How to go broke on several million a year
ONE SATURDAY NIGHT IN DECEMBER, just days after declaring bankruptcy, Burt Reynolds was in the black again: black shirt, black suit and tie, black suede boots. At a West Palm Beach, Fla., benefit (not for him but for the nonprofit Burt Reynolds Institute for Theatre Training), Reynolds stepped onto the Cuillo Centre stage to a standing ovation. "Can you hear me?" he asked, testing the mike. "Yes!" shouted the audience. "God, I wish the income-tax people could," he cracked. Later, as student performers sang "Pennies from Heaven," the financially challenged movie star roamed the stage, eyes uplifted and palms outstretched. The crowd loved it.
There is grim fascination in watching the mighty stumble. Although more than a million Americans file for bankruptcy each year, only a select few—the famous—endure major public humiliation. Kim Basinger, in 1995, was forced to sell the quaint Georgia town she had bought six years earlier, because she had to liquidate her assets. In 1991, while starring in Beverly Hills, 90210, Shannen Doherty—who hasn't gone bankrupt—was bouncing checks higher than some of her old pals at the Roxbury. Last year, rapper M.C. Hammer, whose 1990 earnings alone were estimated by Forbes at more than $33 million, filed Chapter 11—a precipitous fall even by music-industry standards. And Dorothy Hamill, having briefly revived the failing Ice Capades, managed to go bust during a major skating boom.
How do these ex-millionaires do it? Burt Reynolds's problem was a late-'80s, early-'90s double whammy of bad investments in two restaurant chains and a falling-off of his box-office clout. In court papers, Reynolds said he had $6.6 million in assets but $11.2 million in debts. O.J. Simpson's money problems, which are likely to play themselves out for some time in the public arena, began when a jury found him liable for $8.5 million in the Brown-Goldman slayings and continued when they added $25 million in punitive damages. The plaintiffs had argued that Simpson was worth $15.7 million; his own attorneys claimed he was nearly a million in the hole. If nothing else, the disparity showed that numbers crunching has become a high art in Hollywood.
Those other cash-strapped celebrities? Sometimes stars simply don't take home as much as we—and they—think they do. "There are tremendous expenses that come along with being a celebrity," says Dan Center of RNC Capital Management, citing the percentages routinely taken by agents (10 percent), managers (15 percent) and the IRS (45 percent in the highest tax bracket). The truth is, though, that actors, singers and ice skaters are creative people. They can always come up with new ways to blow it all.
Shannen Doherty, who was making $17,500 an episode on 90210 in 1992, had "a complete inability not to spend money," one of her former associates told PEOPLE in 1993. (One big expense: transportation. Although she owned three cars, she bought a Porsche because a friend said she should.) In 1993 landlord Mark Nishimura sued to evict Doherty from her Hollywood Hills house because she allegedly owed $14,000 in rent. Before she vacated, claimed Nishimura in a lawsuit settled privately last year, she caused $136,000 in damages. (He cited destroyed furniture, including a sofa worth $9,769, and $70,150 in structural damage.)
Doherty's financial problems appear to be over. Two lawsuits against her were settled; a third was dismissed. Her overdrafts (totaling more than $30,000) have been paid. Her debts may have been modest enough to be covered by her TV syndication profits. "She will receive residuals into the future," says Joseph Eisenberg, an L.A. attorney who handled the insolvencies of Tom Petty, Natalie Cole and Chaka Khan. "The bank will always get paid—they can always attach the royalties."
As for M.C. Hammer, it's hard to know whether it was the 40-person entourage, the elaborate home sound system requiring 22 miles of electrical wiring, or his dream of motorized bedroom drapes that put the rapper in the red. Hammer filed for bankruptcy last April, claiming assets of $9.6 million and debts of $13.7 million. "I knew him when he was humble and not blowing his money," says video producer John Oetjen. Even so, Hammer had indulgences, among them cars (he owned 17) and racehorses.
