With Darren T. Case, Tax & Estate Planning Attorney
Tax and estate planning attorney, Darren Case, takes on the subject of Kanye West and his recent disclosure that he’s $53 million in debt and tries to make sense of a situation that seems unfathomable to most people.
Acknowledging that this news item could possibly be a ploy to garner more publicity for Kanye, Darren goes on to say that rock stars exist in a different realm than the average person and, in spite of enormous talent and success, these celebrities in sports or entertainment often fall prey to bad advisors and yes-men who hang around for their own interests. With enormous success comes power and often a huge ego, so it’s not hard to understand how those people—either paid advisors and attorneys or family members—who should be protecting the interest of their client, are often afraid to speak up.
Steve asks Darren how it’s possible that the debt holders to Kanye West — whether they be individuals, companies, or institutions—wouldn’t at some point just cut him off. Darren answers that Kanye claims his debt is personal and not tied to his multiple businesses. This claim does seem questionable, however, since to the public eye, it doesn’t appear that he’s cutting back on his lavish lifestyle. Since he’s such a huge draw, Kanye does have an asset that could dig him out of this hole, according to Darren, and that’s his ability to go on tour. The option to fire his advisory team is fraught with contractual complications and may not be the best decision until he’s wiped out some out some of this $53 million albatross. So Kanye may have to go west and east and any direction he can to become solvent.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: If you have heard about the rap star Kanye West’s proclamation that he’s 53 million dollars in debt and he’s asked Mark Zuckerberg to bail him out, you’ve got to wonder how someone so successful can get himself into such trouble. Maybe the self-proclaimed number one rock star on the planet can use some advice from a nerdy advisor like me and my next guest, Darren Case. Darren is a tax and estate planning attorney for Tiffany & Bosco PA. He’s the co-author of the Arizona Estate Planning and Probate Handbook and former president of the Estate Planning, Probate, and Trust section for the Maricopa County Bar Association. Hey Darren, welcome to the show.
Darren Case: Oh, thank you for having me.
Steve Pomeranz: I think the short list of your professional accomplishments does actually make you one of the nerdiest guests ever, but, in this case, I think nerdy is good, so we’re glad to have you here.
Darren Case: Oh, thank you. When I went to law school a while ago it was never my intent to become a tax attorney, but I took a tax course, and I’m just one of those few, strange individuals that finds joy in reading the internal revenue code, and actually understands it.
Steve Pomeranz: Yeah, that is really quite strange. We had interviewed Daymond John earlier in the week and were talking a little bit about Kanye West, and we saw your article on Forbes.com. That’s why we contacted you, to talk to you a little bit about that. I guess my first question is, considering that the median net-worth of an American family is about eighty-one thousand dollars in 2013, can most of us realistically fathom racking up this type of debt? What does it take for somebody to get into this kind of trouble?
Darren Case: It’s really unimaginable for most people, where if ordinary individuals with not too much wealth rack up too much debt, that the bank’s going to be knocking on their door, their credit card’s going to be terminated, and certain assets are going to freeze up. But with celebrities, athletes, these financial institutions can sometimes let them hang, but obviously there’s other business ventures that they enter into that racks up this debt. It’s not just the spending of Kanye’s credit card that got him into this mess. There’s a lot of various factors in play that got Kanye where he is today.
Steve Pomeranz: Well, knowing him, maybe this is just a publicity scheme to promote his latest release. You never know with him, he’s so unpredictable and manages to get people’s attention, kind of like someone who’s running for office right now.
Darren Case: Yeah, humorously, I have an article about that particular someone running for office. Hopefully, I’m going to get that published as well. With Kanye, as I was writing that article part of me really thought, I’m like, “You know what, am I just doing exactly what he wants?”
Steve Pomeranz: That’s right.
Darren Case: Getting him more publicity, but considering how desperate he’s looked of late and as you mentioned before, begging Mark Zuckerberg for money, I think this is serious and not so much of a marketing ploy.
Steve Pomeranz: All right, so what does this say about his judgment, and I think also importantly about the advisors who surround him? Isn’t anybody telling him, if this is all true, if he’s making bad decisions?
What is the role of his advisors in this case?
Darren Case: Yeah, when I meet with certain clients, I always explain to them a bit about myself. My areas of real expertise are tax, estate planning, and then, sadly, Arizona state football, but I don’t really venture out of my areas, where if I were meeting with someone like Kanye West, there’s no denying that he is an amazing artist. He’s sold millions of records; he sells out venues world-wide. Even if he’s not your cup of tea in the music industry, he has been very successful, but you can’t be an expert in every single area. While he’s good at producing music and a few other various areas, he really needs to rely upon his advisory team around him. I think, honestly, most critically important to the team is the financial advisor. Putting safety nets in place where he can’t spend over $100,000 in one night at a bar, or he can’t max out credit cards or enter into certain deals without his attorney being present. These are the types of things… that his advisory team obviously has let him down.
