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Michael Jackson estate says accuser is trying to extract $213mn

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Michael Jackson’s estate has initiated legal proceedings against a former associate of the late pop icon, who threatened to raise fresh allegations of inappropriate conduct just as it hopes a big-budget film will banish the child sex abuse claims that shadowed his later years.

The man and four others told the estate in about 2019, a decade after the singer’s death, that they might go public with allegations that he had acted inappropriately with some of them when they were children. 

In 2020, the estate quietly struck a previously unreported settlement worth nearly $20mn, under which the man and the other accusers agreed instead to defend Jackson’s reputation.

Now, the people managing Jackson’s music and image rights are accusing the man of fabricating his earlier claims while seeking to extract $213mn more in a new settlement with the estate, according to an arbitration claim. They have reported the matter to the US Attorney’s Office in Los Angeles.

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Jackson’s estate is asking an arbitrator to award damages, order the accuser to abide by the terms of the 2020 deal and issue an injunction barring him from releasing details he previously agreed to keep secret.

The episode illustrates how Jackson’s interactions with children, which led to a criminal prosecution and at least one out-of-court settlement, continue to hang over his estate years after his death in 2009 from an overdose of sedatives and anaesthetic. The Jackson estate maintains the singer never engaged in inappropriate conduct with children.

The estate, which was initially $500mn in debt, has since amassed more than $3bn — a figure revealed by its executors in an interview with the Financial Times for the first time.

The change of fortunes has come through the sale of his music catalogue, a Broadway musical and Cirque du Soleil shows. The beneficiaries are Jackson’s three children, his mother and charities.

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In an interview, John Branca, a longtime Jackson aide who co-manages the estate, said: “The time has come to stand up, take a stand, tell Michael’s story.”

The man allegedly making the claims against the Jackson estate did not respond to repeated requests for comment. He is not being named by the FT.

Jackson is one of the most successful but controversial figures in pop music history, springing to fame as a five-year-old with a soaring voice on the pop, soul and funk songs performed by his family band, The Jackson 5. He went on to record Thriller, which remains the best-selling album of all time more than 40 years after its release.

But he was also accused on multiple occasions of inappropriate conduct with children, beginning in the 1990s and continuing until his prosecution in 2005. Though the accusers’ accounts were at times contradictory and Jackson was acquitted in the court case, the allegations took a toll.

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Michael Jackson waves after being acquitted in a 2005 case
Michael Jackson waves to his supporters in California after being acquitted in a 2005 court case © Reuters

When he died, Jackson’s will gave Branca and music executive John McClain the responsibility of managing his estate. Branca has spent the past decade and a half working to restore the singer’s troubled finances and his complicated legacy.

The strategy suffered a setback after HBO’s 2019 documentary, Leaving Neverland, which featured the graphic accounts of two men, Wade Robson and James Safechuck, who alleged Jackson abused them as children.

Shortly after, the five unnamed accusers — who were not featured in the Neverland documentary — made their allegations. According to Jackson’s estate, the man had previously denied Jackson ever engaged in inappropriate conduct.

The estate agreed to settle those claims under what it has described as a “business decision”. The settlement deal, signed in January 2020, was styled as a purchase of their life rights and a consulting agreement, with each of the five accusers to receive $3.3mn over six years.

Since then, it is claimed, each of the accusers received $2.8mn. But in January, before the final $500,000 payment was made to each of them, the man notified the estate that he no longer planned to abide by the agreement, and that he was seeking $213mn in new payments.

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The claim is that the man’s lawyers demanded a “substantive response” to their overture for more payments, and warned they would “be forced to expand the circle of knowledge” if the ultimatum was not met.

The demands came at the time the estate was finalising terms for the $600mn sale of a 50 per cent stake in Jackson’s music catalogue to Sony, valuing the total package at $1.2bn. The accuser’s lawyer asked the estate if it had disclosed his claim to Sony, raising the spectre of risk for the new owners of Jackson’s music and potentially affecting the deal’s value.

Cirque du Soleil show ‘Michael Jackson ONE’
Jackson’s estate has turned around its fortunes through lucrative ventures, including the Cirque du Soleil show ‘Michael Jackson ONE’ © Getty Images

When Jackson died, his estate was saddled with debt after years of unsuccessful business practices and profligate spending.

Progress has been uneven in digging out of the hole; the Broadway show has grossed $216mn, according to Broadway World. But in the aftermath of Leaving Neverland, according to Branca, national commercials with Nike and two banks that each paid $1mn to $2mn a year evaporated and attendance at MGM’s Cirque show dropped for an extended period.

