Owen Dhal .transcripts. Impeached. Michael Jackson Ex, Branca V Irs

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UNITED STATES TAX COURT - TRIAL

ESTATE (OF MICHAEL J. JACKSON DECEASED) EXECUTORS: JOHN G. BRANCA. AND JOHN MCCLAIN V

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COMMISSIONER OF INTERNAL REVENUE (IRS) February 9/10th 2017 Presiding Judge Mark V. Holmes

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Jackson’s estate is represented by Avram Salkin, Charles Paul Rettig, Steven Richard Toscher, R obert S. Horwitz, Edward M. Robbins Jr., Sharyn M. Fisk and Lacey E. Strachan of Hochman Sa lkin Rettig Toscher & Perez PC, Paul Gordon Hoffman, Jeryll S. Cohen and Loretta Siciliano of Hoffman Sabban & Watenmaker and Howard L. Weitzman of Kinsella Weitzman Iser Kump & Aldisert LLP.

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The IRS is represented by its attorneys Donna F. Herbert, Malone Camp, Sebastian Voth, Jordan Mus en and Laura Mullin. Denise Larson.

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-------------------------------------------OWEN DHAL Business appraiser

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Mr. Salkin: Ready for Petitioner? Judge Holmes: Yes.

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Mr. Salkin: Petitioner would like to call Owen Dahl. OWEN DAHL sworn in. Court Clerk: Can you please state your name and address for the record? The Witness: Owen Michael Dahl, ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Mr. Salkin: Your Honor, Mr. Dahl will be testifying as an expert with respect to the fair market value of the MIJAC Music Catalog this morning. He will then be testifying as a percipient witness this afternoon.

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Judge Holmes: Okay. So you have 20 minutes to bring out what you want in the expert witness report.

Judge Holmes: Okay.

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Mr. Salkin: All right. One additional preliminary matter, Mr. Dahl's hands shake a little bit. He would like to explain the medical condition so that nobody will be distracted when they see it, if he may.

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The Witness: I have a benign tremor, an essential tremor. So if he's handing me a piece of paper, you might see it shake a little. Judge Holmes: If you need any help, Ms. Wood can bring things up for you. The Witness: I appreciate it, Your Honor. Thank you. Judge Holmes: Go ahead.

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Mr. Salkin: Yes. May I hand Exhibit 628 for identification to the Clerk, please? Judge Holmes: Okay.

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Court Clerk: Exhibit 628-P is marked for identification.

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Mr. Salkin:

DIRECT EXAMINATION

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Q. Mr. Dahl, you have Exhibit 628-P in front of you, which is a schedule. It says Dahl in the middle and Anson on the right. A. Yes. Q. Could you explain what this is, please?

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A. This is a line-item-by-line-item summary of the differences of opinion related to MIJAC Music and the IRS expert's consular report and how it compares and lines up against my Dahl Consulting report. Q. Okay. And you notice that there are two line items that are circled. Can you explain what those are?

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A. The two sources ... the two circled lines items ... Other Sources of Income, BMI and Society's and MJ Songs ... represent the vast distinction, or difference, between the opinions of the appraisers in this matter. BMI and Society rebates, which are performance royalties payable to the songwriters, relate specifically to Michael Jackson's music and as do the MJ Songs, which are the publishing rights and the income associated with them. And you can see a pretty large difference in our opinions of value.

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Q. All right. On the MJ Songs, does that relate only to songs that were both written by Mr. Jackson and performed by Mr. Jackson?

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A. These are songs that are written by Mr. Jackson and performed by Mr. Jackson, for the most part. There's a small number of songs included in there that are written by Mr. Jackson but actually performed by third parties. There's some parody work in there. There's a welldocumented Rihanna song that was a sample of Mr. Jackson's work. The values of those interests are also included in the MJ rights. Mr. Salkin: We ask this be admitted into evidence, please. Judge Holmes: It is. Exhibit 628-P was received into evidence

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Mr. Salkin: May I approach ...

Judge Holmes: Yes, of course. Remember, this is 628-P. And then probably 629 ... Mr. Salkin: We have ... it's marked?

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Court Clerk: 629-P is marked for identification. Mr. Salkin: Thank you.

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Mr. Salkin:

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Q. You have in front of you Exhibit 629-P, Mr. Dahl. That is the one that's handed WarnerChappell royalties from Year 2006 to 2009. A. I have a paper copy of it, yes.

A. Okay. Fair enough. Q. ... as well as being on the screen. A. Yeah. Oh, there it is. Thanks. Oh, not yet, no. Q. Yes. Can you explain what that is, please?

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Q. Yes, these are all paper copies ...

A. Yes. The summary that we're looking at here which shows up ...

Ms Herbert: Your Honor, I think that they have the wrong exhibit up on the screen.

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The Witness: Yeah. Mr. Salkin: 629..

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Judge Holmes: We still have 628 up there.

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A. Here we go. So what we're looking at here ... 2006, 2007, and 2008 ... are the three years 775 preceding death for 12-month periods beginning July 1st, 2005, ending June 30th, 2006; beginning July 1st, 2007, ending June 30th, 2008; and beginning June 30th ... July 1st, pardon me, 2008, ending June 30th, 2008; and then some 2009 data and some average data. These are the summary Michael Jackson royalties received by MIJAC Music for those periods of time. And they're summarized from the tens and tens and thousands of line items and royalty statements. I think one of the keys for, of course, to understand is that, unlike maybe when you value a business enterprise with audited financial statements, the value of MIJAC Music and the source documents that underline the analytics that we need to do to a MIJAC Music type of catalog involve quarterly ... literally, quarterly data dumps of the information line item by line item by line item that represent tens of thousands of different variances of royalties that are paid for song use. Now, song use is different in terms of title sometimes, and they need to be cleaned up and worked with. And this is a very succinct analysis that shows you different sources of revenue that are generated and paid to MIJAC during the periods really right before death.

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Mr. Salkin:

Q. Okay. Let me interrupt you for a moment.

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A. Sure.

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Q. Does this show us a summary of the actual royalties received?

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A. These are the actual royalties received. For the 2000 ... for the 12 months ended June 30th, 2006, Michael ... MIJAC Music received royalties of 2.159 million for compositions that didn't relate to Thriller itself. There are four songs from the Thriller album which Michael Jackson received songwriter's credit. They generated just under $1 million in total revenue. You can see those same line items for 2007 ... 1.9 million in non-Thriller revenues; about a million ... just slightly over a million in Thriller compositions; 2008, about 2.1 million in revenues; and 1.2 million in revenues. Q. And ...

Ms Herbert: Your Honor, may I interject for a moment? I think maybe we jumped the gun a little bit because I don't think Petitioner has offered Mr. Dahl's qualifications as an expert yet, nor offered into evidence ...

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Judge Holmes: Remember, this is 20 minutes of whatever he wants. He ... I'm sure Mr. Salkin is an experienced lawyer and will move for the admission of the expert witness report. And he can choose in his 20 minutes what to emphasize, whether it's the qualifications or these ...

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Mr. Salkin: I understood Your Honor to say that you prefer to rely on the qualifications set forth in the reports. Judge Holmes: You may. Go ahead.

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Mr. Salkin: A. So one of the ... I think one of the ... Q. Excuse me, Mr. Dahl. A. I'm sorry.

Q. Could you look at the Thriller line for 2009 ...

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A. Yeah.

Q. ... and compare it with the prior years?

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A. What is really, really important and interesting as we get deep into the royalty statements and really pay attention to where the revenue sources are coming from are two things. First of all, the importance of those four Thriller songs to the entirety of the compilation of the collection that we're attempting to value here, they have consistency ... consistently represented a third of the revenue in years prior to death. The other thing is how consistent the non- Thriller composition. So those are the compositions from Bad and History and Dangerous and other albums, other studio albums and compilation albums, the revenues ... pardon me ... that have been generated

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consistently on a year-in and year-out basis for that three period ... three-year period of time preceding death as well. When you look ... and I think this is really important ... at the 2009 levels ... and I know it's the far-right column; I have an average column there, and then I put a 2009 column in there ... you'll see a really large spike in the Thriller composition numbers.

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A number that had historically jumped around about $1 million a year in earnings capacity for MIJAC Music suddenly became $2.2 million. And there's a very specific and very important reason for that. In 2008 ... February of 2008, to be specific ... the rerelease of Thriller under the Thriller 25, the 25th anniversary edition of Thriller, was a very large, successful opportunity for MIJAC Music to rerelease an album that, as I said before, is paramount to the importance of this collection in this catalog. And we see a very large temporary spike in revenues just before death because of that. Q. And this is an accurate summary based on the raw data that you look at?

A. These tie exactly to the five years and tens of thousands of line items of data that represents the royalty statements.

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Mr. Salkin: I'd like to move for admission of Petitioner's Exhibit 629-P, please. Judge Holmes: Okay. It's admitted as well.

Judge Holmes: You may.

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Mr. Salkin: May I approach the Clerk?

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Mr. Salkin: Excuse me. Wasn't the one you just ... that we just moved for admission was 630P? Court Clerk: It was 629-P. Mr. Salkin: Excuse me.

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Judge Holmes: 630-P is headed MIJAC Music and begins with Base Royalty Rate of Change on the right- hand side. Mr. Salkin: Okay. The one you just marked is 630-P? Judge Holmes: Correct.

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Court Clerk: Correct. Mr. Salkin: All right.

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Mr. Salkin:

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Q. Could you look at Exhibit 630-P, which is headed MIJAC Music? And across the top, it says Projected Fiscal Year Ended 6/30 ... A. Yes. Q. ... Jackson Music. Could you explain what this is?

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A. This is the beginning of the initial point of our forecast. And I think it's important to back up a little bit and talk about the sources of revenue again that we generate as we're looking at MIJAC Music. MIJAC Music ... and this is Michael Jackson's works itself ... at the point of death had several ... I hate to use the term opportunities ... but several streams of income that could be reasonably expected to be earned both as a result of Mr. Jackson's continuing exploitation of his works and also, of course, because of the unfortunate effects of death. We start by looking at the base. And if you look back at that prior study ... that prior slide where we see the Michael Jackson's work ... those are works that Michael Jackson himself recorded and performed ... had been generating a very stable base between 3 and $3.2 million a year without the implication of very large, important rereleases. It is my professional opinion that that 3.5 million base has a very stable and important story to tell in how a willing buyer would look at this portfolio of songs in June of 2009. But it's not the whole story. There are three other sources of income that we need to think about. One is the ongoing ability to rerelease materials on a semi-frequent basis. Michael Jackson throughout his life had released new material on an infrequent basis during the last decade of his life. But he continued to release Greatest Hits albums and other opportunities to exploit existing materials. And that opportunity to exploit existing materials represents an opportunity above that base level, that 3 to $3.2 million base level. Q. Now, is that represented by ... do these fixed percentages increase ...

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A. Yes.

Q. ... every year? Or is it some other ... A. It's exactly right.

Q. ... fixed some other way?

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A. It is a function of a percentage growth rate that corresponds to the increases that we see out of Thriller. Thriller was bringing in, in its year and a half on the marketplace prior to death about $1 million a year. It's the most successful album. Let ... just some perspective on album sales ... MIJAC ... pardon me ... Thriller sold 65 million albums at the point of death. By contrast, Bad, which was the second-most popular, had generated about $30 million in album sales. Obviously, Thriller's ... Judge Holmes: Thirty million album sales?

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The Witness: Thirty million album sales.

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Judge Holmes: Okay.

The Witness: About half ... I think it was 32 million album sales versus 65, so, really, almost exactly half as many album sales for the Bad album.

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A. Dangerous was about the same. It sold about 30 million. And then when you look at the other albums, they dropped off considerably in the 20 million range. The point is, is that what we experienced in the Thriller year of 2008 and 2009 represents an upward bound on what a reasonable buyer would have expected new revenue to generate from that base level as new materials came out. These new materials have nothing to do with death. Let me be very clear. These new materials were opportunities to rerelease materials such as, for example, a Bad 25th anniversary album, which was scheduled and came out in 2014. Mr. Salkin:

Q. All right. Now, does this projection take into effect the anticipation that there will be rereleases from time to time?

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A. Yes, it does.

Q. And do you increase the projected revenue as a result of those?

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A. I know this is hard to see, perhaps, on your line items, but if you look at a line called Base Royalty ... pre-spike, no synch, rereleases ... we show the actual 2009, which is an adjusted number that ties back very closely to our prior screen. After adjusting for the impact of Thriller, it's the 3.5 being that base level that we talked about previously. From there, we grow at 4.3 million in base royalties in 2010, again, having no impact or no relation to his death other than to, perhaps, speed up the rate at which those new releases are brought to market. There is an opportunity, obviously, post- death to be more aggressive in terms of bringing albums to market because the window of opportunity is a short one. So we have a $4.3 million ... or an $800,000 annual increase in royalties related to the rerelease of a new album. We have a similar album increase in 2011 to 4.7 million. And then you see 2012 and '13 back off. And this, again, because, if you look at the history of Michael Jackson's release experiences during his lifetime, he released albums on about a three-year basis. It would be between three and five, sometimes as much as seven years, in between release opportunities. Q. So then is it fair to say that what you did is analyze the historical rereleases and take the specific anticipated rereleases into effect in your projection ...

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Ms Herbert: Objection. Leading. Judge Holmes: Sustained.

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Mr. Salkin: Q. How did you deal with the rereleases in the schedule?

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A. What we did is looked, again, at Thriller as our baseline. We knew that Thriller was the highest end, or the high watermark, as far as releases would go and that it was generating about $1 million in a one-year period. And we projected Bad and all other albums to rerelease at about an $800,000 a year increase in revenue, so 20 percent less than what Thriller had done.

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Q. And that ... does that account for the increases and decreases from year to year?

A. You see that in the 4.3 million and in the sustained 4.7 million, the 4.6 million for 2014, and the 4.6 million for 2017, yes. Q. All right. And this has a bottom line that says Net After-Tax Royalties. And it only goes through 2019. Does your report go beyond 2019? A. Yes. We run these royalties. So this base royalty, which you can see way out there at the bottom of 2019, 4,118,000 ... 83,000, and tax-effected at 2.5 million, we then decline that, or decrease that, at an annual 3 percent to the erosion rate.

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Q. All right. So this, in effect, then is just as an example of what your whole picture is in the report so the Court can understand what you've done. Is that correct?

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A. That's exactly right. And obviously, the first 10 years in any forecast are the most important 10 years for two reasons. One, it really corresponds to the window of opportunity post-death for those involved in the exploitation of those rights to have the window of opportunity that makes the most sense exploited. If they're not exploited in 10 years, what we saw in, for example, reviewing Elvis Presley's own (inaudible) post ... after 10 years, the rerelease in new materials really fall off the charts. There's not a lot of successful rereleases that generate a lot of income.

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Q. So to determine the fair market value of the MIJAC Music Catalog, what did you do besides this projection that estimates the royalties over a period of time?

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A. So we talked about the base royalty, that royalty that is affected by death but really is an opportunity to exploit no matter what. There's also the spike issue. And I want to be really clear about what spike is. Spike is a temporary increase in the sale of albums specifically because of the celebrity status and a death and the news media coverage of that death. The studies that we relied on and looked very closely at, the Zurich study, which included over 90 musicians, was a very in-depth look and clearly indicated positive impact ... in ... correlation between death and album sales for a short period of time. The projection in the first studies were about 50 percent spike. We use that as a baseline, expected that our base would spike by another 50 percent, but we retain that spike for a much longer period than what is implied in the five- year studies.

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Q. After you determined these projections since net after-tax royalties, did you discount them back in some way?

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A. We used a discounted cash flow analysis or a discounted income analysis using a discount rate of 9.7 percent. We used each of those years to determine the present value of those seven to eight years' worth of calculations. Q. Is that how you reach your present value in the MIJAC report?

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A. That's exactly right, yes.

Mr. Salkin: Okay. I'd like to move to introduce Exhibit 630-P into evidence. Judge Holmes: Okay. It's an exhibit as well. Mr. Salkin: May I approach? Judge Holmes: You may. Mr. Salkin:

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Q. All right. And Mr. Dahl, could you identify Exhibit 631-P? A. This looks like what we ...

A. ... already put in.

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Q. It's headed ...

Q. ... BMI Society in the upper left.

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A. I'm sorry. Is that not the same schedule that we just looked at? The Witness: Oh, I'm sorry. Mr. Salkin:

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Q. BMI ... it's on legal size paper, the log paper. Do you have that in front of you? A. I do.

Q. Okay. Could you explain what this shows?

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A. So BMI and Society rebates are two different sources of income that are paid to MIJAC Music. They are royalties in the BMI case payable to songwriters for the performance rights or performance uses of their music. The ... you'll see a five-year average number there on 1.461 million. In the five years prior to death, going back again on a 12-month period ... so 12 months ended June 30, 2006, 2007, 2008, and 2009 ... you'll see that actual BMI royalties are extremely volatile, which is not uncommon. They are not as concise. They're not as easy to collect, and

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there's much bigger timing lags in the receipt of payment relative to the Warner-Chappell statements that we were looking at before. And what we see is that BMI income on average for the five years prior to death average about 1.5 million. And this included a period, the 2009 ... last 12 months of 2009 and/or ... pardon me ... the last six months of 2009 and the six months of 2008 that were affected to some degree by the rerelease of Thriller 25. What we see is that, on average, MIJAC Music collects about 1,461,000, if my eyes aren't deceiving me, in BMI royalties, about ... slightly under $50,000 in Society rebates. Those payments are made and continue to be made post-death. We know that there's a spike, and we use spike data from the same studies and apply those to the base or the average BMI collection for each of the years. So you'll see in 2010 a forecast of 2,192,000. That is 150 percent of the base average of 1,461,000. Q. Did you project these out 70 years, also, on your report?

A. We made the same projection. The projection in 2011 was expected to retain ... remain high in the same fashion that we continued the heightened expectation from 2000 ... or pardon me ... from the MIJAC Music. Q. Is this 10 years out of the 70 ...

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A. This is ...

A. This is exactly ... Q. ... example ...

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Q. ... for ...

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A. ... 10 years out of 70. We applied nominal growth rates. The reason for having some nominal growth in there is that, unlike revenues being generated in this industry on the mechanical side of things, performance royalties are not affected to the same degree by the massive change in decline in the music industry, which has affected album sales so dramatically since 2001 and then really since 2005.

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Q. All right. And did this also get discounted back, the present value, to determine fair market value? A. That's exactly right. Yes.

Q. Any other explanation with respect to the BMI royalties that the Court would like to hear?

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A. Well, I think, again, using the methodology that we did in a fairly slow bleed-off, you see what I think is a very conservative forecast in that, 10 years from now, this forecast, which forms the basis of our evaluation of BMI, we still expect royalties which are in line with and higher than the five-year average, as reported for the ... during the life of Mr. Jackson. Remember, Mr. Jackson's opportunity to tour and to remain active in the music industry and to publish new material has a direct effect on the ability for BMI and performance income to remain relevant.

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And the ... well, this is what I think is a very conservative forecast in terms of the longevity of return of revenues and how long ... Q. One ...

Q. One additional question. You ... A. Yeah.

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A. ... it would be expected to stay.

Q. You took, in effect, tax effect, and you deducted the taxes. I assume that the ... both MIJAC ... or all of MIJAC would get the benefit of amortizing the cost of value over a period of years. Is that right? A. Yes. It's a taxable entity that buys it and a taxable entity that's benefitted by getting the lower cost to capital associated with being a taxable entity to also get a 15-year amortization tax benefit.

A. Yes, I did.

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Q. Where does it show on this one?

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Q. Okay. Did you reflect that benefit in your schedules?

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A. This one it doesn't because we cut it off at just the actual forecast. The real schedule, which is on Page ... it's about Page 149 of my report; it's also in the supplemental report in one of the first pages ... shows the calculation and the amortization tax benefit. And actually, it shows it in the first schedule that we looked at as well with the consult comparison if you want to go back to that one. Mr. Salkin: I have no further questions. Judge Holmes: You might want to introduce his expert witness report.

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Mr. Salkin: Oh, pardon me.

Mr Camp: You might want to introduce the reports. Mr. Salkin: May we admit?

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Judge Holmes: Get a number for it. Mr. Salkin: The fourth exhibit, which is, what, 634?

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Court Clerk: Oh, sorry. So 630- ...

Court Clerk: 631 is that ...

Court Clerk: 631-P. Judge Holmes: 631-P it is.

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Judge Holmes: Ms. Wood, what's the real number?

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Mr. Salkin: 633-P.

Mr. Salkin: Did we get all of our exhibits admitted that ... Judge Holmes: Yes, we did. Mr. Salkin: Thank you.

Judge Holmes: Oh, excuse me. Yes.

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Ms Herbert: Your Honor, I think 631-P ...

Mr. Salkin: That's mine.

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Ms Herbert: ... is the schedule that was just looked at.

Judge Holmes: Yes, it is. So we're going with what, Ms. Wood?

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Court Clerk: 631-P. Mr. Salkin: Okay.

Judge Holmes: That's the one sheet. What's the expert witness report next in order? Mr. Salkin: Okay. Well, my lawyer says that I better get the reports admitted into evidence.

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Judge Holmes: What's the expert ... Court Clerk: 632-P is next in order.