But in the early '90s, as Hammer's sales shrank, his entourage grew. "To a certain extent he was helping out the family," says one music-biz source. "But people thought it was a gravy train that was never going to end." It did, and among Hammer's creditors were the IRS (at least $100,000) and NFL star Deion Sanders (for a $500,000 loan). But an unpaid bill for roughly $110,000 from one Janice Smith is most revealing.
Smith, an interior decorator, spent three years working on Hammer Time the six-bedroom home Hammer and his wife, Stephanie, owned on about 12 acres in Fremont, Calif., outside Oakland. According to Smith, the couple planned to spend $3 million on indoor and outdoor swimming pools, a bathtub seating eight, a beauty salon, a softball field and a bowling alley. Hammer ordered $68,000 worth of mirrors and set a budget of $600,000-$900,000 for Italian marble. Then, in May 1992, Smith says, "he asked...where we could start cutting back." Seven months later, with the work two-thirds unfinished, he fired her. An arbiter awarded Smith $80,000, but she says Hammer hasn't paid up. Although the rapper earned $3 million in 1995, he told the court last June that royalties couldn't be counted on because "you don't know exactly when they're going to come and exactly how much they're going to be." His last album, 1995's M.C. Hammer V Inside Out, was a commercial disappointment. And Hammer Time, where he still lives with his wife, has been on the market for seven months at $6.5 million. As for Smith, she at least has some of Hammer's things to remember him by: fabric, furniture-gold records. "I don't wish the man ill," she says. "I want him out of my life, [and] I want his stuff out of my garage."
Although Hammer decided it was "time to stop the bleeding" and file for bankruptcy—a move that would ruin his credit rating but protect him from collection agencies—his decision was one many stars are too embarrassed to make. "Some celebrity clients choose to mortgage their future careers in order to pay off all their creditors, just to avoid the stigma of bankruptcy," says attorney Eisenberg, who concedes, "If your business is being a celebrity, you have to look like a celebrity."
Susan Powter proved that it's possible to keep one's lifestyle in shape after bankruptcy. The exercise mogul, who sold $110 million of workout paraphernalia in 1993 and 1994, filed in January 1995. (Most of the $3.2 million she owed was to her lawyers for litigation against her former partners, who, she alleges, mismanaged her finances. She settled in February 1996, agreeing to pay $2.8 million in exchange for ownership rights to her products.) "I was never down, I was never out," Powter asserts. "I was temporarily derailed financially." She moved from her Pacific Palisades spread to a four-bedroom house in equally tony Bel Air. "We're not hurting for anything," admits Powter, who drives a BMW, has two kids in private school, has just published a fifth book (Hey, Mom! I'm Hungry!—a cookbook) and is returning to QVC to hawk products. "But I don't live a luxurious life. I don't have six damn cars in the driveway; I don't have an entourage. I never have, and I never will."
If some celebrities have maintained the illusion of wealth while sorting out their fiscal troubles, tennis star Bjorn Borg appears to have done the opposite. Borg, 40, who won 11 Grand Slam championships before bowing out of tennis in 1983 and whose fortune was once reported at $60 million, has had a rough retirement: two divorces, a custody battle with a girlfriend over their son, and a failed clothing venture. In 1992 he claimed to be "more or less bankrupt." But it seems he isn't—and wasn't—anywhere near that, according to creditors who are chasing him for $1.9 million they say he's owed them since his business went bust in 1989.
Borg's pleading poverty may in fact be strictly Sweden-specific: When in his homeland, he stays with his parents—who employ him by licensing his name—and reportedly donates his senior-circuit winnings to charity. But he is believed to live in Monaco (where there is no income tax), and there have been reports in the Swedish press, saying he's got money in a tax haven abroad. In any event, Borg's lawyers say he "hopes to have solved all his financial problems within the year." Post-tennis, Borg "took a lot of punches," his former doubles partner Ove Bengtsson told the British newspaper The Independent on Sunday in 1991, "and learned the lessons the hard way."