The estate laid low for a few years but is now taking a more assertive approach as it seeks to defend Jackson’s name. The biopic is being directed by Antoine Fuqua, with actor Miles Teller playing Branca.

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“We survived Leaving Neverland but I’m not sure we could have with those additional allegations,” Branca said. His lawyers, he said, told him: “You have no choice. If these people come forward and make these allegations, then Michael is over, his legacy is over, the business is done.”

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Here's what the top 0.01% pay in taxes

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Here's what the top 0.01% pay in taxes

CNBC’s Robert Frank reports on the ultra-wealthy’s tax bill.

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World economy faces pressures similar to 1920s slump, warns Christine Lagarde

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The global economy is facing rifts comparable to the pressures that resulted in “economic nationalism”, a collapse in global trade and the Great Depression of the 1920s, the president of the European Central Bank has warned.

“We have faced the worst pandemic since the 1920s, the worst conflict in Europe since the 1940s and the worst energy shock since the 1970s,” said Christine Lagarde on Friday, adding that these disruptions combined with factors such as supply chain problems had permanently changed global economic activity.

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In a speech at the IMF in Washington two days after the Federal Reserve cut interest rates by 50 basis points, pushing US equity markets to record highs, the ECB president argued that several parallels “between the “two twenties — the 1920s and 2020s — stand out”, pointing to “setbacks in global trade integration” and technological advances in both eras.

While monetary policy in the 1920s made matters worse as adherence to the gold standard pushed leading economies into deflation and banking crises, “we are in a better position today to address these structural changes than our predecessors were”, stressed Lagarde.

A century ago, she said, central bankers learnt the hard way that pegging the currency to gold and fixed exchange rates was “not robust in times of profound structural change” as it pushed the world into deflation, fuelling “economic malaise” and contributing to a “cycle of economic nationalism”.

Today, central bankers’ tools for preserving price stability “have proved effective”, she said. Lagarde pointed to the quick fall in inflation once central banks started to raise rates in 2022. Consumer prices had shot up following a surge in post-pandemic demand, global supply chain disruptions and big rises in energy prices after Russia’s full-scale invasion of Ukraine.

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She described the episode as an “extreme stress test” for monetary policy.

Central bankers have been able to ease monetary policy in recent months as price pressures abated. Annual inflation in the Eurozone peaked at 10.6 per cent in October 2022 but hit a three-year low of 2.2 per cent in August.

Lagarde said it was “remarkable” that central banks managed to get inflation under control within less than two years while avoiding a rise in joblessness. “It is rare to avoid a major deterioration in employment when central banks raise rates in response to high energy prices. But employment has risen by 2.8mn people in the euro area since the end of 2022,” she said.

However, the ECB president warned against complacency, saying that issues including possible setbacks to globalisation, a partial disintegration of global supply chains, the market power of tech giants such as Google and the “rapid development of artificial intelligence” could all test central bankers.

Uncertainty would “remain high” for monetary policymakers, Lagarde said, adding: “We need to manage it better.”

The ECB will investigate these issues in detail in its looming strategy review, she said. While its 2 per cent medium-term inflation target would not be scrutinised, “we will consider what we can learn from our past experience with too-low and too-high inflation”, she said.

The ECB would also analyse its assessment and disclosure of risks. For example, its baseline inflation scenario could be “balanced . . . with real-time information”, and the central bank could also disclose alternative scenarios.

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Family offices are the most bullish they’ve been in years, survey says

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Family offices are the most bullish they've been in years, survey says

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

Family offices are the most bullish they’ve been in years, putting their cash to work in stocks and alternatives as the Fed starts to cut interest rates, according to a new survey.

Nearly all family offices, 97%, expect positive returns this year, and nearly half expect double-digit gains, according to Citi Private Bank’s 2024 Global Family Office Survey.

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“This is the most optimistic outlook we’ve seen,” said Hannes Hofmann, head of the family office group at Citi Private Bank, which has been conducting the survey for five years. “What we’re clearly seeing is an increase in risk appetite.”

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The survey is the latest sign that family offices — the private investment arms of wealthy families — are emerging from two years of hoarding cash and bracing for recession to start making more aggressive bets on market and valuation growth.

They especially like private equity. Nearly half, 47%, of family offices surveyed say they plan to increase their allocation to direct private equity in the next 12 months, the largest share for any investment category. Only 11% plan to reduce their PE holdings. Private equity funds ranked second, with 41% planning to increase their allocation.