Judge Holmes: Okay. The expert witness report of Mr. Dahl, 632-P, is admitted into evidence.

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Judge Holmes: Cross-examination can begin.

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Mr. Salkin: Okay. That would ... is that all three reports? There are three separate reports, Your Honor. There's the initial report. There's a rebuttal report and a supplement.

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Judge Holmes: Oh, let's see if you want to issue ... the rebuttal can come in at rebuttal time. Mr. Salkin: All right. Ms Herbert: Your Honor?

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Mr. Salkin: How about the supplement, Your Honor? Is that in ... can that be admitted now? Judge Holmes: Let me see. Yes, Ms. Herbert first.

Ms Herbert: Oh, I ... what I just wanted to request is whether these schedules that were just provided to us this morning are just ... contain the same information that's in Mr. Dahl's report. Or was this new information? And if it is new information, I think that the government should be given a little bit of time to evaluate the information in these four exhibits that were just given to us this morning so that we can ask questions about it. Judge Holmes: Where did these come from? I thought they were derived from the data in the reports.

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Mr. Salkin: Some ... they are derived from the data, but they're in a form that's a little easier to follow and shorter.

Mr. Salkin: Yes.

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Judge Holmes: They're summaries, in other words ...

Judge Holmes: ... of existing ...

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Ms Herbert: That's okay, Your Honor. Thank you.

Judge Holmes: Go ahead, Ms. Herbert. The floor is now yours. Ms Herbert: All right.

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Judge Holmes: The supplemental reports will come in when you offer them in rebuttal as well. Mr. Salkin: Thank you.

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Ms Herbert: Your Honor, just for clarification, this would mean that I would not be able to cross-examine Mr. Dahl at this time regarding differences between his original report and supplemental report. In other words, so if ... Judge Holmes: Oh.

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Ms Herbert: ... the numbers have changed, all those figures have changed, it seems that his new opinion is now the one reflected in the supplemental report.

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Judge Holmes: Yeah, you can impeach him with that. I'll let that in. That's a good point. Ms Herbert: Thank you.

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Judge Holmes: It's a weird way of getting it in. Why don't we admit all the reports from Mr. Dahl, then I'll change my mind so that she can refer to them in order. The rebuttal expert witness report will be next in order. Court Clerk: So Exhibit 633-P is marked for identification and will be the rebuttal report for Mr. Dahl. Judge Holmes: I'll admit that one as 633-P. And the supplemental?

Court Clerk: And Exhibit 634-P is marked for identification and will be the supplemental expert report of Mr. Dahl.

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Judge Holmes: Okay. I'll admit that as the supplemental report Judge Holmes: Those are all admitted now. You can easily refer to them by their exhibit number on cross, Ms. Herbert. Thank you for noticing.

Ms Herbert:

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CROSS-EXAMINATION

Q. Okay. Good morning, Mr. Dahl.

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A. Good morning.

Q. Nice to see you again.

A. Good to see you as well. Thank you.

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Q. Okay. Let me start by talking about Thriller 25 since we were just briefly discussing that. Now, that was released in February of 2008. Is that right? A. Yep, that's right.

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Q. The royalties from the Thriller album in 2008 increased from about 1 million to about 1.2 million between 2007 and 2008. Is that a fair statement? A. Yes.

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Q. Yet in 2009, a year later, the royalties increased approximately 2 million, right?

Q. What accounts for the fact that the increase was larger a full year after ... A. I'm not ...

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Q. ... the release?

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A. Yes.

Q. Okay. Thank you.

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A. You're welcome.

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A. I'm not sure if you've ever seen a royalty statement, but I'll give you a real synopsis. So it's too bad we don't have them in evidence because we could spend all day looking at them. But here's how a royalty statement looks. It's a line item on an Excel sheet. It's says the name of a song. It says a dollar amount. It says when that dollar was earned, and it says when that dollar was paid. And it is not ... I'm not going to say that 50 percent of the lag is seven or eight months. But a very large percentage of those royalty receipts are lagged quarters and quarters and quarters from the actual collection. So if you open up a June 30th, 2009, royalty statement and look down it and scan it, what you'll see is royalty received March 2008. So the album itself was released on February 20, 2008. It's absolutely the case that royalty payments in the first quarter of 2008 were almost unaffected by Thriller 25. The beginning of payments on that Thriller 25 would have started during the second quarter, escalated during the third and fourth quarter, and been in full swing in 2009 ... the first part of 2009 as payments from 2008 were ultimately received by MIJAC Music. That is ... and you can go through 2000 ... every ... I'm not sure, and I apologize. I don't know what's been provided to the IRS or not. I know as an expert the royalty statements are the first things that we ask for when trying to appraise these types of assets, and they are very large, voluminous files. And it takes you 30 seconds to scan them and see just how large those lag times can be.

Q. Now, you recall we had a deposition a couple weeks ago. A. I do. It was fun.

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Ms Herbert:

Q. And in your deposition, we talked about your report that has been admitted into evidence here. A. Right.

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Q. Now, I have a couple of questions about the supplemental report that has also been submitted.

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A. Okay.

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Q. If you would mind ... wouldn't mind taking a look at your supplemental report on Page 1, in that report, you provide the following description. A. Does anybody ...

A. ... a copy of that?

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Q. Now, do you have a ...

Ms Herbert: Can you pull that up on the screen?

Ms Herbert: What exhibit number is that, the supplemental? Mr Toscher: 634-P. Ms Herbert: Q. Okay. Looking at 634-P ... Page 1.

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Ms Herbert:

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Q. All right. Now, can you read the paragraph that just says, "Changes that affect my opinion"? Can you read that out loud, please?

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A. Sure. "After considering each of Mr. Weston's criticisms and reviewing them against my original report" ... and I apologize, Mr. Weston; I have mashed up your name there, I think ... "I have made four changes that numerically affect my opinion in summarizing the transmittal letter in reference on Page 49 and 149 in my report." Q. Okay. Now, on page ... if you could now turn to Page 12 of this exhibit, 634-P. A. Okay.

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Q. On Page 12 of your supplemental report, you provide the following description of your conclusion. "As discussed previously, I have amended my opinion to account for three mathematical errors." Do you see that? A. Yes.

w.

Q. Okay. What is the fourth change that you referenced on the first page that materially affected your opinion of value? I see three here.

ww

A. Well, let's see. We left out the BMI income. We the correction for that. We didn't put the unpublished works in. As a result of the unpublished works in, we had to include the amortization of tax benefit. And then we recalculated the amortization tax benefit for all calculations.

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Q. So were those the three items that you ... that are referenced on Page 12 of your report? A. Yes. Q. And is there a fourth? There is no fourth item, is there?

lJa ck so

A. Let me just read up and be sure. There's a fourth item that we considered in an alternate format, which is a reconsideration of the base revenue. But all it did was reconfirm what I did originally. And it's described in this supplemental report. I'd be happy to reread it again for you all. Q. But you did say that these four changes numerically affected your opinions ... A. Yes. Q. ... on Page 1.

ich

ae

A. Yes. So the four opinions that numerically affected my opinion was correcting for BMI income being left in a calculation; correcting for the real ... the exclusion of unpublished works in a list of summary values; correcting, as a result of that inclusion or exclusion of the unpublished works, the amortization tax benefit that was associated with that; and then correcting for an amortization tax benefit calculation on all the works that overstated the true value of the amortization tax benefit. Q. Okay. Thank you. Now, in your report, the original report, you presented the conclusion that the fair market value of New Horizon Trust III was 2,777,351. Is that correct?

mM

A. I'd have to look at it. Q. That would be ...

Mr Toscher: Which exhibit, Ms. Herbert?

Te a

Ms Herbert: On pages ... this is 632-P, and I believe it is contained on both Pages 1 and Page 44 of that exhibit. Mr. Salkin: Your Honor, I don't know if the witness has the exhibit in front of him. Do you have ...

w.

The Witness: I have that ... the transmittal page. It has the three numbers she's referencing. It says that MIJAC Music ... Mr. Salkin: Do you need the hard copy of the report.

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The Witness: No, this is fine.

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Ms Herbert:

A. The ... MIJAC Music is valued at 71,430,000. There's cash balances, I think, that we stipulate to that's 3.5 million. I'm not sure we stipulated. I apologize.

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Q. I believe we did, yes. A. Okay. Q. That's correct.

A. That 3.5 plus 71 formed less the indebtedness of 72.152, which, again, I don't know if that was stipulated to. But that indicates a value of 2,777,000. Q. Okay. Now, in your deposition, you acknowledge that you had forgotten to add the 1,143,581 in value that you had attributed to unpublished songs. Is that right?

ae

A. That's right. Q. Okay.

ich

A. And plus, there's an amortization tax benefit component to that as well that we just spoke about. Q. So am I correct in understanding that, despite adding the previously omitted 1,143,581 in value, that the value conclusion presented in your supplemental report went down but not up?

mM

A. That's correct.

Q. Okay. All right. If you could look at your report, Exhibit ... the remain report, 632-P, Page 28. Ms Herbert: Can you pull that up on the screen?

Te a

Ms Herbert: Q. If you could look on that page at Paragraph 1 and just read out loud the first two sentences. A. The base royalties? Q. Yes, please.

ww

w.

A. Okay. "Base royalties are defined as the royalties that can be reasonably expected based on historical observations and the existing complement of published works. We separate our analysis of synchronization income because it is less stable and generated a base expected royalty on existing mechanical and other income between 2005 through 2008 where average royalties is the basis."

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Q. Okay. Thank you. So did you use the 2005 through 2008 average royalties to determine your base royalties in your discounting cash flow analysis?

lJa ck so

A. We actually used the 2009 royalty basis of 472,000, which is higher than the previous one, if I recall. If you look at Schedule 11, the number that we used is 400 ... I'm sorry ... 424,000, and I know that that was corresponded to the prior 12 months' worth of synchronization income generated by the collection, the catalog. Q. Didn't you exclude the royalties from the first two quarters of 2009? A. No, I don't believe so.

Q. Could we take a look at that report on Page 74? Yes, and before we go to Page 74, can you just - - going back to the question I asked you earlier, why did your conclusion of value go down when you were adding 1.1 million of value that you had forgotten to include?

ae

A. Because the amortization tax benefit as calculate was incorrect. It uses the wrong ... it used a ... the wrong discount rate. It used a risk- free discount rate rather than the actual discount rate of 90.2 percent that was supposed to be applied.

A. Yeah, I'm looking at it.

ich

Q. Thank you. All right. Now we're looking at Page 74 of your report. And I believe it's up on the screen.

Q. Okay. Is this your discounted cash flow analysis for the Michael Jackson works?

mM

A. Yes, it sure is. Yep.

Q. Okay. How did the projections contained on this page, Page 74, correspond to the descriptions that we just ... or you just read on Page 28?

Te a

A. I think ... let's start with the 3,591,000. It's obviously the largest number on the page. And is it possible for us ... I don't know the exhibit numbers, but it would be really helpful if we go back to the very ... I think the second schedule that Mr. Salkin put in front of us this morning. It's called Werner-Chappell Royalties Per Royalty Statements for 12-month Period Ended 6/30. Mr Toscher: 629-P ... I think that's what I have.

w.

The Witness: That's the one.

ww

A. Let's focus for a quick second on the last two columns of this sheet. The top line ... we talked about it before ... is the non-Thriller compositions. And we discussed how stable historically the revenues used you looked at are. They're between a low of 1.93 million and a high of 2.2 million, a very stable band of expected royalties generated from everything excluding those four songs,

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lJa ck so

those four seminal Thriller songs. The Thriller songs were equally stable in 2006, 2007, and 2008. Maybe there's a little bump in 2008 as the beginning of royalties associated with Thriller's 25 started to come out, remembering this is ... our cutoff periods are June 30th, 2008. So 1.2 million, that $200,000 bump, may have a very small impact relative to Thriller 25 because it's only been in the marketplace by about ... for three and a half months. What you see in 2009 that's interesting, though ... this is a full 12-month period where Thriller 25 is at its peak. It is topping charts internationally, and we see that ... royalties over the base, over what we normally expect, are about $1.2 million higher. So when we look back and we look at stable base royalties that we can expect to project off of, excluding these alternate opportunities that will come along from time to time, we reduced our base from 5.2 million by $1.2 million. So look back ... let's go back to my schedule again, my forecast schedule again, or whatever. Ms Herbert: Q. So now we're going to be looking at Page 74, I believe or ...

A. Yeah, keeping that $1.2 million Thriller base in mind, and you'll see that 4.0 million in net royalties includes 3.59 million and 421,000 in synch income.

ae

Q. Can you show us what you're talking about, please?

ich

A. Yeah, I'm sorry. I'm rushing ahead. I apologize. So there's three line items here ... 35910 in spike-related because he hasn't died yet and 424,000 in synch income for a total of $4 million. That is ... Q. Is that million ... that 424, is that 810 million or thousand?

mM

A. 424,000, yeah. So if you add 3591 in millions to 424, you get 4,015,000 as a net base royalty inclusive of synch opportunities and inclusive of third party opportunities, which is below into the 3591. This is ... Q. Okay. Let's just stop there for a second about the ... A. Sure.

Te a

Q. ... 3591. Where did the base royalty figure of 3591 come from?

w.

A. It is a measure of the total Michael Jackson royalties after excluding the excess that we can attribute to Thriller 25. And as you look at the title of that base royalty pre-spike, no synch, account for rereleases, meaning we are going to account for rereleases in that base number. And you can look for it and see it in 2010 and 2011 and 2014 and 2017 on an individual discreet basis rather than throw it in and let it grow from there because that's not what a spike is. A spike relates to existing material and the death effect of existing material. This is ...

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Q. Okay. But ...

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Mr. Salkin: Excuse me. Let him finish, please. Ms Herbert: Q. ... we'll go there in a minute.

Mr. Salkin: Please let him finish. Judge Holmes: He can finish. Ms Herbert: Okay.

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Judge Holmes: Hold on.

ich

ae

A. The point of doing it this way and the point of really trying to get to a true base of 3.591, which is separate from Thriller 25, is to understand the new opportunities. Thriller 25 has run its course. It is almost over by the time of death. But there are new opportunities, and we recognize that. And they need to be applied and accounted for separately from the base. And the base is where the revenue is ultimately going to go back to in 10 years when death is something of the past and the opportunities for very large rereleases have run their course. And that number 3591, if you take it and you add 1.2 million, roughly, in Thriller 25 excess, which we just looked at on that first schedule, and you add those two numbers together and you add the synch income, you will come up with a number that is almost exactly the net royalties earned in the 12- month period ending June 30th, 2009.

mM

Ms Herbert: Q. Just going back to your deposition that we had, I believe you stated in your deposition that how you got to that number is not contained in the four corners of your report, the 3591. Is that correct? A. It was ... it is contained in our work product, and the work product is now contained in the supplemental report in some detail. Q. You had told me ... told us at the deposition that this was in your work files.

Te a

A. Well, I ... at the deposition, I wasn't aware that you didn't have access to the royalty statements which formed the basis of any analyst work product. Q. And you may recall in the deposition we asked that the government be provided with this information so that we would have some idea how you got to the 3,591,000.

w.

A. Well, you never provided the royalty statements? Q. We were not.

ww

A. It seems like the first thing your experts should have asked for.

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Q. We asked for it. I don't believe, also, that it is in your supplemental report, is it? Could you show us where that ... A. Sure.

lJa ck so

Q. ... is in your supplemental report? A. Absolutely.

Mr. Salkin: Ms. Herbert, can you tell us the reference in the deposition that you're referring to? Ms Herbert: Yes. I don't think we need to bring the deposition up, Your Honor, because he admitted that he said those things in the deposition. Mr. Salkin: No, he might have said more. He has ...

ae

Judge Holmes: On direct, he said that he was basing his raw numbers on the royalty reports. What's the problem here? Ms Herbert: That we were told we would be given the work product that was used to arrive at the 3,591,000 figure, which was back in his office.

ich

Mr. Salkin: If you can give us the page reference, he might have said something more than that, as I recall from reading the deposition. Ms Herbert: The deposition is on Page 47, Line 7 to 21.

mM

The Witness: It is ...

Judge Holmes: No, there's no question. The Witness: I'm so sorry, Your Honor.

Te a

Ms Herbert: If we could mark this for identification as Respondent's exhibit next in order, it's the Owen Dahl deposition. Mr. Salkin: Excuse me. Your Honor, may I read from the deposition's Page 47 starting at Line 18?

w.

Judge Holmes: Let Ms. Herbert do her thing first. What do you want admitted, Ms. Herbert? Mr. Salkin: I think that Mr. Toscher clarified it for the record. "For the record, we will and will either begin to directly or in the supplement, but we'll get it to you."

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Ms Herbert: Yes, I have no problem reading that.

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Judge Holmes: Okay.

Ms Herbert: However, it was not given to us or it ... put in the supplemental report. Mr. Salkin: I think ...

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Ms Herbert: I would offer Page 47 of Exhibit ... what do you have? This is ... it's not been marked. Ms Herbert: Oh, could we mark this as a respondent's exhibit?

Judge Holmes: You have to print it out and ... can you print it out? Or do you have a hard copy for Ms. Wood? Ms Herbert: We can print out the page. Judge Holmes: Do that now.

ae

Ms Herbert: Can this exhibit be marked as Respondent's next in order?

Judge Holmes: Yeah, come forward and give it to Ms. Wood. We'll get it marked.

ich

Ms Herbert: We have to get our printer going.

Mr. Salkin: Ms. Herbert, are you introducing the entire page?

mM

Ms Herbert: Yes, I believe so.

Mr. Salkin: That's fine. Thank you.

Ms Herbert: Let the record reflect I'm giving the Clerk a copy of the respondent's exhibit next in order.

Te a

Court Clerk: Exhibit 636-R ... or sorry ... 635-R is marked for identification Judge Holmes: You can go ahead, Ms. Herbert. Ms Herbert: Okay.

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Ms Herbert: Q. So do you remember saying these things in your deposition ... A. I do, yeah.

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Ms Herbert: And so then Respondent offers Exhibit 635-R into evidence.

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Judge Holmes: It's admitted.

Ms Herbert: Q. And then can you show us where in your supplemental report you provided the ... your work files to show how you came up with the 3.591?

lJa ck so

A. Well, I'm going to show you in a couple different ways. We've already looked at this schedule, but I'd like to put it on the screen again. It's the second schedule that Mr. Salkin put ahead of us this morning. It shows the breakdowns by year of the different Michael Jackson sources of income. Q. Is that in the ... is that contained in your supplemental report?

A. This is contained in the ... it is in the supplemental report. It's in a slightly different format today that was brought to court and entered into evidence ...

A. ... earlier this morning. Q. Can you show us ...

ich

A. Do you want to look at this ...

ae

Q. Okay.

Q. ... where it is in the supplemental report?

mM

A. Just in the supplemental report? Okay. Q. That would be ...

A. Can you ... is this the supplemental report? Ms Herbert:

Te a

Q. Dated January ...

A. Can you back it up? Can you back it up? Let's go through the supplemental report and ... Judge Holmes: Which is 634-P, for the record.

w.

The Witness: And I'm going to keep going down. The Witness: Down. Stop right there. Okay. You can go back up a little bit ...

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The Witness: ... to the next heading. Continue analysis as it pertains to post- death spike.

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I wonder if it's helpful for you, Your Honor, for me to read through this in detail. Ms Herbert:

lJa ck so

A. There is a lot of information here that relates specifically to the analysis of the royalties earned themselves, the importance of Michael Jackson ... of Thriller 25, the quarterly impact on statements, and how we ultimately adjusted to get to a base royalty. There's also included ... Judge Holmes: You ... Ms. Herbert, it's your question. You ...

Ms Herbert: A. It's also in here an alternative look that does the exact same thing and comes up with the same numbers. Q. But I do believe we had asked for the data, the underlying data, your work file, which ... with which you arrived at the 3,591,000 that you used as - - it's a very important number because it's a number upon which all of your income projections ...

ae

A. You're ... Q. ... are based.

ich

A. You're right. The royalty statements are the basis of any appraiser's work. I am surprised that your appraiser does not have the royalty statements. I do not know how they would have started their work product without royalty statements. Q. We would have asked for those royalty statements.

mM

Mr. Salkin: Your Honor?

Judge Holmes: Okay. This is not a question for the witness. It was a question for motions to compel before trial, Ms. Herbert. What's going on? Are you trying to impeach him by anything Mr. Toscher and his team did or didn't do?

Te a

Ms Herbert: Well, I do note that it was told to us in the deposition that it would be provided to the government and was not. And that's all I really have to say on that subject. Judge Holmes: Okay.

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Mr. Dahl: Your Honor, might I respond because I'm the one whose ... Ms. Herbert is appointing? The question was, how did you arrive at your number, and we said we'll either give it to you independently or through a supplement. It's provided in a supplemental report. If Ms. Herbert needed something more, all she had to do was give me a call. She never did.

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Judge Holmes: I never saw a motion to compel.

Judge Holmes: All right. Next question, Ms. Herbert.

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Mr. Dahl: Thank you, Your Honor.

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Ms Herbert: Q. Okay. Looking again on Page 74 of your report ... of your ... yes, the original report ... we'll bring that up on the screen. Okay. Is that up on the screen now? Now, we had earlier looked at Page 28 of your report where you said base royalties were calculated using 2005 to 2008 average royalties. Do you recall that? A. Yes.

