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Fame without fortune

For celebrities accustomed to a champagne lifestyle, financial strain may follow when big paydays stop.

June 12, 2008|John Horn and Nicole Loomis | Times Staff Writers

They can live in mansions. Shop at the fanciest department stores. Drive luxury cars. So why is it that so many highly paid entertainers have money issues?

Well, they often live in mansions, shop in the fanciest department stores or drive luxury cars -- even when they can no longer afford it.

Although an exact accounting of Ed McMahon’s financial problems remains undisclosed, he risks foreclosure on his multimillion-dollar Beverly Hills estate, and he and his company owe American Express Co. nearly $750,000. But the veteran entertainer recently said he understood this basic economic principle: When you spend more than you make, you've got problems.

Fame may open lots of doors, but it can't always pay the bills, especially when those tabs run into the hundreds of thousands of dollars and work suddenly slows down or stops altogether. And even though Hollywood celebrities can seem worldly in ways beyond regular folks, they are often surprisingly naive in managing their own financial affairs, lawyers and business managers say.

McMahon, the 85-year-old former sidekick to Johnny Carson on "The Tonight Show" and host of "Star Search," made headlines last week for facing foreclosure on his Mediterranean-style mansion, but that's not his only financial crisis.

On April 16, American Express won an arbitration judgment against him and his company, McMahon Communications Inc., for $747,000 over unspecified debts, according to Los Angeles Superior Court documents. A lawyer from American Express declined to comment about the dispute.

According to the Wall Street Journal, McMahon was more than $600,000 behind in payments on his $4.8-million mortgage, and lender Countrywide Financial Corp. filed a default notice in March. McMahon -- who has hosted real estate infomercials -- has been trying to sell the property for two years; two websites listed the asking price at $5.75 million, but listing agent Alex Davis said it was priced at $6.25 million.

McMahon, who declined to be interviewed, said on CNN’s “Larry King Live” on Thursday, "If you spend more than you make, you know what happens."

McMahon injured his neck in a fall a year and a half ago, which has prevented him from working and earning money to pay his bills, according to his publicist, Howard Bragman. "Ed loves to work," he said. "I don't think he would know what to do if he retired."

Bragman added that McMahon's financial problems stemmed in part from his munificence. "Ed supports a lot of people and charities -- he's been exquisitely generous to everybody. He's just a giving guy."

Whatever is causing McMahon to fall behind on his bills, he's hardly alone in Hollywood.

While millions of working-class people struggle, several highly paid celebrities -- including actor Randy Quaid and rap music impresario Marion "Suge" Knight -- have suffered their own financial difficulties.

Unlike homeowners wrestling with adjustable-rate mortgages, the entertainers are sometimes undone by the true costs of a rich-and-famous lifestyle.

"Renegade" television actor Lorenzo Lamas owed nearly $200,000 on a private plane, while actress Lorraine Bracco, who later became famous on "The Sopranos," was on the hook for more than $7,000 to Giorgio Armani and more than $4,000 to a limousine service, their bankruptcy petitions show.

"I don't think it's unique at all," attorney Jay Cooper, who chairs the West Coast entertainment practice of law firm Greenberg Traurig, said of McMahon's difficulties. "Every single career in the business has its ups and downs. And unless you are prepared for the valleys, you're going to be in trouble."

When the work is coming, so are the perks, which may be part of the reason many celebrities have a hard time understanding the actual costs of their high standard of living. While they are employed, most top stars can go for weeks without having to pay for much more than breath mints. Movie studios cover their hotel, food and transportation bills; designers shower them with free clothes; and gift baskets come jammed with complimentary cellphones, jewelry and other goodies.

That swanky lifestyle soon becomes addictive -- even after some third party has stopped underwriting it. And Hollywood can be as cruel as it is kind with compensation, and the once-hot actress who was making $10 million a few years ago might be forced to scrape by with just $5 million now. If her cost of living has grown to match those better-off days, she might suddenly find herself millions in the hole.

For all the media attention focused on fat show-business paydays, news stories often fail to spell out the financial accounting that's central to entertainer compensation.

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