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her who came the entire manuscript collection of Johann Nepomuccomo, which just did of
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letters between home and all of his friends in the late eighteenth century early nineteenth
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century Beethoven lists, Mendelssohn, gertez Shoulder included also manuscript's original manuscripts of Hummel
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with the notations from his teacher Mozart. Really, she had taken that entire
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collection and given it to the Gerton Museum in Dusseldorf with a right to revoke
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the gift before she died. And when I met her, I met her
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through the brother. She was non Compassmentois with a brain tumor, and her
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brother who had been thrown out of a prominent German family in the twenties because
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they thought he was stupid. It's just he wasn't fitted with glasses. But
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he got to the US and they asked what a German family did when they
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were embarrassed about someone in their family. They sent him to America. Listen
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guy, and it was retired living in a trailer park in California. Met
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him through his son, who became a major instruction by But then the old
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man was the one who really controlled things, and he asked me to help
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him, and the first job was to break the gift. So I had
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a friend, a tax lawyer in Dusseldorf, a good friend of mine,
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and we went to town with the city of Dusseldorf a goodbye the year,
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and we actually did break the gift. We broke the gift, and the
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part of the deal in breaking the gift, we turned around and sold the
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entire manuscript collection to the Gurton Museum in Dusseldorf, who put it well to
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the city of Dusselberf, who put it back into the Gurtu Museum. I
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had enough money from the sale of that catalog to move my actual client from
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his trailer park in San Diego into the hills of San Diego with a little
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house and a swimming pool, and made his life comfortable for the rest of
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his life. And it was a really great feeling. And I think the
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city of distin Lord could afford the modest amount of sun at least they could
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do. At least that was the first thing I did from them. All
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right, So let me ask you a question here. Yeah, your experience,
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everything you see the tax system. Now, what is the biggest problem
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with the United States system of taxation in your opinion? Inside? Oh,
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very simple. The US taxes on the basis of citizenship. Almost no other
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country in the world taxes on the basis of citizenship. They do residency right,
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exactly exactly. They do it on the basis of where you're center of
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vital interested, where you're really resident. And you could be a brit living
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in Kenya, you could be a Frenchman living in South Africa and the juristy
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where you live took the primary expert and whereas with the Americans, the Americans
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acts you on the basis of citizenship no matter where you live. And a
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lot of my practice has developed over the years, everything from expatriating Americans who
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were fed up with America for one reason or another. Sometimes it was political,
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sometimes it was taxation. But I've expatriated my little team when I was
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on my own and then later with Borg and Lewis, we expatriated probably more
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Americans than anybody in London. In fact, I was called by some of
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my more conservative friends in America an economic Benedict Arnold. You know I was
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a traitor to America by encouraging Americans to give up American citizenship. Oh,
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you're doing God's work. You're doing God's work. Well, Hey, really
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really appreciate you're coming on the show here and in just the sharing your experiences
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with us here, it's really been a lot of fun. Charles Hey the
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book again, should hey? Charles has written a book and it's a doozy
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and you want to take a look an improbable journey music, money and the
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law, and it's available on Amazon and wherever fine books used to be sold.
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And if you got a question for Charles or myself, shoot me an
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email kl at Kerry dot com. Make sure you go to site financial Survival
24:33
Network dot com linked to Charles's site. Book will be there, and while
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you're there, sign up for your free newsletter. Charles, I could talk
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to you all day, but we don't have the time. Really appreciate you
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coming on. We'll talk to you again, get some more stories out of
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you. How's that sound? And sounds wonderful to me. I enjoyed talking
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to you. You're an entrepreneurial lawyer as the as I guess I was or
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is, so I enjoyed it very much. Likewise, thanks so much,
25:02
thanks for listening to carry Lets's Financial Survival Network, your solution to today's trying
25:07
times. For the latest, go to Financial Survival Network dot com. Financial
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Survival Network now more than ever