Q. Okay. Now on page 74, you use a number labeled "actual 2009 royalties." That's at the top of that page, right? A. Yes. Q. Why the inconsistency?

ich

ae

A. It's a ... there's no inconsistency. The average that you talked about is actually 3,596,000 versus 3,591,000. So the actual ... and the adjusted actual after the movie Thriller is almost the same as the average from 2005 through 2008. I ... you call it actual. You can call it 3591. You can call it an average. You can call it 3,596. It makes absolutely no difference. That basis is an observation number that shows the consistency of royalties when you exclude the impact of Thriller 25 over several years prior to death. And it is an important number in thinking about that base over time. But as you see, our base changes and grows because we further incorporate the opportunities for new album releases on a periodic basis.

mM

Q. Would it be fair to say that the calculations to arrive at the 3,591,000 are not contained in your report?

Te a

A. That is not fair to say. The calculations are convened in the report. They're shown in the supplemental report. They're shown in that first exhibit that we showed. They are an effort, and a fairly concise effort, to understand the impact and the implications over an 18-month period of Thriller 25 on the earnings capacity for a shortened period of time. Incidentally ... Q. Can you show us where on these exhibits again? You know, I just want to clarify for the record. Where in the exhibits shown this morning are ... is the 3,591,000? I just want to understand.

w.

A. Well, it's actually 3,596,000. I apologize. It's four ... five ... $4500 off, but it's on schedule ... the second schedule shown of the year. Q. That would be several thousand dollars off. Three million, five ninety...

ww

A. Okay. They're $6000, yes.

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Q. Okay. Could that have an impact on the discounted cash flow now?

Q. What numbers are you referring to?

lJa ck so

A. It has no meaning at all. Again, let's look at how that base was forecasted. The 3591 doesn't even show up again in the calculation. Four, three, one, zero, four, seven, four, one, three, six, one, five, three, six, one, five, four, six, four, one, three, six ... we could do this all day.

A. I'm referring to the forecast of cash flow on the base royalty in every year in Schedule 11 that we're looking at. Q. Okay. Looking at Page 53 of your original report ... yes. Could you bring up page 53 of the report? That page is entitled "Michael Jackson Works," just for the record. Now, on Page 53, why do non-recurring sync royalties for 2009, which number I believe is 423,995 ... The Witness: I'm not ... sir, can you scroll down just a little bit? Thank you. Thank you.

ae

Ms Herbert:

Q. Okay. So that would be under the column for 2009. What is that little symbol before the 2009 refer to?

ich

A. First half.

Q. So that number for non-recurring sync royalties is 423,995, right?

mM

A. Yep.

Q. Why did the non-recurring sync royalties for 2009 match the non-recurring sync royalties on Page 74 ... or do they? A. Because the 317,000 was earned in the first half of 2008.

Te a

Q. But the base royalties on Page 74 do not match. A. Let's go to the base royalties. There's the 424. What are you talking about?

w.

Q. The base royalties on those two schedules - - now we're looking at on Page 53 and 74. On Page 53, the base royalties ... we'll have to flip back and forth between these two, I apologize. Okay. So on Page 53, the base royalties are shown as 2,787,014. Is that what that shows on that page? A. For the first half of 2009?

ww

Q. Yes.

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A. Yep, that number is there.

Q. And then going back to Page 74, you have the base royalty that we have been talking about at 3,591,000.

lJa ck so

A. Because ... let's go back to that column and be very clear about this. This ... obviously there's some confusion. The first half of 2009 means it's six months. Actual 2009 as reported in Schedule 74 is a 12-month period. There's no correlation. The only number that you can see in 2009 that correlates is the sync income. The reason the sync income is the same is that in 2009, the first six months there was a $424,000 earning in synchronization income. In the third quarter of 2008 and the fourth quarter of 2008, there was zero sync income. So the sync income is the same because it's four quarters. Every other number that relates to this calculation and how it ties to Schedule 1 in my report are irrelevant because 2009 is a first half year. Does that make sense? Q. Thank you, yes. A. Okay.

ich

A. Correct, yes, for two straight years.

ae

Q. Thank you. Okay. Let's turn to a different topic. On Page 28 of your report ... original report, 632P, did you include a 50 percent postmortem spike?

Q. And was this spike based on a study conducted by a professor from the University of Zurich? A. I think there were three professors, but yeah, that's the study.

mM

Q. So it's referred to sometimes as the Zurich Study? A. Yeah, exactly.

Q. I would like to pull up on the screen the 2011 Zurich Study which is, I believe, the one you may have relied on. Does that sound right?

Te a

A. Yeah.

Ms Herbert: I'd like to mark this exhibit 826 for identification. I have one hard copy of it.

w.

A. If you could ... I apologize, but I'm not certain this is the same version. As you can see, there's duplicate versions. In our deposition, you showed me a version that was not the version that we originally had.

ww

Q. That's correct.

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A. If you could scroll a page down, I may be able to identify it as the same version very quickly. Keep going. This is the same version. Q. So is this the version you looked at? A. I believe it is, yes.

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Ms Herbert: So please mark it for identification, and I will provide the Court with a poorly stapled copy. This is ... I think this is ... well, let's just take a look and make sure the paper one I have is the same. Your Honor, we could either use the electronic version or take a break to print this. Judge Holmes: Let's use the electronic version. Print it over lunch. Ms Herbert: Mr. Campbell will take care of that.

Judge Holmes: Reserve a number for that, and this one.

ae

Ms Herbert: Q. Okay. You've said this is the study that you relied on for the post-death spike of 50 percent. A. Yeah.

ich

Q. How did you determine based on this study that a 50 percent spike was appropriate?

ww

w.

Te a

mM

A. Well, there's a number of things in this study that we should talk about. The 50 percent spike was actually not entirely the basis of what we did. The 50 percent spike was a starting point, and from there we actually projected royalty growth rates to stay high for a year. Now, it's important to remember if you read the study, the study doesn't talk about 50 percent spikes for a year. They estimate the spike life to be about 26 weeks, a much, much shorter period of time. We used the spike estimate as far as the average expansion, but we continued that spike for a much, much longer period. In fact our spike, if you look at Page 74 again, contributes income for a significant number of years, which would be way outside the outline of the study itself. The study itself points to a 50 or a 54 percent expected spike for all artists. But it's interesting to note one of the things it contributes ... one of their primary contributing factors to spike success is the activity of the artist pre-death. Artists who haven't performed new material, haven't released any new material in three years, are expected to spike much less than the typical artist. So even if you look at some of the artists that your expert have included, which ... who are very actively recording, their spike expectations were much higher. Michael Jackson unfortunately had not released new material in almost a decade at the time of death. He falls into the lower category in that term as far as what the expectation ... what the regression and the expectation would be. So we thought a 50 percent spike was reasonable, especially given the fact that we expanded that spike for an extra three years.

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Q. Could you take a look at the Zurich Study, 636R, and just take a look at Page 3 of that document, the first sentence of the last full paragraph? Can you read that sentence ... the first sentence of that paragraph?

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A. "Using data on weekly album sales for 446 albums of 77 artists who died in a period of 1992 to 2009, we reported weekly album sales to be on average 62 percent higher for four months after death than in the four months prior to death." Let's go forward in this report and look at the longevity because that's what (inaudible). That spike that they're talking about here is expected to last 26 weeks not five years, not 26 years. Q. Okay. But this sentence does say 62 percent, correct?

A. That sentence does. There is another place in the report where the average is 54 percent, I believe. Q. All right. Thank you.

ae

A. Not to mention, that the 50 percent that we apply is an annual 50 percent not a 64 percent over four months, which would be a much lower number mathematically. Q. Now, is it fair to say that this study includes some lesser known artists and also some groups rather than all solo artists?

ich

A. This is a much broader study than just handpicking a few artists, yes. Q. In your opinion, would the spike following the death of a member of a larger band provide a reasonable indication of the spike that would occur following the death of a solo artist?

mM

A. You asked me that in deposition. I'm going to give you the same answer. Absolutely depends on the artist. If George Harrison were to die today, I think it would have a very significant impact on the sales of Beatles albums. Q. If a member of a band dies, can they be replaced?

Te a

A. George Michael could not be replaced. Q. Could a solo artist ever be replaced? A. Probably not.

w.

Q. Thank you.

A. Probably not. I could try.

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Q. Are you aware that Michael Jackson's actual postmortem sales spike was 1351 percent, almost 1352 percent?

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A. I'm aware that it was staggering, yes.

Q. Does the disparity between Michael Jackson's actual sales spike and the conclusion presented in the Zurich Study have any impact on your opinion of the relevance of the Zurich Study to an artist such as Michael Jackson?

lJa ck so

A. It does not. Michael Jackson's experience post-death ... and we have looked at several in our supplemental reports, several artists who have great solo careers and are very well regarded and known in the industry, and what I can tell you is that unequivocally sale spikes don't last 26 years. They may be higher what we projected in a single year, but they decline at much more rapid rate than what we ultimately forecasted, which was a slow staggered decline to the point where that actual spike the point where revenue stayed above the pre-death revenues, in our own opinion, were 10 years, which is much higher than any of the artists that we looked at and considered even on an independent SoundScan ... Nielsen SoundScan basis.

ae

Q. Okay. Thank you. So let me then ask you, could Michael Jackson shows ... theme shows or attractions, such as the Cirque de Soleil, help to keep his music relevant for a longer period of time than without such shows?

Judge Holmes: Overruled.

ich

Mr. Toscher: Objection, Your Honor. That is very speculative and there's no evidence that there was a Cirque de Soleil show anticipated as of the date of death.

Te a

mM

A. Without question, a deceased artist who has no ability to ... well, let me back up even further. Live artists benefit, and their existing music catalogs benefit because they have the living, breathing opportunity to support their work product. They tour. They release new material. And all of those things are known to have significant impact on existing works. When an artist dies, you lose that. There are, especially for successful artists and particular somebody like Michael Jackson, there are opportunities to continue to support the catalog just as we've put into our pages on 74. The opportunity to release new material, to look for opportunities to take existing material into new venues, and that is absolutely imperative in retaining a $3,000,000 base. Let me point out, even in a $3,000,000 base when we were talking about steady, stable periods, in every one of those years ... or almost every one of those years, there were greatest hits albums being released and there were other compilation albums being released to support the works. Q. But sir, I don't think you answered my actual question.

w.

A. Well, let me be clear then. Supporting the works is an integral part of retaining the cash flow for a 79-year period. If you don't support the works and don't continue to release new materials, you don't decline at three percent. You decline at a much more rapid rate.

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Q. That would include shows, like a Cirque de Soleil show?

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A. That would include any unknown abilities to support the book as of the date of death. Q. Including a Cirque de Soleil show? A. If it's available, then yes.

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Q. Would that ... there would be some value to that then, correct? A. And it's embedded in the forecasted cash flows.

Q. Did you consider the ability to use the Cirque de Soleil show or other Michael Jackson theme show? A. There is no specific reference to a Cirque de Soleil show. There are many references to the ability to continue to release albums and exploit the works that existed. Q. So there's no specific reference in any of your reports to these types of attractions or shows. Is that correct?

ich

ae

A. It would be my opinion that a Cirque de Soleil show was an asset that doesn't exist at the point of death. And I am not aware of any information that the Cirque de Soleil show had been written or was ready to go. If it was, it's something that's news to me. But if it's not, it's an asset that the state doesn't own. They have the rights to do whatever they want as far as exploiting the works go. But it is entirely speculative to suggest that they were about to release a Cirque de Soleil show and that it would be successful.

mM

Q. But you didn't consider any other similar type theme shows, attractions or anything like that, that could help to bolster his music sales. Isn't that correct? A. We considered what we knew. We considered what was reasonable and what the executors had the obvious opportunities to exploit. Q. So then the answer is no.

Te a

A. I think it would be ... yeah ... you know what, the answer is no. There was no evidence to suggest that that should be even included at the time of death. Q. Okay. Hello, Mr. Dahl. Okay. Turning again to Page 74 of your Report 62 ... 632P, which is up on the screen, can you take a look at the line that says "Spike related" and then going across to the number 2370? I assume that's 2,370,000. Is that right?

w.

A. Yes, that's right.

ww

Q. Can you explain how the spike related royalty of 2,370,000 was calculated?

n.c om

A. Two million, three hundred and seventy thousand is calculated as a percentage increase over the base royalty. It is actually calculated as a ... as the percentage increase over ... I'd need a calculator to be sure of this ... but I believe it might be 50 percent base over the 2011 4741. Q. What number are you referring to?

lJa ck so

A. So let me just do some real quick mental math here. So 2370 is 50 percent of 4741. So it's 50 percent of the base ... the highest base of the two-year period post death.

Q. Now, in your deposition, you may recall that you confirmed that your math was incorrect on this. Do you recall that? A. The way that it reports is that it would be 50 percent of 4310, but I actually increased it and used the higher base and used 50 percent of the peak base royalty for the two-year period. So it's half of 4741 versus half of 4310. It adds about $100,000 in extra value to the implied valuation of MIJAC music. Q. And that was not addressed in your supplemental report, right?

ae

A. No, we left it because at the end of the day it has no fundamental change on my opinion of value.

ich

Q. Okay. Now, let's look at synchronization income. Turn to Page 29, and we'll bring it up on the screen, of the report ... the 632P. I keep forgetting that. On Page 29, Paragraph 6, can you please read that?

mM

A. "Synchronization of approximately 424,000 generated in 2009 which is consistent with the five- year average base" ... Q. Can you go a little bit slower so ... A. Sure.

Q. ... which I'm sure all the court reporters would appreciate?

Te a

A. "424,000 generated in 2009 which is consistent with the five-year average base of synchronization for the Jackson works. Using 2009, we forecasted synchronization income to follow the same death-effected royalty growth rates and forecasted a decline back to a steady state as observed between 2004 and 2009."

w.

Q. Okay. Now, the ... how does this statement ... in particular "We forecasted synchronization income to follow the same death-effected royalty growth rates," how does that statement correspond to the analysis presented at Page 74 of your report?

ww

Ms Herbert: Can we go back to Page 74?

n.c om

Ms Herbert:

A. Yeah. Let's go back to Page 74. So 424,000 ... half of 424,000 would be about 212,000. Four hundred and twenty ... Q. Can you show us ... or explain where you are?

Q. Okay. A. ... is then grown by a rate...

lJa ck so

A. Sure. So actual 2009 sync 424,000, which was the actual 2009 sync income that we described previously ...

????????: Excuse me Mr. Dahl, I'm having trouble following you here. You're talking too fast for me to absorb. The Witness: Oh, I'm sorry.

ae

Ms Herbert:

ich

A. So 424,000.00 which we established is the 12-month trailing base of synchronization income was grown at a rate of 50 percent. So if you multiply 424,000 by 150 percent, you'll get 636,000. We then applied a 25 percent growth rate to that rate of growth, the 636,000 to get to 795,000, and then declines, as mentioned in the report, were applied thereafter bringing it back down to levels that are more consistent with the five-year average. In fact, they stayed higher than the five-year average. Maybe we were overly aggressive.

mM

Q. Can you look at the percentages that are shown on this chart? A. Sure. Fifty percent growth over 2009 and 2010, a 25 percent growth in 2011 over 2010, and then a 20 percent and 18 percent decline in royalties in the years following.

Te a

Q. So is ... I'm just trying to do the math here. So your spike percentages are not the same as your sync percentages. Is that correct? A. The spike percentage on base royalty is calculated differently, but the percentage in year one is exactly the same. It's 50 percent increase. And the increase in year two of 25 percent is a lower rate, but it's in line with what we see from 4.3 million to 4.7 million in the base royalty amounts.

w.

Q. But I think earlier you said you projected the same death-effected royalty growth rates for this. A. Well, they are the same in 2010, as you can see. They're slightly different in 2011.

ww

Q. But not for other years.

n.c om

A. No. We should have put a much steeper decline and brought those back to normal a lot quicker. Our forecast was much more aggressive in terms of royalty base, based on the Zurich Study. It would have suggested a much more rapid fall off.

A. I think that's ... Mr. Toscher: Can you cite the reference, please? Ms Herbert: I'm just asking him if he recalls.

lJa ck so

Q. In your deposition, do you recall stating that you overstated the sync income in your forecast? Do you recall stating that?

ae

A. Yeah. I think that's consistent with what I just said as well. I think in retrospect, I have no reason to change my opinion. I think my opinion is valid, but I think we've used a synchronization forecast that is certainly on the aggressive side, and applied ... and based on the fact ... and let's go back. Maybe it would be beneficial for ... as a point of reference to go back to Schedule 1 of our original report. Is that possible? Q. No. There's no question pending at this time. Okay. Let's talk about postmortem albums - -

ich

A. Sure.

Q. ... on your report at Page 28, Bullet 4. We'll bring that up on the screen. And in there you say, "We are assuming eight total releases in the 10 years following death." Do you see that?

mM

A. I do.

Q. Am I correct that this incorporates both re-release albums and previously unreleased songs? A. This incorporates re-releases of existing material and works that were unpublished and unfinished, yes.

Te a

Q. Now, in your deposition we discussed the basis for your assumption that eight albums would be released. Do you recall that? A. That sounds right.

w.

Ms Herbert: I'd like an exhibit marked for identification. It is the deposition Pages 64 and 65. We have a paper copy. This is one set for the court ... two pages of Mr. Dahl's deposition Pages 64 and 65. Court Clerk: Exhibit 637R is marked for identification.

ww

Ms Herbert: We are going to put it up on the screen as well.

n.c om

Ms Herbert: Q. So in the deposition, as you can see on the screen, I asked, "What is the basis of your assumption that eight albums would be released?" Can you read your answer to that ... or if you can?

lJa ck so

A. "So we know that Thriller 25 had just been released at the point of death. There were works to re-release materials, and if you look back in the 2000s in fact, Michael Jackson had re-released materials every couple of years and there had been a 842 pattern that had been employed for quite some time." Q. Okay. And then continuing onto the next page, can you read the paragraph that says, "In addition to that"?

ae

A. "In addition to that, our separate analysis of the work, of the new material works, and the unpublished material works, led us to believe it was reasonable to potentially see three new albums released over a 10-year period. So the combination of the five albums of re-releases, including for example the 25th anniversary commemorating coming out for Bad, this is an opportunity which is in works very quickly after death, or very shortly thereafter, along with new material works adds up to about eight albums in total."

ich

Q. Okay. So it's your opinion then that at the time of Michael Jackson's death it was reasonably foreseeable that the This Is It film or some other film would be developed.

mM

A. It is reasonably foreseeable not that the film would be developed ... by no means do I talk about the film ... but that a works would be brought to market as rapidly as possible commemorating his passing. We talked about it as a This Is It term just simply because This is It is what ultimately got released. We didn't know anything about This Is It on June 25th, 2009, other than he died and the opportunity to release a commemorative album associated with his death would have been one of the first things that the executors would have attempted to do to exploit the ... Q. But you referred to it as This Is It.

Te a

A. I did in deposition, yes. I meant nothing of it. Q. Now, I want to try to understand how the projections for the re-release albums were developed. Okay. In your deposition at Page 68, which we will now mark for identification. Court Clerk: Exhibit 638R is marked for identification.

w.

Ms Herbert:

Q. So looking at Page 68 of your deposition ...

ww

Judge Holmes: Can Counsel point us to a line?

Ms Herbert:

n.c om

Ms Herbert: Okay. Line 8. I'm sorry, that took me a second.

A. "That's absolutely true, yes."

lJa ck so

Q. The question asked to you was "Would it be correct to say that the re-releases are incorporated 844 into your report qualitatively but not quantitatively." And can you read your answer?

Ms Herbert: Okay. Thank you. Can I have just a brief second, Your Honor. Judge Holmes: You may. Ms Herbert:

ae

Q. So is it fair to state that a release in the first year after death would be more successful than those released in subsequent years? A. It would be fair to say that the first two years would be the window of opportunity to which you would have had the most opportunity to exploit.

ich

Q. Would an album released in 2014 be more successful than an album released in 2017?

mM

A. It would be fair to say that an album released ... and probably two albums released within the first two years would be more successful albums.. Judge Holmes: Go ahead and repeat your answer. Ms Herbert:

Te a

A. I said ... I apologize. The opportunity in the first two years post death are the most compelling opportunity for new releases in terms of commercial success. Q. A repackaged ... if an album is repackaged, it's success would be correlated to the success of the original release. Is that a fair statement? A. Can you ask the question again? I'm not following you.

w.

Q. If an album is repackaged ... A. Can you give me an example of what you mean by repackaged? I just ... I'm sorry.

ww

Q. Okay. So would a 25th anniversary release of Bad be more successful than other releases?

n.c om

A. Yes.

Q. Okay. All right. Now, let's talk a little bit about other major works by writers, one of the categories in the MIJAC catalog. Turning to your report, 632P, Page 31.

lJa ck so

Ms Herbert: Can you pull that up on the screen, Mr. Camp, Exhibit 632P, Page 31, Bullet 6? Ms Herbert: Q. Now, it says ... can you just read that paragraph?

