Nicolas Cage Broke on $20 Million A Year
posted by Lawrence Cunningham
Include the Hollywood-based actor Nicolas Cage on the list of victims amid the real estate crisis and ensuing foreclosure flood. A California court last week ordered him to honor the judgment of a Nevada court by paying $2.4 million to a lender who foreclosed on the actor’s Las Vegas resort home. As with many other borrowers, though, Cage doesn’t have the money to pay.
That may sound astonishing for an actor whose 50 roles in big films over 20 years make him among the highest paid people in the world. Cage’s problem apparently is that, despite the massive cash, he still lives beyond its means.
Besides an apparent spending compulsion, during the real estate boom of the 2000s, he acquired dozens of properties whose prices seem to have risen catastrophically just before he bought them, and fell to the depths in the last three years. Not having any savings to buffer the losses, he’s in default not only on housing bills but owes millions in back taxes.
Financial embarrassment is compounded by bad publicity about his lifestyle. Some he brought on himself. By filing a $20 million lawsuit blaming his straits on his manager, Samuel Levin, Cage provoked a counterclaim with mortifying allegations of a life out of control, even by Hollywood standards.
The allegations in Cage’s complaint sound far-fetched; Levin’s counterclaim sought a mere $120,000 for unpaid fees, small under a contract that paid Levin 5% of Cage’s income since 2001 (running to many millions). That may explain reports saying the suit and countersuit have been dismissed. But some of the pleadings are salacious–with lessons for everyone.
NOTE: For more stories like this about celebrities and their dealings, see the author’s new book CONTRACTS IN THE REAL WORLD: STORIES OF POPULAR CONTRACTS AND WHY THE MATTER.
From Cage’s Complaint
Nicolas Cage is one of the most sought after and highly paid actors in the world. . . . [He] is a world renowned Academy Award winning actor, and is one of the most highly respected and sought after actors in Hollywood, having appeared in excess of fifty (50) motion pictures during the past two decades.
[Cage has paid Levin] millions of dollars. Cage has been forced to dispose of significant assets. [Cage] owes millions of dollars in back taxes, interest and penalties . . . .
Levin recommended and facilitated numerous highly risky and speculative real estate investments; failed to properly diversify Cage’s investment portfolio; failed to obtain proper and adequate insurance on behalf of Cage . . . ; and misrepresented and concealed Cage’s true financial status at the time that [Cage] acquired assets and investments.
From Levin’s Answer and/or Counterclaim
Cage’s allegations of misconduct . . . are entirely false. . . . [Cage ignored Levin's advice to] a) limit extravagant and arguably irresponsible spending; b) acknowledge and act on the advice from Levin that sufficient money would not be available to pay his income taxes if he did not significantly curtail his spending; and c) take responsibility for monitoring his own financial affairs.
[Cage] spen[t] millions of dollars annually to support a lavish lifestyle . . . which was above even his considerable means as a successful Hollywood actor.
Between 2001 and 2008, Mr. Cage purchased numerous personal residences in places such as New York, Rhode Island, New Orleans (Louisiana), Newport Beach (California), San Francisco (California), Las Vegas (Nevada), Bavaria (Germany), Bath (England), the Bahamas, and many other places.
By 2001 Cage had already squandered tens of millions of dollars he had earned as a movie star, he was deeply in debt, and he owed millions of dollars in . . . income taxes, with no funds available to pay the tax debt. . . . Levin warned Cage that he needed to earn $30,000,000 a year just to maintain his lavish lifestyle.
Levin advised, and Cage agreed, that [he must] accumulate, over a period of years, a cash “cushion” of at least $10,000,000 and preferably as much as $20,000,000. . . [To that end] with Cage’s consent, Levin sold off Cage’s $1.6 million comic book collection and sold more than a dozen of his automobiles.
[In the next few years,] Cage had a string of hit films, his earnings soared, and Cage abandoned the economic conservatism he had agreed to with Levin. . . . As Levin sold off automobiles, Cage bought new ones.
[Cage] set off on a spending binge of epic proportions, and by July, 2008, Cage owned 15 palatial homes around the world; four yachts (one for the Caribbean, one for the Mediterranean, one for Newport Beach and one for Rhode Island); an island in the Bahamas; a Gulfstream jet; and millions of dollars in jewelry and art.
[W]ith increasing urgency in 2006-2007, Levin implored Cage to stop buying real estate and urged him to reduce his real estate holdings, warning Cage that the financial press was filled with references to a “real estate bubble.”
Cage rejected this advice and continued his compulsive spending. As a result, in 2007 Cage’s shopping spree entailed the purchase of three additional residences at a total cost of more than $33,000,000; the purchase of 22 automobiles (including 9 Rolls Royces); 12 purchases of expensive jewelry; and 47 purchases of artwork and exotic items.
Cage also spent huge sums taking his sizeable entourage on costly vacations and threw enormous, Gatsby-scale parties at his residences.
The pinnacle of Cage’s spending spree came with his quixotic acquisitions of Midford Castle in England and Schloss Neidstein Castle in Bavaria.
[Cage] continued to spend uncontrollably. Levin described the folly of several other well-known entertainers who compulsively overspent their way into bankruptcy, and warned Cage “it could happen to you.”
[Cage didn’t listen] and was even motivated to continue it (and disregard Levin’s advice), because Cage made millions of dollars in capital gains from buying and selling his residences. However, when real estate values plunged in 2008, most of Cage’s residences turned “upside down,” just as the global credit crunch made it impossible to cover Cage’s endless cash calls by borrowing more money. Since he had never accumulated any cash reserves (as Levin had urged), even with his considerable earnings as a movie star, Cage fell further and further behind on his personal debts, mortgages, and income taxes. . . .
Co-Op Note: Levin’s Counterclaim notes that Cage’s real name is Nicolas Coppola and uses that name throughout; I’ve changed all such references from Coppola to Cage.
Hat Tip: Christa Laser
UPDATE: For more stories like this about celebrities and their dealings, see the new book CONTRACTS IN THE REAL WORLD: STORIES OF POPULAR CONTRACTS AND WHY THE MATTER.