With interest rates heading down, family offices are also regaining their appetite for stocks. More than a third, 39%, of family offices plan to increase their allocation to developed-market equities, mainly the U.S., while only 9% plan to trim their equity exposure. That comes after 43% of family offices increased their exposure to public stocks last year.

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Public equities remain their largest holding by major asset class, with stocks making up 28% of their typical portfolio — up from 22% last year, according to the survey.

“Family offices are taking money out of cash, and they’ve put money into public equities, private equity, direct investments and also fixed income,” Hofmann said. “But primarily it’s going into risk-on investing. That is a very significant development.”

Fixed income has become another favorite of family offices, as rates start to decline. Half of family offices surveyed added to their fixed-income exposure last year — the largest of any category — and a third plan to add even more to their fixed-income holdings this year.

With the S&P 500 up nearly 20% so far this year, family offices are looking for 2024 to end with strong returns. Nearly half, 43%, expect returns of more than 10% this year. More than 1 in 10 large family offices — those with over $500 million in assets — are banking on returns of more than 15% this year.

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There are risks to their optimism, of course. When asked about their near-term worries about the economy and financial markets, more than half cited the path of interest rates. Relations between the U.S. and China ranked as their second-biggest worry, and market overvaluation ranked third. The survey marked the first time since 2021 that inflation wasn’t the top worry for the family offices surveyed, according to Citi.

One of the big differences that sets family offices apart from other individual investors is their appetite for alternatives. Private equity, venture capital, real estate and hedge funds now account for 40% of the portfolios of the family offices surveyed. That number is likely to keep growing, especially as more family offices make direct investments in private companies.

“It’s a significant allocation that shows family offices are asset allocators who are long-term investors, highly sophisticated and taking a long-term view,” Hofmann said.

One of the biggest themes for their private investments is artificial intelligence. The family offices of Jeff Bezos and Bernard Arnault have both made investments in AI startups, and repeated surveys show AI is the No. 1 investment theme for family offices this year. More than half of family offices surveyed by Citi have exposure to AI in their portfolios through public equities, private equity funds or direct private equity. Another 26% of family offices are considering adding to their AI investments.

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Hoffman said AI has already proven to be different from previous investment innovations such as crypto, and environmental, social and governance, or ESG. Only 17% of family offices are invested in digital assets, while a vast majority say they’re not interested.

“AI is a theme that people are interested in and they’re putting real money into it,” Hofmann said. “With crypto people were interested in it, but at best, they put some play money into it. With ESG, we’re finding a lot of people are saying they’re interested in it, but a much smaller percentage of family offices are actually really putting money into it.”

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Microsoft chooses site of nuclear accident for power

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Microsoft chooses site of nuclear accident for power

America’s Three Mile Island nuclear energy plant, the site of a high-profile accident that discouraged nuclear power development in the US for decades, is preparing to reopen as Microsoft looks for ways to satisfy its growing energy needs.

The tech giant said it had signed a 20-year deal to purchase power from the Pennsylvania plant, which would reopen in 2028 after improvements.

The agreement is intended to provide the company with a clean source of energy as power-hungry data centres for artificial intelligence (AI) expand.

The plan will now go to regulators for approval.

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The owner of the plant, Constellation Energy, said the reactor it planned to restart was adjacent to, but “fully independent” of the unit that had been involved in the 1979 accident, the worst in US history.

It caused no injuries or deaths but it provoked widespread fear and mistrust among the US public.

But nuclear power is the subject of renewed interest as concerns about climate change grow – and companies face increased energy needs tied to advances in artificial intelligence.

In a statement announcing the deal, Constellation boss Joe Dominguez said nuclear plants were the “only energy sources” that could consistently deliver an abundance of carbon-free energy.

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“Before it was prematurely shuttered due to poor economics, this plant was among the safest and most reliable nuclear plants on the grid, and we look forward to bringing it back with a new name and a renewed mission,” he said.

Microsoft called it a “milestone” in its efforts to “help decarbonize the grid”.

On 28 March, 1979, a combination of mechanical failure and human error led to a partial meltdown at the nuclear power plant in central Pennsylvania.

The accident occurred about 04:00 in the Three Mile Island plant’s second unit.

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The plant’s Unit 1 – which would reopen under the Microsoft deal – continued to generate power until closing in 2019.

Its owner at the time, Exelon, which spun out Constellation as an independent business in 2022, said the low cost of natural gas extraction had made nuclear-generated electricity unprofitable.