A. "After measuring average royalties for the five-year period preceding evaluation date for each composition, we used a 1.7 percent annual growth rate in royalties for a 10-year period. The rate of growth is one-half of the expected rate of growth in the music publishing industry as reported by IBIS and described above. In light of the aged nature of the collection, a 10-year period of combined annual growth of 1.7 percent represents an upper balance in the forecast of future cash flows."

ae

Q. Okay. Yes. Now, it says toward the beginning that you measured or relied on average royalties for the five-year period preceding the valuation date for each composition, correct? A. Correct.

Q. Is that yes?

mM

A. That's what it looks like.

ich

Q. Okay. Now, if we could look at Page 54 of Exhibit 632P, which is I believe is Schedule 2, and it's up on the screen. Let's look at Love Train. It's the first song listed. Now, I believe that average historical royalties for Love Train are listed to be at the far right as 299,248. Is that correct?

A. Oh, yes. I'm sorry. Q. Okay.

Te a

A. I'm having a little trouble with the numbers. It's blurry. Q. Now, if we compare this to Schedule 12 that starts on Page 75 ... Ms Herbert: Can we bring up page 75 of 632P?

w.

Ms Herbert:

ww

Q. Does page 75 depict your domestic discounted cash flow analysis for Love Train, the song we just referred to?

n.c om

A. Yes. It does.

Q. The historical average does not show up at Schedule 12 as part of your discounted cash flow analysis. Can you explain how you derived the 170 net royalty amount for 2010 that is shown on that page?

lJa ck so

A. It's based ... the 170,000 is based on a royalty split between the domestic and international amounts. I think the most rapid and straightforward way to answer this question is to look at the 60 compositions together. Look at the revenue generated annually, which is always been about 2.5 million, and compare it to our cumulative forecast for this works and what you will see is that these 60 songs and the generated royalty revenues are projected to be higher in every single year of the Dahl Consulting Group's forecast over the three years following our forecast period. In other words, we can isolate and look at each one of these numbers, but in total they tie very closely to growing revenues on a year-over-year basis to the royalty statements themselves. But we can go through these line by line. It's ... Q. Well, not all of them of course because then we would be here for days.

ae

A. Well, obviously some of them would be higher because of the basis and the 60 in sum are higher than the basis of 2009 and 2008 and 2007. And I do believe in our supplemental report we have a very good schedule that outlines this.

ich

Q. So let's look at Page 106 which is Schedule 13. We'll bring that up on the screen. Does Page 106 depict your international discounted cash flow analysis for Love Train? A. Yes.

mM

Q. How did you derive your 2010 royalties of 119 ... what is that, thousand? A. So 119,000 ... can we go back to the prior schedule again? Keep $119,000 in mind as we go back to the prior schedule. Q. Is that Schedule 12 you're referring to?

Te a

A. I believe so, yes.

Q. Which was page ... Schedule 12 is on Page 75.

w.

A. So 170 plus 119 is the basis of royalties. If we could then go back to the summary page. So what's 112 plus 170, $287,000 I believe? Let's go back now to the summary page that you showed us to begin with. Q. Which I don't know what summary page you're referring to.

ww

A. I think it's Schedule 2. I'm not sure of the page number. I'm sorry. It's the one that you started this conversation with. Page 31,

n.c om

Ms Herbert: Let me just confirm that's what we're talking about. Well, Page 31 was the narrative. The Witness: Yeah. No, lower than that. The schedule itself.

lJa ck so

Mr Toscher: Counsel, maybe 54? And if you want me to be quiet, I will. Ms Herbert: No. That's helpful. Thank you, Mr. Toscher. Ms Herbert: Q. Are you referring to this schedule here? A. Yeah. and so you'll see the annual ...

Ms Herbert: Let the record reflect that we are looking at Schedule 2 which is Page 54. Ms Herbert:

mM

ich

ae

A. And there's the annual average of 299,248. That's the total for both domestic and foreign. We had the numbers ... I forget ... within a 170 plus 112 I believe was the basis of our forecast. So we actually have a basis of forecast for Love Train for the first year that's actually higher than the annual average by 12,000. And if you go year-by-year throughout each of these, you will find that the sum of the cash flow that was forecasted by Dahl Consulting Group are consistently and in aggregate more than the forecast as reported by the actual royalty statements, by a couple hundred thousand dollars in the first year. So perhaps we overvalued these assets. We should have used something that was more consistent with the three-year averages which would have been about 2.4 million or 2.5 million in aggregate rather than the 2.7 million in aggregate that I think formed the basis of our opinion. Q. But it's correct that if you add the 851 projected royalties in Schedule 12 and 13 that the number is off. A. The number is higher, correct.

Te a

Q. And it's 289 versus 299.

A. It's ... let's do the math again. I think it's ... Q. It's 170 plus 119.

w.

A. So 170 plus 119 is 189, yes. Q. Two eighty-nine ... is that right?

ww

A. Pardon me, 289, yep.

A. Sure.

n.c om

Q. Okay. Now, let's talk about BMI and society rebates.

A. Right.

lJa ck so

Q. Well, let's just go back for a second to what we were looking at. Let's just look at one more song, Everyday People. Okay. In that one we have the on schedule ... well, your total there is ... average is 145,406. Is that right?

Q. So let's look at Schedules 12 and 13 again and see whether those two things add up. A. Well, keeping in mind ... Judge Holmes: Wait. There was no question. The Witness: I'm sorry. Pardon me.

ae

Ms Herbert:

Q. Okay. There's a reference to Everyday People there, and the ...

mM

ich

A. Can I just ... before you go forward, please acknowledge the statements that we are looking at that you're trying to tie these to are annual statements of 12/31 year ends. As you can see, actual 2009 projected fiscal year ended 6/30. These are four quarterly statements that start on 6/30/2009 and go backwards to July 1, 2008. So the fact that they're slightly different is simply a function of having different quarterly reporting periods accumulating to make the four quarters of a year. Q. Well, let's just go through it just for the record. Okay? A. Sure.

Q. So the historical average for your DCF analysis on Schedule 12 for Everyday People is what?

Te a

A. One hundred and eighty-six thousand in aggregate. Q. Say that again please.

w.

A. One hundred and eighty-six thousand in aggregate, meaning that includes both the domestic and foreign royalties. Q. Okay. And then take a look at the 1.7 percent growth rate reflected there, if you would?

ww

A. Yeah.

n.c om

Q. So then if that's the growth rate, why does the number go down in the following year?

lJa ck so

A. The 186,000 is the aggregate. Let's go back to the schedule again that we start with. That would be helpful. And remember there's two schedules that we need to look at and include together to figure out the value of Love Train. Love Train ... sorry, Everyday People generated 145,000 in annual revenue averages based on those couple of years. Now, let's go back to year two schedules. And remember, we need to add two schedules. Q. Right. That's what we're trying to figure out here.

A. So in Love Train ... or I'm sorry ... in Everyday People, we have 71,000. Now, let's go to the foreign sales. Q. Are you talking about in 2010, 71,000? A. Correct. In 2010, it's 71,000 for domestic. Q. And that would be ...

ich

Q. So international sales.

ae

A. I'll write this down just so that we don't forget it. Seventy-one thousand, that portion of 186,000 is attributable to domestic sales only. Now, let's go to Schedule 13, and we'll look at the foreign sales.

A. Right. And it's 49,000. Is that right, 49,000? So 49,000 plus 110,000 ... 71,000 equals about 110,000. Now, can we go back again to the ...

mM

Q. All right. Let's do that slowly. Let's go really slowly here. A. Sure. I'm sorry.

Q. So we have 49 for Schedule 13 for international. This is for 2010?

Te a

A. Yeah.

Q. Net royalties. So that's 49. Now go back to Everyday People for ... in Schedule 12. A. Seventy-one thousand.

w.

Q. We have ... is it ... what is it,, 71? A. Seventy-one. So that's $120,000 for a forecast of 2010.

ww

Q. Would you add those together, 71 plus 49?

Q. And that is ... let me check my math. Is that 120? A. It's 120, yeah.

lJa ck so

Q. Okay. So let's look at the Everyday People.

n.c om

A. You would, exactly. Yep.

A. Seventy-eight, two thirty-three, fifty-one, three sixty-six with an average of 145. Q. Okay. So those numbers don't match then?

ae

A. Well, they don't match. And again let me restate this. These are year-to-date on an annualized basis. This 121 happens to reflect the four quarters preceding June 30th, 2009. And as you can see, Everyday People is a great example of the kind of volatility that you see in these small songs. It's reporting. It's time lags in terms of earning receipts. The average of 145 versus the actual four quarters preceding 2009 which was 121,000 are about the same. And again, when you take each one of these 60 songs and you add them up and you look at the unique quirks of the way that royalties get paid, they all come out in the wash. I can show you how ... let's go to the bottom of this page real quickly. 2007 ... Q. No. That's okay, Mr. Dahl.

ich

A. Okay. It's imperative to the answer of the question.

Judge Holmes: Okay. I'm sure that Mr. Salkin will ...

Ms Herbert:

mM

The Witness: I'm sorry. Thank you.

Q. So would it then be safe to say that you cannot fully follow the analysis in your report without additional information?

Te a

A. Without having the royalty statements and the quarterly royalty statements in your hands, you would not be able to identify to the penny. You would just simply see the summaries and see that they're close because royalty statements are unlike financial statements. They don't get reported on a year-end basis. They get reported quarterly by quarterly allowing the analysts to pick any 12-month period they want as far as the reporting basis.

w.

Ms Herbert: Okay. So Your Honor, I was thinking that before we get into the next topic of BMI and society rebates that perhaps it would be a good time for a lunch break. Judge Holmes: Oh, it's 12:30 already.

ww

Ms Herbert: If everyone agrees.

n.c om

Judge Holmes: Time Flies. Ms Herbert: Can we have until 1:30? Judge Holmes: Oh, certainly.

lJa ck so

Ms Herbert: It's only an hour and five.

Judge Holmes: That's fine. One-thirty it is. Judge Holmes: Good afternoon. I'm told we have a hard copy of the Zurich report, which is labeled what, Ms. Wood?

Court Clerk: Exhibit 636-R. It was marked for identification. And that's the Zurich report.

ae

Judge Holmes: Okay. That's admitted

ich

Judge Holmes: And any other housekeeping, Ms. Herbert, before we go?

Ms. Herbert: No. Anyone else?

mM

Judge Holmes: Mr. Salkin?

Mr. Salkin: Yes, Your Honor. There is one item.

Te a

Judge Holmes: Which is?

w.

Mr. Salkin: A reference was made to back up for the figures that Mr. Anson .... Mr. Dahl was testifying on. They're covered in Paragraph 571 with the stipulation of facts as part of the record. 864

Ms. Herbert: Can we just have a moment to look at it?

ww

Judge Holmes: Go ahead.

lJa ck so

Mr. Camp: No, it's the first.

n.c om

Ms. Herbert: For the record, is that part of the third stipulation ....

Ms. Herbert: The first? Okay.

Mr. Camp: It's the spreadsheets.

Ms. Herbert: All right.

ae

Mr. Camp: We'll look at it.

Judge Holmes: Go ahead.

mM

Ms. Herbert: Okay.

ich

Ms. Herbert: Shall I proceed, Your Honor?

Judge Holmes: The floor is yours.

Te a

Ms. Herbert:

Q. Good afternoon, Mr. Dahl.

w.

A. Good afternoon.

ww

Q. Okay. Now, one of the items you said that you had corrected in your supplemental report was to the analysis of BMI and Society rebates. Is that correct?

n.c om

A. Yes, it sure is.

Q. Okay. I'd like you to look at your supplemental report, which is Exhibit 634-P, Page 12.

lJa ck so

Mr. Camp: Page 12?

Ms. Herbert: Yes.

Ms. Herbert:

Q. Okay. It's up on the screen. So it says, "As discussed previously, I have amended my opinion to account for three mathematical errors. First, I left out BMI income that should have been generated and contributed to cash flow in 2010." Is that correct?

ae

A. Correct.

Te a

A. It is, yes.

mM

ich

Q. Now, I'm still a little unclear as to your analysis. The .... in your original report at Page 32, which I will now ask Mr. Camp to bring up, the first bullet point .... and the basis of your projections was described. And I believe this is .... I'm sorry. I believe this is under the category which begins on the previous page, Page 31, called BMI and Society Rebates. And then turning to Page 32, it says, "For both income sources, we used a five-year average earning basis and forecasted revenue growth equal to the same expected spike increases described in forecasting revenues from the Jackson works above." Is that correct?

Q. And am I correct that your post-mortem spike is 50 percent?

w.

A. It is.

ww

Q. Okay. Now, if revenue growth for BMI and Society rebates is supposed to match the postmortem spike, why are BMI royalties projected to increase 1.5 percent in 2010 and not the 50 percent spike previously described? And for this, I'd ask you to look at your supplemental report, Page 2. I'm sorry.

n.c om

lJa ck so

A. Right before you go to the supplemental report, let's reread Bullet Point 1 just so that we're clear, and then I can show you the math. I think it's important. For both income sources, we used a five- year average earnings basis and forecasted revenue growth equal to the same spike based on that revenue average basis. If we can go to my first report, there's a schedule in there that shows exactly the five-year BMI royalties, which were 1,457,000, I want to say. It might be 1,497,000. We can certainly go to that schedule and find the average. That is the basis to which the 50 percent growth rate is applied.

Q. So if you could look at Page 2 of your supplemental report.

A. Sure, yeah.

ae

Judge Holmes: I just have one clarifying question. That means .... because your base was increasing from year to year, were you applying the spike percentage increase to not only the constant base, but the incremental addition to the base each year?

Te a

mM

ich

A. Yes. So BMI is different. It's unique in a lot of senses as far as collection and reporting. And BMI had expanded in 2009, in part because of the Thriller release that affected airplay. We use a five-year average as a much more reasonable basis as to what BMI income going forward would be based at but for the death. So it'll be .... so the spike is a spike on what's normal. When we looked at Jackson, we had all of the data necessary to pull Thriller out and treat that base on a much different basis, on a much different analytical basis. By using a five-year average as the basis of BMI, that longer term included the chances for rereleases. The normalcy included a much more stable base of BMI income that we would expect to have going forward. That's the basis that the 50 percent should be applied to, not to the expanded base from just one single ....

Judge Holmes: Oh, okay.

w.

A. .... a year.

Judge Holmes: I think I get that now. Go ahead, Ms. Herbert.

ww

Ms. Herbert:

n.c om

Q. Okay. Looking up on the screen, we see at .... on Page 2 of your supplemental report .... If you look at Page 2, you apply a 1.5 percent growth rate to the actual 2009. Is that correct?

lJa ck so

A. That's not correct. A 1.5 percent growth rate is the observation that's created when you apply a 50 percent growth rate to the correct five-year average base that we just spoke of. 2.192, if you look at that .... and let's focus on that 2,192,000 .... is 50 percent higher than the five-year average BMI royalty, which is slightly less than 1.5 million. In other words, 50 percent of 1.5 million is 700,000. That's what's being added to get to the 2,192,000.

Q. And on the next line, why are Society rebates projected to decline 54.8 percent rather than increase 50 percent?

mM

ich

ae

A. Once again, this is a five-year average. If you look at Society rebates and what they are, they have no correlation with any specific music movement. They are sort of a black box of payments. They're very volatile. If we go back to schedule .... to my first report and look at the five-year average, what you'll see is that the five-year average is incredibly low. It is not 232,000. 232,000 is most likely a catch-up payment because the year prior to that was very, very low. They will range from 50,000 one year to 250,000 another year. It's just the way that Society payments get made. They're very volatile. They're lag, the actual payments .... the reason for the payments. And they're paid on a very infrequent basis.

A. And it would be worth putting that up on the screen, Your Honor, if you'd like to take a look at it.

Te a

Judge Holmes: Is there a way to normalize this?

A. Five-year average

w.

Judge Holmes: Five-year ....

ww

A. That's what we .... and that's the basis there that you see on .... over the last five years, they had collected about $100,000 a year. They had collected about 100 .... pardon me .... 1.5 million a year in BMI royalties.

n.c om

Ms. Herbert: Q. Where are you looking at that?

lJa ck so

A. Let's go to schedule .... oh, I'm going to go off the top of my head. I believe it's Schedule 10 of the first report. We could start there, and I'll be able to drag you back or forward from it. It would be, I want to guess, Pages around 65, maybe a little higher.

Judge Holmes: It might be 73.

A. Keep going. It'll be right after this stuff. Here you go. Good guess, Your Honor.

Ms. Herbert:

ae

Q. Okay.

ich

A. So this is the BMI accountings. The bottom page of this, the payments by 12-month periods, if you just scroll down a little bit .... there we go .... 1.14 ....

A. I'm sorry.

Ms. Herbert:

mM

Mr. Camp: Can you talk up a little bit, please.

ww

w.

Te a

A. 1,140,000 in the five .... in the year ended June 30th, 2005, 900, 1.3, 1.7 .... and then you can see the implications in '08 and '09 of the Thriller album release. The use of a five-year average is representative of the BMI opportunities with releases put in there. And also, a stable year is put in there as well. It's an estimate of what you would kind of expect BMI receipts to be going forward on a normal basis. And as I said, it's not 2.7 million. It's 1.5 million. That's the average of those five years. The same calculation .... I believe it's the next schedule we can take a look at .... is the Society rebates. And you'll see the .... just the incredible volatility. Oh, no, it must be the one before it. I'm sorry. There you go. This is the Society rebates page. Look down on the bottom .... 13,000, 0, 130,000, 140,000, 232,000. This is the nature of Society rebates. They lag dramatically. Payments happen in years. You can see 2006; no payments were made at all. And

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there's catchup payments because the '06 payments 872 weren't made. So using an average, a five-year average, is much more sensible than presuming for erroneous reasons the 232,000 represents any kind of base as to the royalties that will be generated by Society rebates.

lJa ck so

Q. Okay. Thank you. Let's turn now to a discussion of unreleased songs. How many unreleased or unpublished songs did you include in your valuation analysis, if you could remember?

A. We assumed that three albums' worth of material will eventually be found.

Q. What was the source of the information you used to determine how many unreleased songs there were?

ich

ae

A. Well, we started with a really big list and worked closely with Karen Langford to .... I tried very hard to identify the source, or validity, of this. And we found that, really, there's no evidence for the majority of the theoretical song. I don't know if theoretical is even the right word .... the hypothetical songs. We found a list of references to music that still may or may not exist and determined based on what actually happened posthumously, based on Michael Jackson's own experience in releasing new material during the last decade of his life that it was reasonable to assume a three-album release over the next 10 years would be really pushing it, based on what's there.

mM

Q. Okay. So were you personally aware of how Michael Jackson created new music?

Te a

A. In what way do you ask that question? Are you talking how he recorded his voice into cassette tapes?

Q. Yes. Are you personally aware of how he ....

w.

A. I have been ....

Q. .... did that?

ww

A. I .... it has been explained to me many times, yes.

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Q. Do you know whether he typically recorded more songs than he anticipated would be released on an album?

lJa ck so

A. I think that's a misrepresentation of what a song is. So I'm going to ask you to define song for me. Do you mean finished products?

Q. Yes.

ich

ae

A. I'm sure there was occasionally finished products. But the majority, the vast majority, of the works were not prepared and ready for release. And one of the best reasons to suggest that is that, in his most dire moments financially in 2008 and 2009, there was no effort made by anybody. And in fact, Mr. Branca himself did not suggest releasing material as a way to further and benefit his financial situation. The works that we're talking about are incomplete, unfinished. They are not songs in the way that you're trying to portray them. They are ideas for songs. They are snippets. They are pieces. They're incomplete. And we do not know that .... more than 30 songs will ever be released. It is ....

Q. But you don't have personal knowledge of this, correct?

mM

A. You can't have personal knowledge of something that doesn't exist. It is so frustrating to answer the question.

Q. Is it possible that there are additional unreleased songs that the estate has not yet identified?

w.

Te a

A. To the extent that's even possible in an appraisal thought process, you are talking about assets that will exist in the future and may eventually have value. But today, they are speculative. They cannot be placed. I cannot touch them. I cannot feel them. And we know they need a lot of work to get them to market. If that ever happens, maybe we'll need to value them. But today, as of June 25th, 2009, they were nothing more than speculation. And I personally, as appraiser, have no understanding of how you value speculation.

ww

Q. Now, are you aware that Karen Langford testified the other day that there were some 7,000 to 10,000 pieces of recordings that are in the possession of the estate?

n.c om

A. I'm not aware of that, but I would love to ask her what she means by recordings.

Mr. Toscher: Objection. Mischaracterization. Judge Holmes: Sustained.

Mr. Toscher: Pieces is what ....

lJa ck so

Q. And so in the times that you spoke to Ms. Langford in gathering information for your analysis, did you ever discuss the 7 to 10,000 recordings?

A. We spoke ....

ich

Ms. Herbert: Your Honor, could the ....

ae

Judge Holmes: She said, indeed, pieces. We had that colloquy yesterday.

mM

Judge Holmes: Wait, wait. She gets to ask the question again.

Ms. Herbert: Your Honor, could the objections come from the attorney who ....

Te a

Judge Holmes: Oh.

Ms. Herbert: .... is handling this witness?

w.