Steve Pomeranz: I think it comes down to whether the advisory team turns out to be just a bunch of yes-men-and-women or family members, and it’s the power to say no, and the responsibility of your advisor, attorney, or financial or otherwise, to actually say, “No, this is really not in your best interest, and I would not really be doing my fiduciary duty if I told you otherwise.”
Darren Case: Oh, absolutely, I can’t imagine he has too many people in his entourage or his advisory team that are wiling to stand up to him, which is sad because you just look at that number, fifty-three million dollars in debt. At what point does somebody step forward and say, “No, Kanye, you shouldn’t do that, you’re already fifteen million dollars in debt, twenty-five million dollars in debt.” How it got all the way to fifty-three is just shocking in my mind.
Steve Pomeranz: It also brings up the other side of this, who are these debt holders? Who are the people or companies and institutions that would lend him this much money without, at some point saying, “Time to stop, we’re cutting you off,” or someone would watch their money carefully. There seems to be some kind of a breach on that side as well.
Darren Case: Yeah, I’m wondering if people within his advisory team found other access to lenders out there, and, as you know there’s all types of lenders. There’s some very good lenders and very bad lenders, but from Kanye’s recent statements, he’s leading the public to believe that all of this is personal debt. It’s not tied to business, and so it would be a very interesting situation if he tried to declare bankruptcy. Again, I don’t know if he’s that far down the road. He still does have, according to Forbes and other websites, a substantial net-worth, but, yeah, fifty-three million dollars on his balance sheet is not good.
Steve Pomeranz: Well, I’ve read some statements on the internet, so I can’t really vouch for the voracity of them, but he’s been quoted as saying that he doesn’t really want to use his personal assets to pay off this debt because he’s got to live his lifestyle, and he’s got to have the things that he wants to have, which in a normal person’s world would just be a laughable statement, if you think about it.
Darren Case: Oh, absolutely. I’ve seen some of those stories as well where he’s very high on using other people’s money for investment purposes. In an investment [inaudible 00:08:14] that’s not such a bad thing in most circumstances, but it seems like it’s more personal here. Personal spending, filling up mansions, taking his friends and family around the world, or the friends of his friends around the world for lavish spending parties and what have you.
Steve Pomeranz: Yeah, and if they’re his advisors, then they’re definitely not going to say no to any of that, so he’s not at arm’s length. We’re just supposing here, but in that particular case, you really don’t want to have your friends, or the people who get to benefit from all your largess as the people who are advising you. How does somebody dig out of a fifty-three million dollar hole in this case? Do you just fire your advisors immediately? Some of those advisors are going to have contracts as well. It’s going to be kind of complicated.
Darren Case: Kanye West still does have a very good skillset where a lot of people within the music industry or entertainment industry, if specifically said, he can get out of this debt relatively quickly, if he starts going on tour over and over and over again for the next several years.
Steve Pomeranz: Kind of the Billy Joel thing, right? No, remember, he accused one of his relatives of taking his money, and I guess he did actually run out of money and was forced to go back out on the road quite extensively to build it back up.
Darren Case: There are celebrities out there that… I’ve heard the kings of going on tour are people like Katy Perry, and they just bring in a substantial amount of wealth. Firing the advisors is going to be very tricky. I’m guessing, as you pointed out earlier, that a lot of these advisors are probably friends and family, so it’s very personal, but as my article mentions, how many friends would let an actual friend rack up fifty-three million dollars in debt? But he really needs to have a new advisory team in place before he starts firing people, because if he’s left without proper people in place, it just further exposes him to legal and financial liability if people aren’t closely monitoring what’s going on.
Steve Pomeranz: Well, there’s got to be a calculation too. If he’s got to buy people out of their contracts and so on, that could be expensive, and he’s got to make the calculation whether to fish or cut bait, and make the painful financial decision to change his financial team and all that. My guest is Darren Case. He’s a tax and estate planning attorney for Tiffany & Bosco PA located in Phoenix, right?
Darren Case: Yep, Phoenix, Arizona.
Steve Pomeranz: Very nice, and, Darren, where can people find you, what website?
Darren Case: If you just Google my name Darren Case and type in attorney as well, it most likely will pull up my information. The website to Tiffany & Bosco is www.tblaw.com
Steve Pomeranz: Very good, and I got to you through Forbes.com. You write articles for them from time to time, so that’s a good place to find you as well, right?
Darren Case: Oh yes, absolutely and please keep reading. I enjoy seeing the views go up.
Steve Pomeranz: Very good. Thank you, Darren, take care.
Darren Case: All right, thank you ,Steve.