So has Kim Basinger. "All she had to do was make a simple apology and a phone call," says Carl Mazzocone, the producer who in 1993 filed a lawsuit against Basinger for failing to live up to her agreement to star in his movie Boxing Helena. "I was amazed that the whole thing escalated the way it did." After Basinger, star of Batman and wife of Alec Baldwin, pulled out of Helena in 1991, Main Line Pictures, Mazzocone's production company, was awarded $8.9 million. (In December 1995, on the eve of a retrial, Basinger agreed to pay up to $3.8 million.) Hollywood was stunned. So was the uninsured actress, who in 1993 filed Chapter 11, revealing in the process that she spent $575 a month for dry cleaning, $9,000 a month in alimony for her ex-husband and $7,000 on pet care (she then had 17 dogs and cats) and other personal expenses. In 1995 she sold her interest in Braselton, Ga. (pop. 418), which she'd bought in partnership for $20 million in 1989, for $4.3 million.
TLC, whose second album, CrazySexyCool, and No. 1 single ("Waterfalls") have made them the most successful female group ever, never had serious cash to begin with. When Tionne "T-Boz" Watkins, Lisa "Left-Eye" Lopes and Rozonda "Chilli" Thomas filed for bankruptcy in July 1995, their list of creditors was mundane: AT&T, $32.15; Atlanta Gas Light, $172.46. "There were no Mercedeses, no Rollses, no yachts," says TLC's lawyer David Bisbee. Sure, there was a bill from their former management company for a half-million dollars each on "unrecouped balances," and Lopes's $527,000 settlement with Lloyd's of London—she agreed to pay that for burning down the house of her on and off boyfriend, football star Andre Rison, two years ago. But most of TLC's troubles seem endemic to the music industry.
"People think new artists make a lot of money after a hit record," says Monica Ewing, an Atlanta entertainment lawyer familiar with the case. "But a new artist has to sign whatever contract is offered him. It's understandable for the label—they're taking a risk on an unknown quantity." Ewing adds, "These girls earned nothing compared to what they generated." Although their records made some $92 million, the group was lucky to see $1.2 million, according to the Los Angeles Times.
TLC settled their case in an agreement in December and are arranging to pay off their creditors. But skating star Dorothy Hamill is still on thin ice. Hamill won a gold medal at the 1976 Olympics, joined the Ice Capades and acquired the rights to the show in 1983. But in 1994 she sold it and last spring declared bankruptcy. She claims her ex-husband Dr. Kenneth Forsythe, from whom she filed for divorce last November after an eight-year marriage and one child (Alexandra, 8), managed business affairs that "proved to be financial disasters." Forsythe says of the situation, "It's a tragedy."
Watching anyone go bust is unsettling, even if bankruptcy doesn't have a devastating effect on the stars—and it usually doesn't. Wayne Rogers (TV's M*A*S*H's Trapper John), now a financial adviser who helps keep showbiz colleagues from indulging, concedes that banks and creditors have no interest in stripping stars of their lifestyle, their image and therefore their earning power. "Celebrities are businesses," Rogers says. "Burt Reynolds is a business. Burt Reynolds is an asset."
Tell it to Loni Anderson. Reynolds's ex was assessed $565,000 last September by an L.A. civil court for not living up to a contract to promote skin-care products. But her problems are more than skin-care deep. She told the court she failed to pay the IRS $106,000 in taxes in 1995 in order to cover mortgage payments Reynolds hadn't made. "It is desperate," Anderson said. Her attorney James T. Duff claimed that after years of starring on TV (WKRP in Cincinnati) and in films (Stroker Ace) "Miss Anderson has a negative worth of $120,000." That's Hollywood: She would probably never be this broke if she didn't look like a million bucks.
LYNDA WRIGHT, JEFF SCHNAUFER. MARC BALLON and IRENE ZUTELE in Los Angeles, DON SIDER in West Palm Beach, KRISTA REESE in Atlanta, CYNTHIA WANG in New York City, SIMON PERRY in London and ANNE MAIER in Houston
- Lynda Wright,
- Jeff Schnaufer,
- Marc Ballon,
- Irene Zutell,
- Don Sider,
- Krista Reese,
- Cynthia Wang,
- Simon Perry Anne Maier.