Constellation said it would invest $1.6bn (£1.2bn) to upgrade the facility, which it would seek approval to operate through 2054.

Reopening the plant would create 3,400 direct and indirect jobs and add more than 800 megawatts of carbon-free electricity to the grid, generating billions of dollars in taxes and other economic activity, according to a study by The Brattle Group cited by Constellation.

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Local media reported earlier this month that word of its possible revival had drawn some protesters.

Microsoft is not the only tech company that is turning to nuclear power as its energy needs expand.

Earlier this year, Amazon also signed a deal which involves purchasing nuclear energy to power a data centre. Those plans are now under scrutiny by regulators.

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Podcast: The art of putting things right

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Podcast: The art of putting things right

In this Weekend Essay, Amanda Newman Smith shares a personal story highlighting the importance of excellent customer service, especially when dealing with vulnerable clients. She contrasts negative experiences with a paint company and a clock supplier against a positive resolution with NatWest bank when assisting her elderly mother. This episode underscores the significance of empathy, clear communication, and proactive problem-solving in building trust and loyalty.

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US adopts first guidelines to shore up carbon credit markets

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The US derivatives watchdog has finalised the first federal guidelines for unregulated carbon offsets, as the Biden administration seeks to standardise a disorderly market in a bid to tackle climate change. 

The Commodity Futures Trading Commission adopted measures announced on Friday that ask exchanges to validate carbon offset derivatives, which base their prices on those of financial instruments bought by companies to offset emissions.

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Treasury secretary Janet Yellen issued a statement on Friday praising the new guidelines as a means to “promote the integrity of carbon credits and enable greater liquidity and price transparency”.

The unregulated market for carbon credits is estimated to grow to $100bn by 2030, up from $2bn this year, according to Morgan Stanley. But the voluntary carbon derivatives market has languished, with only a handful of contracts attracting substantial trading volume due to concerns about credibility.

“We actually have a legal responsibility to ensure the health and transparency of both the derivative side, but also the underlying cash market,” CFTC chair Rostin Behnam told the Financial Times.

The guidelines, which were initially proposed in December, seek to crack down on manipulation and price distortions by pushing exchanges to ensure that voluntary carbon credit derivatives comply with CFTC regulation as well as US law. 

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“With any project that has the scale that the carbon market is seeking, you’re going to have error rates, you’re going to have bad actors,” Behnam said. 

The CFTC voted 4-1 in favour of adopting the guidelines, with Summer Mersinger, one of the agency’s two Republican commissioners, voting against.

Boosting the reputation of carbon markets has been a political priority for the administration of US President Joe Biden, which sees carbon credits as a way to lure more private sector money into renewable energy and conservation.

While the credits have been initially popular among companies, they have also attracted criticism for failing to deliver the carbon removals they promise.

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Earlier this summer, Treasury secretary Janet Yellen unveiled guidelines for developers selling credits, and for the companies buying them to offset emissions. Former US climate envoy John Kerry has also thrown his weight behind carbon credit markets, launching a state department-led initiative in 2022 aimed at decarbonising regional power sectors.

Despite the political momentum behind efforts to develop voluntary carbon markets, Behnam cautioned that the energy transition would “take decades”.

“This notion that we’re going to be able to just transition to renewables in the near future and not rely on carbon-based energy sources . . . it’s not reality, right?” said Behnam. “The transition is going to take time.”

The guidance puts the onus on exchanges registered with the agency to ensure the integrity of voluntary carbon credit derivatives.

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Exchanges should consider whether a contract ensures that a project creates emission reductions that would not occur without it. They should also seek to ensure there is no “double-counting”, which occurs when multiple carbon credits are backed by the same trees, for example.

The guidance “will help professionalise and scale voluntary carbon markets,” said Mark Carney, the UN special envoy on climate action and finance and former Bank of England governor. “Other global regulators should now follow the CFTC’s lead.”

Guidance is not the same as regulation, a more powerful tool. But “it was pretty clear that a guidance document would be the best starting point . . . and one that would get support from a broad coalition of stakeholders”, Behnam said.

For years, the unregulated carbon market has suffered from greenwashing concerns, and the guidelines come as the market has narrowed. Derivatives exchange CME Group on August 30 said it would delist one of its futures products for emissions offsets that was launched only two years ago.

Recent surveys of carbon credit users have found worries about carbon offsets’ credibility has discouraged businesses from buying them, MSCI said in a September 19 report.

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