Mr. Salkin: It was simultaneous, Your Honor.

ww

Judge Holmes: No tag teams.

n.c om

A. I'm sorry. Can you ask the question more time? And I didn't under .... did you sustain, Your Honor?

Ms. Herbert:

Judge Holmes: I did. So she gets to ask it again.

Ms. Herbert:

lJa ck so

Q. When you spoke with Ms. Langford ....

Q. .... in gathering information for your analysis, did you discuss the 7 to 10,000 recordings with her?

ae

A. No, we ....

ich

Mr. Salkin: Objection, Your Honor. There's no basis for that testimony.

mM

Judge Holmes: Okay. She said it again as well .... recordings. I'll .... are you asserting that recordings equal pieces, as we talked about yesterday?

Ms. Herbert: Yes.

Judge Holmes: Okay. There you go. You can answer the question now.

Te a

A. I am not aware of 7 to 10,000 snippets in any fashion. What I am aware of is a collection of songs for which there may be pieces. And they are much, much larger than 7 to 10,000 songs in terms of the discussions that I've had with Ms. Langford.

w.

Ms. Herbert:

ww

Q. Now, if there were such recordings and if they contained, let's say, a single instrument or drum tracks or Michael Jackson beat boxing, which means making musical sounds with his mouth, could there potentially be value to those recordings?

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lJa ck so

A. There could be future value to those recordings. But as of today, there is no indication that they are anything other than a speculative .... you can't even place your finger on it. How do you know it's going to end up on a recording somewhere? It .... to the extent that's an asset, God willing, the estate will eventually find it and pay taxes on it, and it will become an asset of the estate. But as we sit here today, Your Honor, there is nothing other than speculation and theory as to the fact that it even exists.

Q. Now, on .... in your report, Exhibit 632-P, you identify 68 compositions of unpublished works that could be validated by the estate. Is that correct? Let's turn to Page 32. Yes, in the middle paragraph there under Forecast of Cash Flow, the second paragraph, I think you state, "In total, the two schedules represent 68 compositions that could be validated and another 11 titles where there remains no clarity as to ownership or existence." Is that what it says?

ae

A. That is what it says, yeah.

ich

Q. Are the 68 compositions that you identified part of the .... or do they include any of the bits and pieces of recordings that the estate owned?

Q. Yes.

mM

A. I'm not sure I understand your question. Do you .... are you asking if the 68 recordings are included in this alleged 7 to 8,000 snippets that ....

Te a

A. I have no idea.

Q. Okay. How are the 68 compositions that you identified sourced? Where did you get the information?

ww

w.

A. Karen Langford was instrumental in taking a list and helping us isolate it and break it down in search. And there have been countless hours spent trying to identify songs that we can't even put our fingers on. It would be useful for us to go to that list of 68 songs, perhaps.

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Q. We'll get to that.

A. Okay.

lJa ck so

Q. So who determined that the 68 compositions you identified are the only compositions that were available?

A. Karen Langford was instrumental in that. She is the most knowledgeable person as to what exists.

Q. Has .... thank you. Has anyone else verified the materials to see if there are potentially additional compositions that could be exploited, to your knowledge, other than Karen Langford?

ich

ae

A. To my knowledge, there has been interest in other musicians who have spent time with Karen looking at compositions and looking at the ability to potentially monetize them in the future. I'm not 880 aware of where that's gone other than to the fact that we've had certain songs released posthumously with the instrumental assistance of other artists.

A. No.

mM

Q. Did you personally listen to any of the 68 compositions that you were able to identify?

Te a

Q. Did you personally listen to any of the other pieces of recordings that Ms. Langford had in her possession?

A. No.

w.

Q. Did you ever request to listen to any of the material?

ww

A. No.

n.c om

Q. If you didn't listen to them, how can you know whether there was value to them?

lJa ck so

A. Because we had extensive conversations as to the nature and limitations of these recordings. It was represented to me that what we're talking about are song ideas and snippets and outtakes and things that are very natural for any artist. What is the concern of most of .... well, certainly of Ms. Langford .... and I know of, anecdotally, that it was a concern of Mr. Jackson during his lifetime was that the quality of unfinished ....

Q. And how do you know that?

A. Through ....

ae

Mr. Salkin: Excuse me ....

Mr. Salkin: .... counsel.

ich

A. .... Ms. Langford.

A. I'm sorry?

mM

Judge Holmes: Hold on, hold on.

Te a

Mr. Salkin: Can you finish the sentence?

ww

w.

A. Yeah. Through conversations with Ms. Langford, it was made clear to me that the works themselves were in such a fashion and such an incomplete fashion that their completion to music was not imminent or likely. And I point back to the fact that you've had two days of testimony, from what I understand, from financial experts who have told you very directly about the financial discourse of Mr. Jackson's life in 2009. And no effort was ever made to take what you believe to be this trove of data and make music for it, even though he was on his way to tour. It is irrational. It doesn't fit with what I know about musicians in my experience in appraising and valuing business interests.

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Q. Okay. That's not what I asked you, Mr. Dahl. So please limit your answers to the questions asked.

A. I'm sorry.

lJa ck so

Ms. Herbert: And I move to strike that last answer.

Judge Holmes: All right. Your motion is granted. By

Ms. Herbert:

Q. Were you aware that Ms. Langford had not listened to all of the 7 to 10,000 recordings in possession of the estate?

ich

ae

A. I am aware that Ms. Langford can't even find the majority of the compositions that she described ....

Q. Is that a yes or a no? Are you aware that she did not listen to all the music?

mM

A. She certainly didn't listen to compositions that don't exist. So

Q. If there were 7 to 10,000 physical recordings that she didn't listen to .... all right. I'm sorry. Strike that.

Te a

Ms. Herbert:

w.

Q. On Exhibit 17 of your report .... we're going to get a page reference here. Page 140 of Exhibit 632-P .... it's up on the screen now. This is a chart of unpublished works confirmed by the estate, is it not?

ww

A. This is a list that includes unpublished works confirmed by the estate and includes a hypothetical new release album as well.

A. Yes, they are.

lJa ck so

Q. How were the revenue projections for unpublished songs developed?

n.c om

Q. Are these your revenue projections for unpublished songs?

ae

A. Well, after our first workup in 2010 when the estate was aware of no unpublished materials, it was my understanding that materials had been found, that we were asked to consider the actual materials that were released and consider the possibility that new releases would come from the 68 .... eventually 68 song titles that were in play. And we looked at what a reasonable forecast .... again, over a 10-period being the window of opportunity here .... to release these materials would look like. We looked at historical revenue releases for the actual posthumous works, compared them to the post .... to the pre-death works, in particular, the releases of the .... of new material in the 2000s. And we built a forecast which accounts for these three albums released three in a row in a five- year period and then a fourth .... pardon me .... two in a row in a five-year period and a third released in 2017.

ich

Q. So why did the projected royalties from unreleased songs match the historical royalties from the 19 songs that were actually released and presented in Exhibit 4?

Te a

mM

A. We used the actual numbers because they correspond pretty closely. In fact, they're high relative to what Mr. Jackson had experienced when he tried to release new material in 2005. They were .... if we had used that 2005 experience as a basis for the royalty release, our forecast would have been a lot lower. It was decided to use the actuals for the short period of time simply because it demonstrates the true degree to which the Michael Jackson works had cache in the marketplace. They also represent, remember, the fact that Michael Jackson is a co-writer on these songs 885 and, in most cases, owns 50 percent or less of the songwriter's share, something that is very imperative when thinking about the royalty opportunity for MIJAC Music.

ww

w.

Q. Okay. Thank you. So now in your report, you previously said that you have identified 68 unreleased songs. So how .... if you use the income from the 19 songs that were released, how are the other 49 unreleased songs incorporated into your analysis?

n.c om

A. First of all, they're not songs. They're compositions. They're partial songs. They're pieces and snippets and ideas for songs. We don't know how many of those 68 compositions will ever make it to what you are referencing as a song status.

lJa ck so

Q. Did you assume that all 68 unreleased songs would be released?

A. Absolutely.

Mr. Salkin: Mischaracterized his testimony. He didn't say there were 68 songs.

Ms. Herbert: I believe in his report he identified at Page ....

ae

Judge Holmes: No, that's overruled. He just said it.

ich

Ms. Herbert: Okay.

A. These ....

mM

Judge Holmes: No questions.

A. These 68 ....

Te a

Judge Holmes: There's no question pending.

A. I'm sorry, Your Honor.

w.

Ms. Herbert:

Q. How .... did you assume all 68 unreleased songs would be released?

ww

A. I did not. And again, I .... they are not songs. They are compositions.

n.c om

Q. And was the data you have provided for in your reports, which comes from the royalty statements that you reviewed, accurate?

Ms. Herbert: I need a moment, Your Honor.

Judge Holmes: All right.

Ms. Herbert:

lJa ck so

A. I believe they're accurate, yes.

ae

Q. Okay. If the estate was unaware of any unpublished songs in 2010, how is it not speculation for you to include any unpublished material in your analysis?

ich

A. Are you talking about my 2010 analysis or today?

Q. Today.

Te a

mM

A. The estate requested that, based on the new published materials and some of the works that had come later and well after we had done our original work, that we reconsider the status of the unpublished materials. Some of those unpublished materials .... when we did our original evaluation report in September of 2010, the estate was not even aware of the workups and the products that were going to go to market just shortly thereafter, I believe, in December of 2010. That workup was being done commensurate with our work product being performed. After the report was issued and after that first album came out, it became, I think, evident that we needed to reconsider the idea of unpublished works. The problem is nobody knows the status of the majority of what you try to .... are trying to value.

w.

Q. Did you include any value for the unpublished works then in your 2014 report?

ww

A. No, not that I recall.

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Ms. Herbert: I have no further questions.

Judge Holmes: Redirect, Mr. Salkin?

Judge Holmes: Okay.

lJa ck so

Mr. Salkin: May we take a break, Your Honor?

RECESS……………….

Judge Holmes: Please be seated.

ae

Mr. Salkin: Your Honor ....

ich

Judge Holmes: Request to take somebody out of order?

Mr. Salkin: .... we have two requests of the Court.

mM

Judge Holmes: Go ahead, Mr. Salkin.

Mr. Salkin: First is to delay the redirect until after the testimony of Mr. Doelp is taken.

Te a

Judge Holmes: Okay. Is he a third party witness?

Mr. Salkin: Yes, he is, Your Honor.

w.

Judge Holmes: Okay. We .... and solicitous of them , is he here?

ww

Mr. Salkin: Yes, he is, Your Honor.

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Judge Holmes: He is. Okay. Come on ahead, Mr. Doelp.

lJa ck so

Mr. Salkin: Okay. The second, Your Honor, the second request, Mr. Dahl is both an expert witness, and he will be a percipient witness with respect to penalties. And we would like the Court's permission for him to be able to stay in the courtroom while Mr. Doelp testifies.

Ms. Herbert: Your Honor, I believe that we've invoked the rule. So we would think since he's testifying as a fact witness he should be excluded.

Judge Holmes: Okay. He will be excluded then for a short time. Stay close, though, Mr. Dahl.

Mr. Toscher: But he's an expert. (Lawyers all chatter at once on Estate side.)

ich

ae

Judge Holmes: Yeah, he's an expert. But if he .... the next testimony is going to be about his factual testimony, and I see Mr. Doelp is going to be testifying about finding recordings, which we just spoke about. I'll sequester him. So Mr. Dahl goes into sequestration.

mM

Mr. Salkin: To our knowledge, Your Honor, Mr. Doelp will not be testifying in any way about anything related to penalties.

Judge Holmes: I see select materials to release after Michael Jackson's death. I'll still exclude him for now. Send him away.

Te a

Mr. Toscher: Tell him to wait, though. Or he can go ....

ww

w.

Judge Holmes: Yes, do tell him to wait. Swear him in

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****Footnote: WAS ANDY HEYWARD ABOUT TO COMMIT PERJURY?? JUDGE SHUTS IT DOWN, NOW WONDERING HOW MUCH OF HIS TESTIMONY WAS TRUTHFUL?? At the match with John Branca..*****

A. Thank you.

Judge Holmes: Thank you very much.

lJa ck so

Judge Holmes: Okay. You're free to go, Mr. Heyward.

Judge Holmes: Next up Mr. Toscher or Mr. Weitzman?

Mr. Dahl: Good morning, Your Honor.

ae

Mr. Toscher: It would be Mr. Dahl, Your Honor.

ich

Judge Holmes: Good morning again. With that, Mr. Toscher can ask you questions.

mM

OWEN DAHL recalled sworn in.

DIRECT EXAMINATION

Te a

Mr. Toscher:

Q. Good morning, Mr. Dahl. We're recalling you as a fact witness today. Your Honor, I'm just going to go briefly through some preliminary very quickly, because we didn't do it with him as an expert because it's in his report. So could you give your name and address for the record sir?

w.

A. Yes. Owen Dahl, D- A-H-L. My home address ………..

ww

Mr. Toscher: Okay. Your Honor, I was just informed that Mr. Heyward had something he wanted to add to his testimony .... oh. Okay before we go on, Mr. Heyward just informed counsel that he wanted to add something. Can he ....

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Judge Holmes: To correct an untruth or something like that, to clarify an answer?

lJa ck so

Mr. Toscher: Nothing like that. I don't know what it was. I just had the ....

Judge Holmes: How odd. Well, bring him back in.

Mr. Toscher: If Mr. Heyward wants to come back in, the Judge will allow it. Thank you, Your Honor.

Judge Holmes: Well now you've got me curious. Mr. Dahl, can you step to one side for just a second?

ich

ae

Mr. Voth: Respondent objects to this, Your Honor. We don't know if Petitioner's counsel spoke to Mr. Heyward. I think it's inappropriate to add something else.

Mr. Weitzman: I'm going to explain exactly what happened, and then you can make a decision.

mM

Judge Holmes: Okay, explain.

Te a

Mr. Weitzman: When we got in the hallway outside and thanked Mr. Heyward for coming, he said to me you know, I forgot to say one thing in response to your question, and I want to explain it. I said time out. We'll see if you can testify again. What is involved? Sure. I said what does it involve? He said Walmart. He said there's already a witness on the stand and I'll see if we can interrupt for you to for me to ask that question so you can respond to the question.

Mr. Voth: Respondent objects.

w.

Judge Holmes: Yeah, yeah. Mr. Heyward can go. That's fine.

ww

Mr. Weitzman: Really? For a mere 30 seconds?

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Judge Holmes: I don't want to have him commit perjury or something if he remembered something about facts. But elaborating a question, ehh. I don't like surprises. You can go, Mr. Heyward. It's fine.

lJa ck so

Mr. Weitzman: Did you say he had perjured? I don't understand.

Judge Holmes: No, no. If he had said something that was untrue upon further reflection.

Mr. Toscher: No. That's not the case, Your Honor.

Judge Holmes: Sometimes witnesses .... yeah, sometimes witnesses ....

ich

ae

Mr. Toscher: I think the record's clear. It's the he had an incident regarding Walmart that if the Court ....

Judge Holmes: It would be an additional story or something, right?

mM

Mr. Weitzman: I'm sorry. He was going to just relate to the Court the meeting he had with Walmart about this project.

Te a

Judge Holmes: Yeah. It was an additional story or an elaboration of his existing testimony. So it's not self-protective. It's fine. We got his story. Go ahead, Mr. Toscher. Where's Mr. Dahl again?

Mr. Toscher: Could you get Mr. Dahl please?

w.

Judge Holmes: Again, again. There he is. …………………………………….

ww

Judge Holmes: Go ahead, Mr. Toscher.

Mr. Toscher:

A. I am a business appraiser.

Q. And do you have a name of the business?

lJa ck so

Q. Mr. Dahl, what is your current business?

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CONTINUED DIRECT EXAMINATION

A. The business name is Dahl Consulting Group.

ae

Q. Okay. Can you just briefly .... are you married?

ich

A. I am engaged.

Q. You're engaged, okay. Do you have children?

mM

A. Five children.

Q. Okay. Can you briefly describe your educational background for the Court?

Te a

A. Sure. I have an undergraduate in Economics from the University of British Columbia, pardon me, the University of Victoria-British Columbia; I have three professional designations. I'm an accredited senior .... I'm sorry.

ww

w.

Q. Okay. I was going to ask you. Can you tell us slowly what your professional designations are please?

n.c om

A. Sure. I am a chartered financial analyst. That's a designation from the CFA Institute. I am an accredited senior appraisers with the American Society of Appraisers, and I am a licensed international financial analyst from the AIMR Institute.

lJa ck so

Q. Could you briefly go through your work history after you left college?

A. Sure. For several years I worked in banking as a currency trader. In 1999 I left the banking industry to work full time as a business appraiser with Moss Adams, a firm that I stayed with from 1999 to 2012. In 2007 I became a partner of Moss Adams. My role and responsibility both before partnership and after partnership was entirely related to business appraiser. I was a specialist in the area of intellectual property.

Q. Okay. Can you tell us a little bit about Moss Adams? What is Moss Adams?

ich

ae

A. Moss Adams, I don't know if it's the 10th, 11th or 12th largest public accounting firm. It seems to change from year to year. It's one of the larger accounting firms in the nation. It's a full service firm that offers audit and tax work and has a consulting division as well. The Valuation Group was a component of the Consulting division.

A. Yes, yeah.

mM

Q. Okay, and you were in the Consulting division?

Te a

Q. So tell us a little bit about .... and you said the Valuation Group was in the Consulting division?

A. Yes.

w.

Q. Tell us a little bit about what the Valuation group does?

ww

A. So the Valuation Group consisted of, when I was there, four partners up and down the west coast. We performed a large variety of valuations for a variety of purposes, from the

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establishment of ESOPs to litigation support to estate planning and gift tax reporting. It was what I would call a full service appraisal firm, business appraisal firm.

Q. Can you estimate how many people were in the valuation practice of Moss Adams?

Q. Okay. Where were they located, physically?

lJa ck so

A. When I left, there were probably 25. It's a guess.

A. Our headquarters was Seattle. We had offices in .... Valuation offices in Portland and northern California and southern California.

ae

Q. Okay. Going back to the 2009 era, you said 2009. You said you left in 2012. What was your position at Moss Adams at the time?

ich

A. I was a partner.

mM

Q. And what were your responsibilities?

A. In addition to obviously sourcing and finding clients, my job was to oversee the production of valuation reports. I was also the technical director of Moss Adams Valuation Group. So my responsibilities were to establish policy, establish methodologies that were group centric methodologies and policies.

Te a

Q. Could you put up stipulations Exhibit 57 please?

w.

Mr. Camp: 5-7?

Mr. Toscher: 557. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

ww

Mr. Toscher:

n.c om

Q. Mr. Dahl, did there come a time where Moss Adams rendered a valuation of Michael Jackson's name and likeness?

A. Yes, there was.

A. It was.

Q. And the Form 706 is what?

ae

A. That's the Estate tax return.

lJa ck so

Q. And do you recall whether that was in connection with the preparation of the Form 706?

ich

Q. Okay. I'm looking at what's .... I believe the government does not object to Exhibit 557. Can you go to the next page please? Okay. Do you recognize .... can you see it, Mr. Dahl? I guess you have it on the screen there.

mM

A. Yes.

Q. Is that your signature on that?

A. It is, yeah.

Te a

Q. Okay. And is this your report, your valuation of Michael Jackson's name and likeness as of the date of his death?

w.

A. Yes, it is.

ww

Q. Okay. Can you tell us who at Moss Adams was involved in the preparation?

n.c om

A. I was principally involved. There were several other analysts. It's been long enough that it would be helpful if I could go to the back and see the resumes attached to know that.

A. Sure.

lJa ck so

Q. Okay. I'll just ask you this question.

Q. Are the people who were involved in the preparation, are their resumes attached?

A. Yes.

ae

Q. Oh, you were able to get to it. Okay.

A. It was Clayton Cafferata, Ivor Scott would probably be there as well.

ich

A. concurring reviewer my partner Alan Hungate would have been involved. I presume his resume is attached.

mM

Q. I haven't seen it, but okay. So you think maybe Mr. Hungate was involved as well?

A. He would have certainly been involved in discussions as we thought this process through, yes.

Te a

Q. Okay, and the CVs or resumes attached to you, Mr. Cafferata and Mr. Ivor, those set forth their qualifications; is that correct?

w.

A. Yes, correct.

ww

Q. Okay. Now can you tell us generally what was .... what were you charged with? What was Moss Adams charged with in the preparation of this report?

n.c om

A. Specifically to the name and likeness, we were charged with the task of determining the fair market value of Michael Jackson's image and likeness as it pertains to the opportunity to license and merchandise and otherwise engage in activities, generate cash flow that are unrelated to the music business itself.

lJa ck so

Q. Okay. Did you also do .... did Moss Adams also do other reports regarding the valuation of the music assets?

A. This was work that was done at the same time and in conjunction with the appraisals of Mijac Music and the master recordings, which all occurred within that same couple of month period, yes.

ae

Q. Okay. Now was it your practice to request information from a client in order for you to do your valuations?

ich

A. Yes. Every appraisal starts out with your being engaged with it and a document request list, and with documents requested of the client specific to the engagement in question.

Q. Was the Estate cooperative with you in providing all information you requested?

mM

A. At all times, yes.

Te a

Q. Okay. Going back to Exhibit 557, can you go to the .... well, I think you're familiar with this. You've reviewed this before today, haven't you Mr. Dahl?

