Trust me, I'll take care of it all

A court case involving Elton John again highlights the delicate relationship stars have with those who manage their affairs
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The Independent Online

Elton John cannot be expected to concern himself with "boring administrative affairs". He has to write songs, give live performances, attend charity balls and go shopping at Versace. The flamboyant musician's aversion to the mundane task of handling his vast wealth, reported to be around £160m, was cited last week by his barrister as one of the reasons behind his failure to notice that around £20m of that money had gone missing in the 1980s and 1990s.

Elton John cannot be expected to concern himself with "boring administrative affairs". He has to write songs, give live performances, attend charity balls and go shopping at Versace. The flamboyant musician's aversion to the mundane task of handling his vast wealth, reported to be around £160m, was cited last week by his barrister as one of the reasons behind his failure to notice that around £20m of that money had gone missing in the 1980s and 1990s.

The loss was eventually noticed by an auditor in 1998, leading John to sue Andrew Haydon, the former managing director of John Reid Enterprises, which had been his management company, and the City accountants PricewaterhouseCoopers, which looked after his business interests. The High Court is hearing the case.

While the sums involved in Elton John's case are extraordinary, the singer is not the first celebrity to find himself suing a business adviser. Earlier this year, some of Hollywood's brightest young things, including Winona Ryder, Leonardo DiCaprio, Matt Damon and Ben Affleck, found that they had been swindled out of millions of dollars by Dana Giacchetto, self-styled financial adviser to the stars.

Giacchetto, who pleaded guilty to fraud in April, took money from a host of film and rock stars, using it to fund his own glittering lifestyle. In an indictment presented to the court, Giacchetto was shown to have spent $50,000 on restaurant bills and $120,000 on hotel accommodation in the space of a few months. Yet his clients, many of whom he knew socially, either failed to notice his extravagance, or did not find it remarkable.

Sting, the former frontman of The Police, was another star who remained oblivious to the disappearance of large chunks of his money. In 1995, Keith Moore, Sting's accountant, was jailed for six years after being found guilty of stealing £6m from the singer. Moore had begun purloining money to fund some of his more bizarre business ventures, such as converting Russian military aircraft, in 1988, but it was not until 1992 that the black hole in the singer's finances was noticed.

Even allowing for the wealth of those involved - at the time Sting was estimated to be worth £70m - it seems amazingthat such sums can vanish without anyone noticing. It is tempting to think of celebrities as financially illiterate at best, complacent and arrogant at worst.

Elton John's argument that he did not like dealing with "men in suits" appears to confirm the stereotype. You can almost hear the luvvies cry: "But how can I be expected to concern myself with tax and pensions? I'm an artiste!"

This, however, is simplistic. James Higgins at Chamberlain de Broe, financial advisers with a number of celebrities on their client list, says: "If someone takes a large chunk of money out of most people's bank accounts, sooner or later a credit card will be declined or a cheque will bounce. When you're Elton John, that doesn't happen."

Higgins concedes that there can be an element of snobbery among stars when it comes to managing cash. "There isn't always animosity between stars and their accountants, but there is a feeling that some things should just be left to the suits," he says. "This is particularly the case with the more arty celebrities. For musicians, it has never been particularly cool to be too close to the management of their own money. It runs counter to their whole culture."

As a result, an industry has grown up to cater to the needs of the super-rich and very famous: agents to get them work and ensure that they appear on the right talk shows; personal assistants to plan their diaries and pick up their dry cleaning; personal trainers to take them through their gruelling exercise routines and plan their diets.

On the financial side, accountants, advisers and auditors have become essential accoutrements for any would-be star. The tendency to employ whole teams of financial experts - rather than just one or two, as common or garden rich people might have - makes it all the easier to cover up financial misdeeds or mistakes. Particularly since the business affairs of modern celebrities are complex. Higgins explains: "In the case of musicians, there is not a single income stream. Money comes in from song writing, royalties, back catalogues and merchandising. These people are big businesses in themselves."

While rock stars may hire accountants and advisers to keep tabs on their money, they rarely deal with the finance people directly: a further layer of middlemen usually takes care of day-to-day business.

Higgins says: "Although we have famous clients, we rarely see them. I have one client whose priority is adding to his fleet of Lamborghinis and Ferraris. His stepfather comes in to look at the grittier details. The star himself is not in the slightest bit interested in whether his pension fund has enough exposure to UK equities."

A few celebrities are noted for getting actively involved in their finances. Ben Elton, the comedian, is said to ensure that his cash is invested in an ethical way. Others keep a close eye on their money out of necessity. Daniel Freedman at London & Capital, a firm of financial advisers whose clients have included top-flight footballers as well as models and actors, points out that the brevity of careers, which rarely span more than a decade at the top of the game, means that nothing can be left to chance.

While celebrities may take differing degrees of interest in the way their money is managed, they all share the need for privacy. Consequently, a reliance on trusted friends to take care of their affairs is common. But this can sow the seeds of trouble. Higgins says: "Often, celebrities are tempted to use people with whom they have social connections to manage their affairs. This is usually not a good idea, not because you need to be a rocket scientist to manage money, but because it is better to employ someone who has a professional obligation to you, rather than just a social one. It also makes things much easier if something should go wrong."

George Harrison, the former Beatle, learnt this lesson the hard way. He entered a partnership with an old friend, Denis O'Brien, who was also his business manager. The two set up a film company, HandMade Films, which was responsible for cult hits such as Withnail and Iand Monty Python's Life of Brian. Despite early successes, the company ran into trouble. O'Brien managed to conceal the extent of the losses by setting up a complex set of offshore companies which meant that the former Beatle was unable to keep track of his affairs. The bitter legal battle that ensued ended with O'Brien being instructed to pay his former friend £6.7m in damages.

Superstars in the making, be warned. It may offend your artistic sensibilities to take a professional interest in your money, but it certainly pays.

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