Did Depp cause his own financial downfall?

LOS ANGELES • Hollywood star Johnny Depp took in hundreds of millions of dollars as Captain Jack Sparrow in Walt Disney's Pirates Of The Caribbean franchise and other movies, but it was not enough to pay for his own swashbuckling lifestyle.

The 54-year-old actor's financial implosion is at the heart of a lawsuit he brought against his former business manager, seeking US$25 million (S$35 million) in damages for negligence and mismanagement.

In a preliminary skirmish on Monday in Los Angeles, his lawyers persuaded a state judge to narrow counter-claims by The Management Group that he is to blame for his financial problems.

California Superior Court Judge Teresa Beaudet ruled that The Management Group's list of outrageous spending by Depp was irrelevant to the counter-claims against him for unpaid fees.

She also tossed out the business manager's request for a declaration that Depp authorised all the payments made on his behalf, that the company filed his taxes on time, and that he was responsible for his own financial waste.

She denied Depp's request to throw out a separate claim against him for promissory fraud - essentially alleging he had no intention to fulfil his promise to pay some of the company's management fees.

The row made headlines when the company Depp fired last year alleged that he had ignored warnings that his US$2-million-a-month lifestyle was not sustainable.

His purchases included a chateau in France, islands in the Bahamas and art works by Andy Warhol, according to the company.

Depp said the list of big-ticket purchases was "an improper, retaliatory effort" to publicly attack him and distract from The Management Group's wrongdoing.

The Beverly Hills-based company received 5 per cent of his gross income, or about US$28 million over 17 years. It had on average four full-time staff working on Depprelated matters, it said.

Unlike the talent agents and entertainment lawyers whose services Hollywood stars rely on, business managers are not regulated, which creates a greater risk of disputes ending up in court, said Mr Devin McRae, a lawyer with Early Sullivan Wright Gizer & McRae LLP.

In the Depp case, the business manager's deflection of blame on the client raised the question of whether the company should have represented Depp if it was not able to control him, added Mr McRae.

But The Management Group would not drop a long-term client during "his most difficult time", Mr Michael Kump, a lawyer for the company, said last week.

"The idea that Depp would have been better off without TMG is bizarre," he added.

Beyond what Depp paid his business managers, his talent agency took 10 per cent from the top of his income and his entertainment lawyer another 5 per cent, according to The Management Group.

After that, he was on the hook for about 50 per cent of his income in United States and California taxes.

Depp was forced to take loans to cover his expenses, the company said, claiming that his lawsuit was prompted by its decision to foreclose on his Los Angeles home.

The property was collateral for a US$5 million loan the firm made to him in 2012 when a bank called in a loan that he could not repay.

The Management Group started foreclosure procedures last year, months after Depp fired the company and failed to make payments on the still outstanding loan.

Depp alleged that the company's failure to pay his taxes on time, its practice of loaning money from him to others, mismanagement of his expenses and "reckless borrowing" on his behalf are the reasons he suffered US$25 million in damages.

After Monday's hearing, Mr Kump said: "Today's ruling was a clear victory for The Management Group because the court ruled in favour of our fraud claim."

He added that the company will ask again for the judge to find that Depp brought his troubles on himself.

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A version of this article appeared in the print edition of The Straits Times on July 12, 2017, with the headline 'Did Depp cause his own financial downfall?'. Print Edition | Subscribe