A. Yes, I have.

w.

Q. Okay, and did you render an opinion as to the value of Michael Jackson's name and likeness?

ww

A. I did.

A. It's 2000 and maybe 2,105 an it might be 2,405. I forget which it is.

lJa ck so

Q. Okay. It's in the report.

n.c om

Q. And do you recall the number that you ....

A. Yeah.

Q. Can you describe for the Court the methodology you used to arrive at that number?

ich

ae

A. The methodology really starts with the document, I mentioned the document request, and the purposes of valuing the opportunities to license that brand or that image or likeness. We requested royalty statements. We requested contracts. We requested historical financial statements that show payments made to Mr. Jackson for use of his image and likeness. We requested business plans and opportunities in place as of the time of death. Those would have been the typical documents we would request whenever doing a name and likeness valuation.

mM

Q. Okay. So you arrived at a value of $2,100. What appraisal or valuation method did you use to arrive at that valuation?

A. This was a discounted cash flow analysis. It's really the only valuation methodology that makes sense when applying image and likeness valuation. These types of assets don't sell in a marketplace very readily, particularly ones that are deeply impaired.

Te a

Q. Okay. The $2,100 number has been criticized by perhaps the Internal Revenue Service. Can you describe for the Court how you arrived at that number?

ww

w.

A. Yeah. When we start the process, we have no preconceived notion, and as we ask for documents and gather documents, it's the documents and facts that drive the appraisal process. At the end of the day, you know, I think it's been clear and I think there's possibly some evidence that's already been entered that there simply had been no financial gain made from the image and likeness licenses for several years now. There are several reasons for that. The length of time by which Mr. Jackson had actively tried to license his name without success is so long and so comprehensive that by the time we got to June 25th, 2009 ....

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Ms. Larson: Objection, relevance.

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Judge Holmes: Overruled.

Ms. Larson: Testifying as an expert.

Judge Holmes: This is .... you're limiting this to how he did this?

Mr. Toscher: That's correct, Your Honor.

ae

Judge Holmes: Okay, overruled.

ich

A. By the time we .... I'm sorry. Let me step back. By the time we had reviewed all of the documents requested, all of the documents that we feel are relevant and pertinent, we had come to the conclusion that there simply had been no income generated for years and years and years, and there were very specific and straightforward reasons for that.

mM

Mr. Toscher:

Q. Okay, and what do you think those reasons were, that there was a lack of historical income?

Te a

A. This is very tough conversation, and it

Q. Well let me ask you first. Are those reasons set forth in your report?

w.

A. They're in the report.

ww

Q. Okay. So you can just with that briefly tell the Court.

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lJa ck so

A. It pains me in open court to have to discuss the fact that there are child molestation charges that directly and deeply changed the landscape of this analysis. The idea that opportunities that existed for Mr. Jackson to license his image and likeness prior to 2000, 1995 and then more importantly prior to 2005, and their relevance to what was actually occurring in 2006 and 2007 and 2008 and 2009 are such a relevant part of the story for an appraiser considering the facts and circumstances on June 25th, 2009. When we get to June 25th, 2009, we asked for all of the documents available to the Estate. We came to the conclusion that any valuation methodology that doesn't focus on the realities of the situation are nothing but speculation.

Q. Okay. And is it fair to say that you indicated 2004, 2005 or '05, '06, '07, '08, '09. What are the significance of those years or let's say the 2000 ....

Judge Holmes: He is. Go ahead.

ich

Mr. Toscher:

ae

Ms. Larson: Objection. I have a continuing objection to his testifying as an expert. He's here as a fact witness.

Q. What's the significance to the 2005 year that you're talking about?

Te a

mM

A. When an appraiser is asked to value any asset, landmark moments that change and we use the term "impairment" as appraisers. Landmark moments that impair the asset because very specific landmark moments for thought process when it comes to considering fact. There was an impairment that occurred in 2005, whether we want to talk about it or not, and that impairment continued to the date of death. In fact, impairment was significant to the date of death in light of the conversations that I had with the Estate in detail during our work product, related to opportunities and attempts by Mr. Jackson and others in 2007 and 2008 to find ways to monetize and build on image and likenesses that frankly never occurred. As you know, as the record I believe shows quite clearly, not a penny was earned in 2007 or 2008 or 2006 that I could find that relates specifically to the value of the image and likeness.

w.

Q. In your report, did you go through the even back further the 1993 allegations with respect to Mr. Jackson?

ww

A. No. There's no point.

n.c om

Q. They're not in your report?

Q. No. You misunderstood my question.

A. Oh, I'm so sorry.

Q. I'm sorry, Mr. Dahl.

ae

A. Apologies.

lJa ck so

A. They're not in my report. There's commentary in my report about this life, but we did not look at the financials prior to 1993.

ich

Q. No. The allegations against Mr. Jackson that arose first in 1993.

mM

A. Right. Yeah, we considered them. I think it's an ongoing unfortunate and deeply troubling story that started so many years before death, and really culminate and snowball with some of the other allegations such as drug abuse, such as the removal of self from society for several years, to the point where he was effectively recluse. These are not the actions of somebody who are actively trying to endorse products and engage in image and likeness activities. You see that in the Davie-Brown index scores, which we allude to in our report and I know that ....

Te a

Q. Okay, stop.

A. I'm sorry.

w.

Q. No, stop a second, because they are in your report and that's part of the factual background, Your Honor. But tell the Court what the Dave Brown index scores are?

ww

A. Davie-Brown index is one of a couple of sources of consulting work that are done by third parties, when large corporations are interested ....

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Ms. Larson: Objection. We want to say that the Court shouldn't accept any of this expert testimony. It should be limited to the penalty issue only.

A. Yeah, they sure were, Your Honor.

lJa ck so

Judge Holmes: I understand. Were these Davie-Brown scores in the appraisal that was attached to the I&T ....., I'm sorry, the tax return 706?

Judge Holmes: Okay. They're in for that purpose to show the potential for reasonable reliance on this opinion by the Estate in filing the return at the time it was filed. With that limitation, go ahead.

Mr. Toscher:

mM

ich

ae

A. The importance of the Davie- Brown scores, and I'll just back up to make sure there's some understanding. They are survey-driven scores that measure a celebrity's position in many, many ways. Davie-Brown, for example, Michael Jackson scores among the highest, most recognized celebrities in their index. It means 99.7 percent of the world know who Michael Jackson is. What's interesting, though and what's troubling as we look at trying to figure out what the value of Michael Jackson's name and likeness was in June 25th, 2009, is that he ranked among the lowest in terms of trustworthiness, and among the lowest in terms of scores that matter to corporations who are interested in using image and likeness to promote their products. Mr. Jackson at June 25th, 2009 was essentially a pariah from the perspective of licensing material.

Te a

Q. Okay. Mr. Dahl, did there come a time that you delivered or communicated with the Estate regarding the 2105 value you came up with?

A. Yes.

w.

Q. And what was the reaction?

ww

A. They were surprised and thought it should be higher.

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Q. Okay, and what did you .... how did you .... what was your response to that?

Ms. Larson: Objection, personal knowledge.

lJa ck so

A. It's a difficult conversation because when as an appraiser you follow the procedures and methodologies and approached that you believe to be inherent on how you are trained and how you proceed in other matters, the number is what it is. To change the number meant to change the facts, and there were no facts that we could change because the facts were what they were. Mr. Jackson's scores as measured by Davie- Brown, Mr. Jackson's ability to license as measured by years and years and years of inactivity, Mr. Jackson's own actions in terms of reclusiveness had led to the point on June 25th, 2009 when his ability to ....

Judge Holmes: Good point. Elaborate a foundation for this one.

ae

Mr. Toscher:

ich

Q. Mr. Dahl, are you talking about the foundation for the report you wrote?

A. I am, Your Honor. I am sir, yes.

mM

Judge Holmes: On what were those observations based?

A. The observations, what was the basis?

Te a

Judge Holmes: That you just said about ....

A. So Davie-Brown scores, Internet searches, general knowledge as to Mr. Jackson's whereabouts over many years.

w.

Judge Holmes: So this is things you read in the media?

ww

A. Things in the media, things that come directly from the Estate representatives and things that, as I mention, come from qualitative scores, yes.

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Mr. Toscher:

lJa ck so

Q. Mr. Dahl, I think there was one example in your report concerning a clothes line, clothes line, a line of clothes that was being discussed?

A. I think you might ....

Judge Holmes: Clothing line.

Mr. Toscher:

ae

Q. Clothing line.

ich

A. Is this the Ed Hardy line?

A. Ed Hardy?

mM

Q. Pardon?

Q. I believe so.

Te a

Judge Holmes: Okay, answer the question.

w.

A. Sure, sure, sorry. So Ed Hardy, which is a very well known, it was very popular especially at the time of death, there was a clothing line that Mr. Jackson uniquely approached Ed Hardy and asked if they would be interested in pursuing a joint clothing line with Michael Jackson.

ww

Ms. Larson: Objection, lack of personal knowledge.

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Mr. Toscher: This is all the foundation for his report. If they want to .... you're right.

Judge Holmes: I understand. Again, it's not for the truth of the matter asserted; it's for the truth that he relied on it.

lJa ck so

Mr. Toscher: That's correct, Your Honor.

Judge Holmes: The possibility that it was reasonably relied upon when it came to the Estate. So with that understanding, the objection is overruled. Go ahead, Mr. Toscher.

Mr. Toscher:

ae

Q. So describe your understanding of that transaction? I think you said Michael Jackson approached Ed Hardy?

ich

A. Yeah. Mr. Jackson approached Ed Hardy. This transaction deal ultimately failed and went nowhere. But a goal by Mr. Jackson or Mr. Jackson's advisors was to put forward a clothing line that was co-opted between Ed Hardy and Michael Jackson images involved in it.

mM

Judge Holmes: What does co-opted mean?

A. It means that Ed Hardy would fund it and create the clothes with Michael Jackson designs being embedded and incorporated into their designs.

Te a

Judge Holmes: Okay, go ahead.

A. Ed Hardy had these very kind of unique graphic shirts, and it would be some Michael Jackson references within their graphics.

w.

Mr. Toscher:

ww

Q. And you said that deal went nowhere?

n.c om

A. Well, the deal went nowhere, but it was kind of interesting for another reason, and that is that it was Michael Jackson who approached Ed Hardy, not the other way around, and it was Ed Hardy who ultimately rejected being involved with Michael Jackson in any way.

Ms. Larson: Objection, calls for speculation.

lJa ck so

Q. Okay. It's been a lot of time since your 2009 .... well 2010 report, Mr. Dahl. Did the Estate reasonably rely or rely upon that report your opinion about its ....

Judge Holmes: That one's sustained. You may be able to lay a foundation.

Mr. Toscher:

ae

Q. Did you provide the report with the intent that the Estate would rely upon it, Mr. Dahl?

ich

A. I sure did.

Q. And I know there's been a lot of time since then. Do you still stand by your opinion of that at that time?

Te a

mM

A. Yeah, I absolutely do, and to the extent there's a change in the value of that image and likeness, and to that I'm not in a position to speak to the value change, I want to make it clear that that is a completely new asset. To the extent that Mr. Jackson's image and likeness changed postJune 25th, 2009 and resuscitated, an asset was created that did not exist on June 25th, 2009. What existed on June 25th, 2009 was a deeply flawed person with serious significant issues when it came to the issue of licensing image and likeness in a non-music setting.

Mr. Toscher: Thank you. No further questions, Your Honor.

w.

Judge Holmes: Cross.

ww

Ms. Larson: Thank you.

Ms. Herbert: What's your name?

Judge Holmes: Hi, Ms. Larson. Your witness.

Judge Holmes: Oh absolutely.

Ms. Larson: Thank you.

ich

Judge Holmes: For mid-morning even.

ae

Ms. Larson: May we take a break please?

lJa ck so

Ms. Larson: Denise Larson.

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Judge Holmes: You're a new face. What's your name ma'am?

mM

RECESS…………….

Ms. Larson: Okay, Ms. Larson. Oops, Mr. Toscher is still at the stand.

Te a

Mr. Toscher: No. Can I stay here so I can hear better? She's going to question from there, Your Honor.

Judge Holmes: It's her choice. If you want to question from there, Mr. Toscher can stay.

w.

Ms. Larson: Yes. I'll stay here. I'll let him have the podium.

ww

Judge Holmes: Go ahead, Ms. Larson.

Ms. Larson:

lJa ck so

Q. Thank you, Your Honor. Good morning, Mr. Dahl.

n.c om

CROSS EXAMINATION

A. Good morning.

Q. You've testified that you valued .... you listed the value that you listed on the appraisal provided to the Estate for name and likeness was $2,105?

A. That sounds right.

ae

Q. And you used .... also you testified that you used a discounted cash flow analysis for that appraisal?

ich

A. Correct.

mM

Q. And the cash flow that you used was based on historical numbers only?

A. That's correct.

Te a

Q. Thank you. In doing that, you used income that were from before Mr. Jackson's death?

A. That's correct as well.

w.

Q. Now can we have the exhibit actually that was brought up before. This is page 25 of your appraisal report. Do you recognize it?

ww

A. It looks like it would be, yeah.

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Q. Okay. Do you see there that you have income from .... that's being projected, and it starts at $369?

A. Okay.

lJa ck so

Q. And this income stream, this was based on royalties from printed sheet music?

A. That's correct.

Q. There were no other additional income streams provided you by the Estate?

ae

A. There were no other income streams provided by the Estate, no.

ich

Q. Thank you. You also reviewed a memo from Karen Langford of Ziffren Brittenham for information regarding pre-death name and likeness income, didn't you?

mM

A. You might want to give it to me so I can review it. It sounds familiar, but I don't want to go on memory. It's been eight years. Or maybe it's seven, I forget. It's a long time.

Q. I don't need you to review it. Do you remember reviewing it?

A. I remember a memo that was consistent with conversations that we had, yes.

So you didn't attribute any income based on this memo?

Te a

Q.

w.

A. Well, would you be more specific and tell me what income you're talking about?

ww

Judge Holmes: When you say "attribute to this memo," do you mean the memo had income on it or some statement on it that he was relying on or ....

Ms. Larson: I mean aren't we ....

lJa ck so

Mr. Toscher: Yeah. We have to put the memo up there.

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Mr. Toscher: Well ....

Ms. Larson: We can just ....

Ms. Herbert: We can mark it for ....

Mr. Toscher: Yeah, we need it ....

ae

Ms. Larson: Can we have this marked for identification?

ich

Judge Holmes: Okay. You can approach or have somebody approach.

Ms. Herbert: Your Honor, can we have a minute to print?

mM

Judge Holmes: Sure. ……………………..

Judge Holmes: Go ahead, Ms. Larson.

Te a

Ms. Larson:

Q. Okay, Mr. Dahl. You didn't consult with any intellectual property attorneys to help you determine the scope of name and likeness, did you?

w.

A. No. I have valued name and likeness assets in the past.

ww

Q. Your forecasted future earnings, as we discussed, only projected from pre-death income; correct?

lJa ck so

Q. You didn't use any foreseeable post-death income in your valuation?

n.c om

A. That is correct.

A. My opinion is that as of June 25th, 2009, there was no foreseeable post-death income, based on the .... irreparable harm to Mr. Jackson's name and likeness as of June 25th.

Ms. Larson: Thank you. I want to move to strike. That's beyond the scope of the question.

Judge Holmes: Granted.

ae

Ms. Larson:

Q. You testified that you used a post-death spike in all of your Mijac reports?

ich

A. Correct.

mM

Q. You also testified that name and likeness is intertwined with the music ....

Mr. Toscher: Objection, characterization. The word "intertwined" was not used yesterday.

Te a

Judge Holmes: Overruled. Go ahead.

Ms. Larson:

Q. And you also testified that the name and likeness is intertwined with the music rights?

ww

w.

A. Name and likeness affects the value of music rights. Without question it's an inclusive part of what we valued in Mijac Music, and also what was valued and already settled in the master recordings.

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Q. Move to strike. That is ....

Mr. Toscher: Your Honor, can I be heard on that.

Ms. Larson:

lJa ck so

Judge Holmes: You can redirect, Mr. Toscher.

Q. If the music spikes, wouldn't the name and likeness spike as well?

A. You are talking about buckets of income, and I believe this .... I am worried that you're going to strike this, Your Honor.

ae

Judge Holmes: Just answer the question.

mM

Ms. Larson: Yes or no.

ich

A. But we are talking about buckets of income, and a bucket of music income attributable to Mr. Jackson includes Mr. Jackson's authority and impact on the sales of that revenue. That is included. It is not ....

Mr. Toscher: No, Your Honor.

Te a

Judge Holmes: Hold on, hold on. You can object. You can't help answer. You can answer, but you should answer the question. The question was ....

A. There is a spike ....

w.

Judge Holmes: Wait, wait, wait. Let her answer the question.

ww

Ms. Larson:

Q. The question is should there be a spike, and it's a yes or no.

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A. There is a spike, and it is included in the valuations of Mijac Music and other assets appraised by other people.

A. I think I answered that.

Judge Holmes: Okay. You said no, right?

Mr. Toscher: No, that's not what he said.

ae

A. That's how I ....

lJa ck so

Q. No. Is there a spike .... the question is should there be a spike in name and likeness?

ich

Judge Holmes: Is there a spike .... should there be a post-death spike for the Estate's income from the use of Mr. Jackson's name and likeness?

mM

A. Before I answer that, could we define what you want name and likeness to include, because you have included music assets in your question to me.

Mr. Toscher: Okay, Your Honor. Can I just make a suggestion, so we don't ....

Te a

Judge Holmes: Okay.

Ms. Larson: No, it's in your report.

ww

w.

Mr. Toscher: Ms. Larson asked an open- ended question and then called for a yes or no, so he should be able to answer it. So what I would suggest is let's move on with her questions, so we don't get bogged down.

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Judge Holmes: Overruled. Did you have a spike in income in your appraisal report attached to the Form 706 for income attributable to the use of Mr. Jackson's name and likeness.

lJa ck so

A. Since the IRS used the term "intertwined," the answer to the question is yes. If we segregate that and treat the impact on music separately from the very separate right to license his name and likeness that excludes his use of music, then the answer is no. But to the extent there was a spike, that spike is affected by the fact that it was Mr. Jackson and not an unknown artist.

Ms. Larson: Q. Thank you.

A. We started this question ....

ae

Judge Holmes: No, no. No question, no question. Go ahead, Ms. Larson.

ich

Ms. Larson:

Q. Thank you. Okay, no question. You didn't take into consideration the series of 50 concerts that were sold out seven months prior to Mr. Jackson's death?

Q. Correct.

Te a

A. No.

mM

A. The ones that didn't happen because he died?

Ms. Herbert: Is that a no?

w.

Ms. Larson:

ww

Q. Is that a no? You didn't take into account the agreements with Bravado for branded merchandise before he died, did you?

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A. The ones that were signed after death, no.

A. The ones that were signed after death, no.

lJa ck so

Q. You didn't take .... you didn't take into account the agreement with Bravado, the arrangements and agreements with Bravado for branded merchandise after he died; correct?

Q. You didn't consider the fact that his career was reviving prior to his death?

A. I don't take .... I don't agree with that statement. His music career may have been reviving, but his name and likeness scores were at an all-time low.

ae

Q. Did you take any of that into consideration?

ich

A. In our music valuation we sure did, yes. We know spent a day talking about spikes.

Q. But not in your name and likeness; correct? Not in name and likeness; correct?

mM

A. Name and likeness in the use for merchandising purposes there was no spike. That is my professional judgment.

Te a

Q. Did you .... you didn't consider any of this foreseeable post-death income opportunities in your

Mr. Toscher: Objection, asked and answered, Your Honor.

w.

Judge Holmes: Overruled.

Ms. Larson:

ww

Q. You didn't consider any of the foreseeable post-death income opportunities in your appraisal?

n.c om

A. What foreseeable post-death income are we talking about? That's a really broad question.

lJa ck so

Q. The answer is no? The answer is no?

A. I don't think I can answer it, but I guess I'll go with no just to keep the Court moving.

Q. Yes or no.

A. I just said no.

ae

Q. Okay, all right. You didn't consider comparable celebrity estates in coming up with the 2009 name and likeness value, did you?

ich

A. We considered it. I'm not aware of a single celebrity estate in which the allegations of child molestation. I don't find any comparability between things that have happened prior to death

mM

Q. But none of them were in your report?

A. We considered it and made a determination that there is no comparable to the situation in place on June 25th, 2009 involving Michael Jackson.

Te a

Q. Thank you. There was no analysis in your report comparing Michael analysis to ....

Mr. Toscher: Objection. I didn't understand it and the other lawyer was talking. Would you rephrase the question?

w.

Judge Holmes: Overruled.

ww

Ms. Larson:

n.c om

Q. There was no analysis in your report comparing Michael Jackson to any other deceased celebrities?

A. Actually, the Davie-Brown index does a very good job of comparing celebrities and ....

lJa ck so

Q. That's .... is that in your report?

Judge Holmes: That wasn't the question, Mr. Dahl. Was there in the appraisal report attached to the Estate's tax return that you prepared any income attributable to the name and likeness?

