February 24, 2017

Fraudster of the Week: Johnny Depp v. The Money Managers

By the C|C Whistleblower Lawyer Team

As the rest of Hollywood prepares for Sunday night’s Oscar ceremony, Johnny Depp is gearing up to fight his financial advisers in court. Last month, the Pirates of the Caribbean star sued his long-time advisers at The Management Group, alleging that they “engaged in years of gross mismanagement, self-dealing, and at times, actual fraud.” The Management Group has since countersued, asserting that Depp’s lavish lifestyle—with bills averaging more than $2 million per month—caused his recent financial troubles.

Depp has appeared in some of the highest-grossing films of the past 30 years, earning him an estimated $650 million.  He’s opted to spend that money on some questionable purchases—items like 14 homes, a chain of islands in the Bahamas, $30,000 per month on wine, and $3 million to blast the ashes of Hunter S. Thompson from a custom-made cannon. He’s also paid more than $5.6 million in interest on overdue taxes and has lent millions to people unlikely to pay him back.  According to Depp’s suit, however, he’s not to blame for these expenses—he simply misplaced his trust in The Management Group for nearly 16 years.

In its countersuit, The Management Group claims that it “did everything possible to protect Depp from his own irresponsible and profligate spending.” The Management Group further asserts that it always filed Depp’s taxes on time, and that the taxes were paid when Depp had money on hand.  The countersuit seeks a declaration that Depp is to blame for his financial woes, $560,000 in unpaid fees, and $4.2 million for repayment of a loan made to the actor.

The lawsuits, however, offer more than Hollywood intrigue; they provide insight into the ongoing battle over President Obama’s 2015 fiduciary rules. These rules—which were not finalized before Trump took office—would require financial advisers to give their clients the best possible advice.  Critics of the rule, including those with influence in the Trump administration, believe that individuals ought to bear more responsibility for monitoring their finances.

Depp would seem to be a proponent of the Obama-era rules. In his lawsuit, Depp concedes that he was less-than-diligent about monitoring his finances because he assumed that his financial adviser “was behaving as a loyal fiduciary and prudent steward of his funds and finances.”  Indeed, Depp admits that he often had no idea what was occurring in his bank accounts and would regularly sign whatever documents The Management Group put before him, without bothering to read what they said.  We’ll have to see whether Depp’s approach to his personal finances holds up in court.

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