A. Was that the question? I'm sorry. You asked if there was any income attributable to name and likeness.

ich

ae

Mr. Toscher: Your Honor, I don't think that was the question. I think the question was, was there an analysis of other celebrities, and the response was it was done through the Davie-Brown index.

Ms. Larson:

mM

Q. The question was whether it was in his report?

A. We considered it and excluded it and did not include it in the report, because we feel that there is no comparison between the implications and allegations against Mr. Jackson and allegations against other deceased musicians.

Te a

Q. Okay, thank you, thank you. In your report, you didn't mention any rights of publicity under California or other state laws?

w.

A. What would those rights of publicity be?

Judge Holmes: Answer the question.

ww

A. I'm not sure.

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Ms. Larson: California Code 3343.

Judge Holmes: 3343.

A. The right to use ....

Judge Holmes: Image and likeness.

lJa ck so

Judge Holmes: I'll .... did you when she leaves it like that. So did you consider the, specifically the rights that Mr. Jackson would have had under California Civil Code. What were the four digits again?

ich

ae

A. Image and likeness. That is implicit in what we considered and the reason why there is no revenue ....

Ms. Larson: Okay, thank you. So that's no, not in your report?

mM

Mr. Toscher: Your Honor I think ....

A. I think I just said yes.

Te a

Judge Holmes: Hold on. That was implicit not explicit.

A. It was implicit, yes.

Ms. Larson:

w.

Q. And what about did you consider other state laws?

ww

A. No.

n.c om

Q. In your report, you didn't consider the value of any trademarks held by Michael Jackson?

Q. Did you mention trademarks in your report?

A. I don't recall.

lJa ck so

A. The trademarks are synonymous with his name. They are incorporated in by default part of the valuation of the name and likeness.

Q. Did you consider any values of name and likeness under international laws?

ae

A. The question is no, but they're also embodied in the history of Mr. Jackson's works.

mM

A. I'm not aware of that.

ich

Q. Thank you, thank you. Were you aware .... were you aware that the Estate was sending dozens of cease and desist letters in the first 90 days after Michael Jackson's death regarding name and likeness?

Q. Okay. Were you aware that the Estate was filing multiple trademark applications in the U.S. and abroad in the first 90 days after his death?

Te a

A. I don't recall.

Q. Were you aware that the Estate immediately engaged attorneys to protect name and likeness?

w.

A. It would be sensible, but I wasn't aware of that.

ww

Q. Did you know that they were actually spending at least hundreds of thousands of dollars during this 90 day period for protection of name and likeness?

n.c om

A. Are you talking about post-death?

A. Are you talking about post-death?

Q. Post-death, yes.

lJa ck so

Q. I'm sorry?

A. Yes. I'm not aware of what happened post- death.

ae

Q. Okay. …………………………………… Mr. Dahl, you were at your firm in charge of the production of valuation reports you testified?

ich

A. That's correct.

Q. And you were also in charge of policy and methodology for Ross Adams?

mM

A. Technical policy and methodology for Ross Adams, correct.

Mr. Toscher: Can the witness speak up a little bit?

Te a

A. I'm sorry.

Ms. Larson:

w.

Q. You advised clients in the acquisition and disposition of intellectual property assets?

ww

A. Yes, that's correct.

n.c om

Q. In 2009, would you have advised the Estate to sell Michael Jackson's name and likeness for 2009

Mr. Toscher: Objection, not relevant Your Honor.

lJa ck so

Judge Holmes: That one is not relevant. Sustained. Now you're getting into the expert testimony rather than the conditions of preparation and the contents of that which may have been reasonably relied on by the Estate. That one's overruled.

Ms. Larson: Okay. In 2009, would you have advised the Estate to sell Michael Jackson's name and likeness.

ae

Ms. Herbert: I think that was ....

Mr. Toscher: Sustained.

ich

Judge Holmes: Oh, I'm sorry. That one was sustained.

mM

Judge Holmes: Sorry. That one was sustained.

Ms. Larson: Okay, okay.

Te a

Mr. Toscher: Got to stay awake in this courtroom.

Judge Holmes: It's getting hotter and hotter.

w.

Mr. Toscher: Not the Court, of course. Your Honor, it's tag teaming. Objection.

ww

Mr. Voth: If that had not taken place ....

Judge Holmes: Don't talk Mr. Voth. It was sustained.

Ms. Larson:

n.c om

Mr. Toscher: I apologize. I drew Mr. Voth into a tag team.

Q. Okay, thank you.

A. You're welcome.

Judge Holmes: Redirect.

ich

Ms. Larson: No further questions.

ae

A. Eventually I understand they did, yes.

lJa ck so

Q. Okay. After you presented your report to the Estate advisors, did they seek a second opinion?

mM

Mr. Toscher: Your Honor, could I have a few moments please?

Judge Holmes: Back on the record.

Te a

REDIRECT EXAMINATION

Mr. Toscher:

ww

w.

Q. Thank you, Your Honor. Mr. Dahl, directing your attention to some of the questions raised by Ms. Larson, based upon information provided to you in your own independent investigation, were you able to determine whether there was any pre-death name and likeness income for the five years preceding death?

A. Yes, I sure was.

n.c om

Q. And what was that determination?

lJa ck so

A. It was zero.

Q. You were asked a question as to whether you consulted with an attorney. Did you feel you needed to consult with an attorney to render your opinion?

A. No.

Q. Okay. Ms. Larson went through a number of items, and maybe we can do this. For instance, the 02 concert. Was the 02 concert discussed in your report?

ae

A. I don't recall. It's certainly not germane to the name and likeness in 2009.

mM

A. That's correct.

ich

Q. Okay. So did any .... so did the 02 concert, now that you mentioned it, that you said it's not germane, not relevant to your opinion; is that correct?

Q. And what about the Bravado transactions; relevant to your opinion?

Te a

A. The Bravado transactions completed post- death, they're not relevant to what was occurring on June 25th, 2009.

w.

Q. Okay. Did you consider all reasonably foreseeable potential income on the name and likeness in connection with your report?

ww

A. We, in my opinion, absolutely did.

n.c om

Q. Okay. What about the fact of cease and desist letter, the fact that you heard they were sent by the Estate. Does that alter your opinion at all?

lJa ck so

A. It changes nothing relative to June 25th, 2009. It shows that activities related to post-death actions were .... I mean I don't even know what I would do with that. They have no revenue basis. The Estate didn't make money because they sent cease and desist letters that I'm aware of. The opportunity or the right to send cease and desist letters seems to be me to be a pretty minimal or de minimis valued asset.

Q. Were you aware that in connection with the 02 tour, there was a Bravado merchandising agreement being negotiated?

A. In 2002 tour?

ae

Q. No, the 02 tour.

ich

A. Oh, the 02 tour. I'm sorry. I understand there was a merchandise deal that was being contemplated, yes.

mM

Q. Okay, and did you .... how did you take that into consideration in your report?

Te a

A. Well, unlike spike which happens post- death, there's something else that happens, and that is the tours don't happen and those concert sales went away. They were gone. Without Michael Jackson the tour doesn't continue and merchandise sales cannot continue as well.

Q. Okay. Were you aware that subsequently the Estate did enter into an agreement with Bravado?

w.

A. I'm aware, yes.

ww

Q. And how did you take that into consideration?

n.c om

lJa ck so

A. Well, the contract which was signed several weeks after death, I believe it has a lot of .... there's a lot of things going on after the death that led to that. The AEG, who was the original contractor with the tour, the 02 tour, had some very significant financial turmoil created by death and approached Bravado, and was instrumental in getting the Bravado deal signed. The Bravado deal is an offshoot of basically a salvation that occurred as a result of the failure of the 02 tour itself. But as of June 25th, 2009, all that was known was that the tour was not going forward and there was no merchandising deal.

Q. You testified before, I think it was on cross, that Moss Adams also did other music appraisals; is that correct?

A. Yes, many.

ich

A. Yes, I would say without exception.

ae

Q. And did you follow the same methodology or the same procedures in order to prepare those appraisals that we talked about with respect to the name and likeness appraisal?

Mr. Toscher: Okay. No further questions, Your Honor.

mM

Judge Holmes: Any pointed recross?

Ms. Larson: No, Your Honor.

Te a

Judge Holmes: Okay. I just want to stress for the record that I'm not taking into account Mr. Dahl's opinion on the value of the name and likeness except as it goes to penalties here. I know that the Petitioners have different experts for the actual value. In keeping with that, I have a few questions for you Mr. Dahl.

w.

A. Yes.

ww

Judge Holmes: With whom did you .... who hired you on behalf of the Estate to do this appraisal?

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A. I know, I recall that the engagement letter itself was signed by Hoffman Sabban. I don't recall if .... exactly who signed it, but we were retained by counsel.

A. Hoffman Sabban.

Judge Holmes: Oh, is it Sabban?

Ms. Herbert: Sabban.

lJa ck so

Judge Holmes: For what firm?

ae

A. I'm sorry, Joel. It may have been Joel that signed the engagement letter, but I don't recall.

ich

Judge Holmes: The famous football league. So the Sabban firm, the Hoffman Sabban firm retained you. Did you have discussions on what they were looking for in the appraisal with them?

mM

A. We had .... yeah, we had several discussions. It's been years enough that I don't recall maybe all of the natures of them.

Judge Holmes: What did they tell you they were looking for in an appraisal?

Te a

A. A valuation of Mijac Music, of MJ Ventures and the masters and obviously the name and likeness.

w.

Judge Holmes: Did they specify those three assets or were there other assets as well, for which your firm or you were retained?

ww

A. Sycamore Valley, I believe, as well.

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Judge Holmes: And that's the Neverland ranch holding entity?

A. That's right, and it's been so many years I don't even recall the nature of that, which was more of a real estate asset.

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Judge Holmes: Did they tell you what to look for in preparing the appraisal that they would use to report the Estate tax owed?

A. Specifically the name and likeness report or all of them, Your Honor?

Judge Holmes: All of them.

ae

A. No.

ich

Judge Holmes: Did they give you .... did you discuss the numbers with them at the time of your engagement?

mM

A. Never.

Judge Holmes: Did you discuss the numbers that you arrived at after your engagement was over and you had prepared the appraisal?

Te a

A. I did, yes.

Judge Holmes: And what was their reaction to those numbers?

w.

A. They thought the name and likeness valuation was too low.

ww

Judge Holmes: Did you change your report in response to that objection?

A. No.

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Judge Holmes: Did they have any other objections or comments on the report related to the numbers you had arrived at for the assets which you had valued?

lJa ck so

A. None that I recall, Your Honor.

Judge Holmes: Were other people at your firm involved in conversations with the Hoffman Sabban firm or anyone else on behalf of the Estate in connection with the appraisal?

A. There are two sides to that question. Post-release, myself and probably my partner Allen Hungate would have been involved in conversations. Prior to release, my staff would have had regular contact with certain members of the Estate as well as myself.

ae

Judge Holmes: Did any of your staff or Mr. Hungate tell you that the Estate was looking for a particular number?

ich

A. Never.

mM

Judge Holmes: Did any .... did Mr. Hungate or anybody else on your staff who worked on the appraisal that was attached to the Estate tax return discuss with you whether the appraisal was too high or too low?

Te a

A. Never, with the exception of the name and likeness report. I think there was surprise by the Estate that the number was as low as it was.

Judge Holmes: Did anyone other than the Hoffman Sabban firm or its representatives discuss the appraisal with you on behalf of the Estate?

w.

A. At the time of the 706 filing?

ww

Judge Holmes: Or before.

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A. I don't recall. It's possible that Karen Langford may have provided commentary, but I don't recall the nature of it. I know she was on a couple of phone calls that we discussed our findings and our rationales.

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Judge Holmes: And what was her response to the appraisals that you had prepared or were about to prepare on behalf of the Estate?

A. I don't remember .... sorry about that. I don't remember a response one way or the other from her. I think the general consensus was that it was too low, but that there was no other information that would provide any evidence for an appraiser to consider anything different.

Judge Holmes: Did you discuss the appraisal that was attached to the Estate tax return with Mr. Branca?

ich

ae

A. Again, I don't recall. I have a very vivid recollection that he may have been involved in a single phone call.

Judge Holmes: Did he object or have any comment whatsoever on the numbers in the appraisal?

mM

A. None that I recall.

Judge Holmes: Did you discuss the appraisal of Mr. McClain?

Te a

A. Never.

w.

Judge Holmes: Did you discuss the appraisal of anyone else who has been used by the Estate to manage its assets?

A. The name and likeness return, no.

ww

Judge Holmes: Or any of the other appraisals?

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A. I certainly had ongoing conversations over the year with David Dunn involving data and collection of data.

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Judge Holmes: Did he convey to you anything from the Estate about whether the appraisals were too high or too low?

A. No, never.

Judge Holmes: Or how they were to be conducted?

A. Never.

ae

Judge Holmes: Does the name Fatty Arbuckle mean anything to you?

ich

A. It sounds like I've heard it once, but not really.

mM

Judge Holmes: Long ago. Do you know did the Estate rely on your appraisal in preparing the return?

A. I believe they did, Your Honor, yes.

Te a

Judge Holmes: On what basis do you say that?

A. Conversations with counsel. I have never personally reviewed the 706.

w.

Judge Holmes: Okay. Do you have any follow- up questions, Mr. Toscher?

ww

Mr. Toscher: No, Your Honor.

Ms. Larson: No, Your Honor.

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Judge Holmes: Lunch?

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Judge Holmes: Do you have any follow-up questions, Ms. Larson?

Mr. Toscher: Yes, Your Honor.

Judge Holmes: You have Mr. Phillips after lunch?

Mr. Weitzman: No, we have one witness before, Mr. Sebacious.

ae

Judge Holmes: Oh him.

ich

Mr. Weitzman: I asked him to be here at 1:30.

Judge Holmes: That's perfect timing, isn't it?

mM

Mr. Weitzman: Off the top of my head.

Judge Holmes: The gift of foresight, Mr. Weitzman.

Te a

Mr. Toscher: Thank you, Your Honor.

WAS ANDY HEYWARD ABOUT TO COMMIT PERJURY?? JUDGE SHUTS IT DOWN, NOW WONDERING HOW MUCH OF HIS TESTIMONY WAS TRUTHFUL?? At the match with John Branca..

w.

Judge Holmes: Okay. You're free to go, Mr. Heyward.

ww

A. Thank you.

Judge Holmes: Next up Mr. Toscher or Mr. Weitzman?

Mr. Dahl: Good morning, Your Honor.

lJa ck so

Mr. Toscher: It would be Mr. Dahl, Your Honor.

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Judge Holmes: Thank you very much.

Judge Holmes: Good morning again. With that, Mr. Toscher can ask you questions.

OWEN DAHL recalled sworn in.

ae

DIRECT EXAMINATION

ich

Mr. Toscher:

mM

Q. Good morning, Mr. Dahl. We're recalling you as a fact witness today. Your Honor, I'm just going to go briefly through some preliminary very quickly, because we didn't do it with him as an expert because it's in his report. So could you give your name and address for the record sir?

A. Yes. Owen Dahl, D- A-H-L. My home address ………..

Te a

Mr. Toscher: Okay. Your Honor, I was just informed that Mr. Heyward had something he wanted to add to his testimony .... oh. Okay before we go on, Mr. Heyward just informed counsel that he wanted to add something. Can he ....

Judge Holmes: To correct an untruth or something like that, to clarify an answer?

w.

Mr. Toscher: Nothing like that. I don't know what it was. I just had the ....

ww

Judge Holmes: How odd. Well, bring him back in.

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Mr. Toscher: If Mr. Heyward wants to come back in, the Judge will allow it. Thank you, Your Honor.

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Judge Holmes: Well now you've got me curious. Mr. Dahl, can you step to one side for just a second?

Mr. Voth: Respondent objects to this, Your Honor. We don't know if Petitioner's counsel spoke to Mr. Heyward. I think it's inappropriate to add something else.

Mr. Weitzman: I'm going to explain exactly what happened, and then you can make a decision.

Judge Holmes: Okay, explain.

ich

ae

Mr. Weitzman: When we got in the hallway outside and thanked Mr. Heyward for coming, he said to me you know, I forgot to say one thing in response to your question, and I want to explain it. I said time out. We'll see if you can testify again. What is involved? Sure. I said what does it involve? He said Walmart. He said there's already a witness on the stand and I'll see if we can interrupt for you to for me to ask that question so you can respond to the question.

mM

Mr. Voth: Respondent objects.

Judge Holmes: Yeah, yeah. Mr. Heyward can go. That's fine.

Te a

Mr. Weitzman: Really? For a mere 30 seconds?

w.

Judge Holmes: I don't want to have him commit perjury or something if he remembered something about facts. But elaborating a question, ehh. I don't like surprises. You can go, Mr. Heyward. It's fine.

Mr. Weitzman: Did you say he had perjured? I don't understand.

ww

Judge Holmes: No, no. If he had said something that was untrue upon further reflection.

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Judge Holmes: Sometimes witnesses .... yeah, sometimes witnesses ....

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Mr. Toscher: No. That's not the case, Your Honor.

Mr. Toscher: I think the record's clear. It's the he had an incident regarding Walmart that if the Court ....

Judge Holmes: It would be an additional story or something, right?

Mr. Weitzman: I'm sorry. He was going to just relate to the Court the meeting he had with Walmart about this project.

ich

ae

Judge Holmes: Yeah. It was an additional story or an elaboration of his existing testimony. So it's not self-protective. It's fine. We got his story. Go ahead, Mr. Toscher. Where's Mr. Dahl again?

Mr. Toscher: Could you get Mr. Dahl please?

mM

Judge Holmes: Again, again. There he is. …………………………………….

Judge Holmes: Go ahead, Mr. Toscher.

Te a

CONTINUED DIRECT EXAMINATION

Mr. Toscher:

w.

Q. Mr. Dahl, what is your current business?

ww

A. I am a business appraiser.

A. The business name is Dahl Consulting Group.

A. I am engaged.

Q. You're engaged, okay. Do you have children?

A. Five children.

lJa ck so

Q. Okay. Can you just briefly .... are you married?

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Q. And do you have a name of the business?

ae

Q. Okay. Can you briefly describe your educational background for the Court?

ich

A. Sure. I have an undergraduate in Economics from the University of British Columbia, pardon me, the University of Victoria-British Columbia; I have three professional designations. I'm an accredited senior .... I'm sorry.

mM

Q. Okay. I was going to ask you. Can you tell us slowly what your professional designations are please?

Te a

A. Sure. I am a chartered financial analyst. That's a designation from the CFA Institute. I am an accredited senior appraisers with the American Society of Appraisers, and I am a licensed international financial analyst from the AIMR Institute.

Q. Could you briefly go through your work history after you left college?

ww

w.

A. Sure. For several years I worked in banking as a currency trader. In 1999 I left the banking industry to work full time as a business appraiser with Moss Adams, a firm that I stayed with from 1999 to 2012. In 2007 I became a partner of Moss Adams. My role and responsibility both before partnership and after partnership was entirely related to business appraiser. I was a specialist in the area of intellectual property.

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Q. Okay. Can you tell us a little bit about Moss Adams? What is Moss Adams?

lJa ck so

A. Moss Adams, I don't know if it's the 10th, 11th or 12th largest public accounting firm. It seems to change from year to year. It's one of the larger accounting firms in the nation. It's a full service firm that offers audit and tax work and has a consulting division as well. The Valuation Group was a component of the Consulting division.

Q. Okay, and you were in the Consulting division?

A. Yes, yeah.

ae

Q. So tell us a little bit about .... and you said the Valuation Group was in the Consulting division?

ich

A. Yes.

Q. Tell us a little bit about what the Valuation group does?

mM

A. So the Valuation Group consisted of, when I was there, four partners up and down the west coast. We performed a large variety of valuations for a variety of purposes, from the establishment of ESOPs to litigation support to estate planning and gift tax reporting. It was what I would call a full service appraisal firm, business appraisal firm.

Te a

Q. Can you estimate how many people were in the valuation practice of Moss Adams?

A. When I left, there were probably 25. It's a guess.

w.

Q. Okay. Where were they located, physically?

ww

A. Our headquarters was Seattle. We had offices in .... Valuation offices in Portland and northern California and southern California.

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Q. Okay. Going back to the 2009 era, you said 2009. You said you left in 2012. What was your position at Moss Adams at the time?

Q. And what were your responsibilities?

lJa ck so

A. I was a partner.

A. In addition to obviously sourcing and finding clients, my job was to oversee the production of valuation reports. I was also the technical director of Moss Adams Valuation Group. So my responsibilities were to establish policy, establish methodologies that were group centric methodologies and policies.

ae

Q. Could you put up stipulations Exhibit 57 please?

ich

Mr. Camp: 5-7?

Mr. Toscher:

mM

Mr. Toscher: 557. ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Q. Mr. Dahl, did there come a time where Moss Adams rendered a valuation of Michael Jackson's name and likeness?

Te a

A. Yes, there was.

Q. And do you recall whether that was in connection with the preparation of the Form 706?

w.

A. It was.

ww

Q. And the Form 706 is what?

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A. That's the Estate tax return.

A. Yes.

Q. Is that your signature on that?

A. It is, yeah.

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Q. Okay. I'm looking at what's .... I believe the government does not object to Exhibit 557. Can you go to the next page please? Okay. Do you recognize .... can you see it, Mr. Dahl? I guess you have it on the screen there.

ae

Q. Okay. And is this your report, your valuation of Michael Jackson's name and likeness as of the date of his death?

ich

A. Yes, it is.

mM

Q. Okay. Can you tell us who at Moss Adams was involved in the preparation?

A. I was principally involved. There were several other analysts. It's been long enough that it would be helpful if I could go to the back and see the resumes attached to know that.

Te a

Q. Okay. I'll just ask you this question.

A. Sure.

w.

Q. Are the people who were involved in the preparation, are their resumes attached?

ww

A. Yes.

Q. Oh, you were able to get to it. Okay.

n.c om

A. It was Clayton Cafferata, Ivor Scott would probably be there as well.

lJa ck so

A. concurring reviewer my partner Alan Hungate would have been involved. I presume his resume is attached.

Q. I haven't seen it, but okay. So you think maybe Mr. Hungate was involved as well?

A. He would have certainly been involved in discussions as we thought this process through, yes.

ae

Q. Okay, and the CVs or resumes attached to you, Mr. Cafferata and Mr. Ivor, those set forth their qualifications; is that correct?

ich

A. Yes, correct.

Q. Okay. Now can you tell us generally what was .... what were you charged with? What was Moss Adams charged with in the preparation of this report?

mM

A. Specifically to the name and likeness, we were charged with the task of determining the fair market value of Michael Jackson's image and likeness as it pertains to the opportunity to license and merchandise and otherwise engage in activities, generate cash flow that are unrelated to the music business itself.

Te a

Q. Okay. Did you also do .... did Moss Adams also do other reports regarding the valuation of the music assets?

w.

A. This was work that was done at the same time and in conjunction with the appraisals of Mijac Music and the master recordings, which all occurred within that same couple of month period, yes.

ww

Q. Okay. Now was it your practice to request information from a client in order for you to do your valuations?

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A. Yes. Every appraisal starts out with your being engaged with it and a document request list, and with documents requested of the client specific to the engagement in question.

lJa ck so

Q. Was the Estate cooperative with you in providing all information you requested?

A. At all times, yes.

Q. Okay. Going back to Exhibit 557, can you go to the .... well, I think you're familiar with this. You've reviewed this before today, haven't you Mr. Dahl?

A. Yes, I have.

ich

ae

Q. Okay, and did you render an opinion as to the value of Michael Jackson's name and likeness?

A. I did.

mM

Q. And do you recall the number that you ....

A. It's 2000 and maybe 2,105 an it might be 2,405. I forget which it is.

Te a

Q. Okay. It's in the report.

A. Yeah.

w.

Q. Can you describe for the Court the methodology you used to arrive at that number?

ww

A. The methodology really starts with the document, I mentioned the document request, and the purposes of valuing the opportunities to license that brand or that image or likeness. We requested royalty statements. We requested contracts. We requested historical financial

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statements that show payments made to Mr. Jackson for use of his image and likeness. We requested business plans and opportunities in place as of the time of death. Those would have been the typical documents we would request whenever doing a name and likeness valuation.

lJa ck so

Q. Okay. So you arrived at a value of $2,100. What appraisal or valuation method did you use to arrive at that valuation?

A. This was a discounted cash flow analysis. It's really the only valuation methodology that makes sense when applying image and likeness valuation. These types of assets don't sell in a marketplace very readily, particularly ones that are deeply impaired.

Q. Okay. The $2,100 number has been criticized by perhaps the Internal Revenue Service. Can you describe for the Court how you arrived at that number?

mM

ich

ae

A. Yeah. When we start the process, we have no preconceived notion, and as we ask for documents and gather documents, it's the documents and facts that drive the appraisal process. At the end of the day, you know, I think it's been clear and I think there's possibly some evidence that's already been entered that there simply had been no financial gain made from the image and likeness licenses for several years now. There are several reasons for that. The length of time by which Mr. Jackson had actively tried to license his name without success is so long and so comprehensive that by the time we got to June 25th, 2009 ....

Ms. Larson: Objection, relevance.

Te a

Judge Holmes: Overruled.

Ms. Larson: Testifying as an expert.

w.

Judge Holmes: This is .... you're limiting this to how he did this?

Mr. Toscher: That's correct, Your Honor.

ww

Judge Holmes: Okay, overruled.

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Mr. Toscher:

lJa ck so

A. By the time we .... I'm sorry. Let me step back. By the time we had reviewed all of the documents requested, all of the documents that we feel are relevant and pertinent, we had come to the conclusion that there simply had been no income generated for years and years and years, and there were very specific and straightforward reasons for that.

Q. Okay, and what do you think those reasons were, that there was a lack of historical income?

A. This is very tough conversation, and it

ae

Q. Well let me ask you first. Are those reasons set forth in your report?

ich

A. They're in the report.

Q. Okay. So you can just with that briefly tell the Court.

Te a

mM

A. It pains me in open court to have to discuss the fact that there are child molestation charges that directly and deeply changed the landscape of this analysis. The idea that opportunities that existed for Mr. Jackson to license his image and likeness prior to 2000, 1995 and then more importantly prior to 2005, and their relevance to what was actually occurring in 2006 and 2007 and 2008 and 2009 are such a relevant part of the story for an appraiser considering the facts and circumstances on June 25th, 2009. When we get to June 25th, 2009, we asked for all of the documents available to the Estate. We came to the conclusion that any valuation methodology that doesn't focus on the realities of the situation are nothing but speculation.

w.

Q. Okay. And is it fair to say that you indicated 2004, 2005 or '05, '06, '07, '08, '09. What are the significance of those years or let's say the 2000 ....

ww

Ms. Larson: Objection. I have a continuing objection to his testifying as an expert. He's here as a fact witness.

Mr. Toscher:

lJa ck so

Q. What's the significance to the 2005 year that you're talking about?

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Judge Holmes: He is. Go ahead.

ae

A. When an appraiser is asked to value any asset, landmark moments that change and we use the term "impairment" as appraisers. Landmark moments that impair the asset because very specific landmark moments for thought process when it comes to considering fact. There was an impairment that occurred in 2005, whether we want to talk about it or not, and that impairment continued to the date of death. In fact, impairment was significant to the date of death in light of the conversations that I had with the Estate in detail during our work product, related to opportunities and attempts by Mr. Jackson and others in 2007 and 2008 to find ways to monetize and build on image and likenesses that frankly never occurred. As you know, as the record I believe shows quite clearly, not a penny was earned in 2007 or 2008 or 2006 that I could find that relates specifically to the value of the image and likeness.

mM

A. No. There's no point.

ich

Q. In your report, did you go through the even back further the 1993 allegations with respect to Mr. Jackson?

Q. They're not in your report?

Te a

A. They're not in my report. There's commentary in my report about this life, but we did not look at the financials prior to 1993.

Q. No. You misunderstood my question.

w.

A. Oh, I'm so sorry.

ww

Q. I'm sorry, Mr. Dahl.

A. Apologies.

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Q. No. The allegations against Mr. Jackson that arose first in 1993.

lJa ck so

A. Right. Yeah, we considered them. I think it's an ongoing unfortunate and deeply troubling story that started so many years before death, and really culminate and snowball with some of the other allegations such as drug abuse, such as the removal of self from society for several years, to the point where he was effectively recluse. These are not the actions of somebody who are actively trying to endorse products and engage in image and likeness activities. You see that in the Davie-Brown index scores, which we allude to in our report and I know that ....

Q. Okay, stop.

ae

A. I'm sorry.

ich

Q. No, stop a second, because they are in your report and that's part of the factual background, Your Honor. But tell the Court what the Dave Brown index scores are?

mM

A. Davie-Brown index is one of a couple of sources of consulting work that are done by third parties, when large corporations are interested ....

Ms. Larson: Objection. We want to say that the Court shouldn't accept any of this expert testimony. It should be limited to the penalty issue only.

Te a

Judge Holmes: I understand. Were these Davie-Brown scores in the appraisal that was attached to the I&T ....., I'm sorry, the tax return 706?

A. Yeah, they sure were, Your Honor.

ww

w.

Judge Holmes: Okay. They're in for that purpose to show the potential for reasonable reliance on this opinion by the Estate in filing the return at the time it was filed. With that limitation, go ahead.

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lJa ck so

A. The importance of the Davie- Brown scores, and I'll just back up to make sure there's some understanding. They are survey-driven scores that measure a celebrity's position in many, many ways. Davie-Brown, for example, Michael Jackson scores among the highest, most recognized celebrities in their index. It means 99.7 percent of the world know who Michael Jackson is. What's interesting, though and what's troubling as we look at trying to figure out what the value of Michael Jackson's name and likeness was in June 25th, 2009, is that he ranked among the lowest in terms of trustworthiness, and among the lowest in terms of scores that matter to corporations who are interested in using image and likeness to promote their products. Mr. Jackson at June 25th, 2009 was essentially a pariah from the perspective of licensing material.

Mr. Toscher:

Q. Okay. Mr. Dahl, did there come a time that you delivered or communicated with the Estate regarding the 2105 value you came up with?

ich

Q. And what was the reaction?

ae

A. Yes.

A. They were surprised and thought it should be higher.

mM

Q. Okay, and what did you .... how did you .... what was your response to that?

Te a

A. It's a difficult conversation because when as an appraiser you follow the procedures and methodologies and approached that you believe to be inherent on how you are trained and how you proceed in other matters, the number is what it is. To change the number meant to change the facts, and there were no facts that we could change because the facts were what they were. Mr. Jackson's scores as measured by Davie- Brown, Mr. Jackson's ability to license as measured by years and years and years of inactivity, Mr. Jackson's own actions in terms of reclusiveness had led to the point on June 25th, 2009 when his ability to ....

w.

Ms. Larson: Objection, personal knowledge.

ww

Judge Holmes: Good point. Elaborate a foundation for this one.

Q. Mr. Dahl, are you talking about the foundation for the report you wrote?

lJa ck so

A. I am, Your Honor. I am sir, yes.

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Mr. Toscher:

Judge Holmes: On what were those observations based?

A. The observations, what was the basis?

Judge Holmes: That you just said about ....

ae

A. So Davie-Brown scores, Internet searches, general knowledge as to Mr. Jackson's whereabouts over many years.

ich

Judge Holmes: So this is things you read in the media?

Mr. Toscher:

mM

A. Things in the media, things that come directly from the Estate representatives and things that, as I mention, come from qualitative scores, yes.

Te a

Q. Mr. Dahl, I think there was one example in your report concerning a clothes line, clothes line, a line of clothes that was being discussed?

A. I think you might ....

w.

Judge Holmes: Clothing line.

ww

Mr. Toscher:

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Q. Clothing line.

A. Is this the Ed Hardy line?

A. Ed Hardy?

Q. I believe so.

Judge Holmes: Okay, answer the question.

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Q. Pardon?

ich

ae

A. Sure, sure, sorry. So Ed Hardy, which is a very well known, it was very popular especially at the time of death, there was a clothing line that Mr. Jackson uniquely approached Ed Hardy and asked if they would be interested in pursuing a joint clothing line with Michael Jackson.

Ms. Larson: Objection, lack of personal knowledge.

mM

Mr. Toscher: This is all the foundation for his report. If they want to .... you're right.

Judge Holmes: I understand. Again, it's not for the truth of the matter asserted; it's for the truth that he relied on it.

Te a

Mr. Toscher: That's correct, Your Honor.

w.

Judge Holmes: The possibility that it was reasonably relied upon when it came to the Estate. So with that understanding, the objection is overruled. Go ahead, Mr. Toscher.

Mr. Toscher:

ww

Q. So describe your understanding of that transaction? I think you said Michael Jackson approached Ed Hardy?

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Judge Holmes: What does co-opted mean?

lJa ck so

A. Yeah. Mr. Jackson approached Ed Hardy. This transaction deal ultimately failed and went nowhere. But a goal by Mr. Jackson or Mr. Jackson's advisors was to put forward a clothing line that was co-opted between Ed Hardy and Michael Jackson images involved in it.

A. It means that Ed Hardy would fund it and create the clothes with Michael Jackson designs being embedded and incorporated into their designs.

Judge Holmes: Okay, go ahead.

ae

A. Ed Hardy had these very kind of unique graphic shirts, and it would be some Michael Jackson references within their graphics.

ich

Mr. Toscher:

Q. And you said that deal went nowhere?

mM

A. Well, the deal went nowhere, but it was kind of interesting for another reason, and that is that it was Michael Jackson who approached Ed Hardy, not the other way around, and it was Ed Hardy who ultimately rejected being involved with Michael Jackson in any way.

Te a

Q. Okay. It's been a lot of time since your 2009 .... well 2010 report, Mr. Dahl. Did the Estate reasonably rely or rely upon that report your opinion about its ....

Ms. Larson: Objection, calls for speculation.

w.

Judge Holmes: That one's sustained. You may be able to lay a foundation.

Mr. Toscher:

ww

Q. Did you provide the report with the intent that the Estate would rely upon it, Mr. Dahl?

n.c om

A. I sure did.

lJa ck so

Q. And I know there's been a lot of time since then. Do you still stand by your opinion of that at that time?

A. Yeah, I absolutely do, and to the extent there's a change in the value of that image and likeness, and to that I'm not in a position to speak to the value change, I want to make it clear that that is a completely new asset. To the extent that Mr. Jackson's image and likeness changed postJune 25th, 2009 and resuscitated, an asset was created that did not exist on June 25th, 2009. What existed on June 25th, 2009 was a deeply flawed person with serious significant issues when it came to the issue of licensing image and likeness in a non-music setting.

ae

Mr. Toscher: Thank you. No further questions, Your Honor.

Ms. Larson: Thank you.

ich

Judge Holmes: Cross.

mM

Judge Holmes: You're a new face. What's your name ma'am?

Ms. Herbert: What's your name?

Te a

Ms. Larson: Denise Larson.

Judge Holmes: Hi, Ms. Larson. Your witness.

w.

Ms. Larson: May we take a break please?

ww

Judge Holmes: Oh absolutely.

Judge Holmes: For mid-morning even.

lJa ck so

RECESS…………….

n.c om

Ms. Larson: Thank you.

Ms. Larson: Okay, Ms. Larson. Oops, Mr. Toscher is still at the stand.

Mr. Toscher: No. Can I stay here so I can hear better? She's going to question from there, Your Honor.

ae

Judge Holmes: It's her choice. If you want to question from there, Mr. Toscher can stay.

ich

Ms. Larson: Yes. I'll stay here. I'll let him have the podium.

Judge Holmes: Go ahead, Ms. Larson.

Ms. Larson:

mM

CROSS EXAMINATION

Te a

Q. Thank you, Your Honor. Good morning, Mr. Dahl.

A. Good morning.

w.

Q. You've testified that you valued .... you listed the value that you listed on the appraisal provided to the Estate for name and likeness was $2,105?

ww

A. That sounds right.

n.c om

Q. And you used .... also you testified that you used a discounted cash flow analysis for that appraisal?

A. Correct.

lJa ck so

Q. And the cash flow that you used was based on historical numbers only?

A. That's correct.

Q. Thank you. In doing that, you used income that were from before Mr. Jackson's death?

ae

A. That's correct as well.

ich

Q. Now can we have the exhibit actually that was brought up before. This is page 25 of your appraisal report. Do you recognize it?

A. It looks like it would be, yeah.

A. Okay.

mM

Q. Okay. Do you see there that you have income from .... that's being projected, and it starts at $369?

Te a

Q. And this income stream, this was based on royalties from printed sheet music?

A. That's correct.

w.

Q. There were no other additional income streams provided you by the Estate?

ww

A. There were no other income streams provided by the Estate, no.

n.c om

Q. Thank you. You also reviewed a memo from Karen Langford of Ziffren Brittenham for information regarding pre-death name and likeness income, didn't you?

lJa ck so

A. You might want to give it to me so I can review it. It sounds familiar, but I don't want to go on memory. It's been eight years. Or maybe it's seven, I forget. It's a long time.

Q. I don't need you to review it. Do you remember reviewing it?

A. I remember a memo that was consistent with conversations that we had, yes.

Q.

So you didn't attribute any income based on this memo?

ich

ae

A. Well, would you be more specific and tell me what income you're talking about?

mM

Judge Holmes: When you say "attribute to this memo," do you mean the memo had income on it or some statement on it that he was relying on or ....

Mr. Toscher: Well ....

Ms. Larson: I mean aren't we ....

Te a

Mr. Toscher: Yeah. We have to put the memo up there.

Ms. Larson: We can just ....

w.

Ms. Herbert: We can mark it for ....

ww

Mr. Toscher: Yeah, we need it ....

lJa ck so

Judge Holmes: Okay. You can approach or have somebody approach.

n.c om

Ms. Larson: Can we have this marked for identification?

Ms. Herbert: Your Honor, can we have a minute to print?

Judge Holmes: Sure. ……………………..

Judge Holmes: Go ahead, Ms. Larson.

Ms. Larson:

ae

Q. Okay, Mr. Dahl. You didn't consult with any intellectual property attorneys to help you determine the scope of name and likeness, did you?

ich

A. No. I have valued name and likeness assets in the past.

mM

Q. Your forecasted future earnings, as we discussed, only projected from pre-death income; correct?

A. That is correct.

Te a

Q. You didn't use any foreseeable post-death income in your valuation?

A. My opinion is that as of June 25th, 2009, there was no foreseeable post-death income, based on the .... irreparable harm to Mr. Jackson's name and likeness as of June 25th.

w.

Ms. Larson: Thank you. I want to move to strike. That's beyond the scope of the question.

ww

Judge Holmes: Granted.

n.c om

Ms. Larson:

Q. You testified that you used a post-death spike in all of your Mijac reports?

lJa ck so

A. Correct.

Q. You also testified that name and likeness is intertwined with the music ....

Mr. Toscher: Objection, characterization. The word "intertwined" was not used yesterday.

Judge Holmes: Overruled. Go ahead.

ae

Ms. Larson:

ich

Q. And you also testified that the name and likeness is intertwined with the music rights?

mM

A. Name and likeness affects the value of music rights. Without question it's an inclusive part of what we valued in Mijac Music, and also what was valued and already settled in the master recordings.

Q. Move to strike. That is ....

Te a

Mr. Toscher: Your Honor, can I be heard on that.

Judge Holmes: You can redirect, Mr. Toscher.

Ms. Larson:

w.

Q. If the music spikes, wouldn't the name and likeness spike as well?

ww

A. You are talking about buckets of income, and I believe this .... I am worried that you're going to strike this, Your Honor.

n.c om

Judge Holmes: Just answer the question.

lJa ck so

A. But we are talking about buckets of income, and a bucket of music income attributable to Mr. Jackson includes Mr. Jackson's authority and impact on the sales of that revenue. That is included. It is not ....

Ms. Larson: Yes or no.

Mr. Toscher: No, Your Honor.

ae

Judge Holmes: Hold on, hold on. You can object. You can't help answer. You can answer, but you should answer the question. The question was ....

ich

A. There is a spike ....

Judge Holmes: Wait, wait, wait. Let her answer the question.

mM

Ms. Larson:

Q. The question is should there be a spike, and it's a yes or no.

Te a

A. There is a spike, and it is included in the valuations of Mijac Music and other assets appraised by other people.

Q. No. Is there a spike .... the question is should there be a spike in name and likeness?

w.

A. I think I answered that.

ww

Judge Holmes: Okay. You said no, right?

Mr. Toscher: No, that's not what he said.

n.c om

A. That's how I ....

lJa ck so

Judge Holmes: Is there a spike .... should there be a post-death spike for the Estate's income from the use of Mr. Jackson's name and likeness?

A. Before I answer that, could we define what you want name and likeness to include, because you have included music assets in your question to me.

Judge Holmes: Okay.

Ms. Larson: No, it's in your report.

ae

Mr. Toscher: Okay, Your Honor. Can I just make a suggestion, so we don't ....

ich

Mr. Toscher: Ms. Larson asked an open- ended question and then called for a yes or no, so he should be able to answer it. So what I would suggest is let's move on with her questions, so we don't get bogged down.

mM

Judge Holmes: Overruled. Did you have a spike in income in your appraisal report attached to the Form 706 for income attributable to the use of Mr. Jackson's name and likeness.

Te a

A. Since the IRS used the term "intertwined," the answer to the question is yes. If we segregate that and treat the impact on music separately from the very separate right to license his name and likeness that excludes his use of music, then the answer is no. But to the extent there was a spike, that spike is affected by the fact that it was Mr. Jackson and not an unknown artist.

Ms. Larson:

w.

Q. Thank you.

ww

A. We started this question ....

Ms. Larson:

n.c om

Judge Holmes: No, no. No question, no question. Go ahead, Ms. Larson.

A. The ones that didn't happen because he died?

Q. Correct.

A. No.

ae

Ms. Herbert: Is that a no?

lJa ck so

Q. Thank you. Okay, no question. You didn't take into consideration the series of 50 concerts that were sold out seven months prior to Mr. Jackson's death?

Ms. Larson:

ich

Q. Is that a no? You didn't take into account the agreements with Bravado for branded merchandise before he died, did you?

mM

A. The ones that were signed after death, no.

Q. You didn't take .... you didn't take into account the agreement with Bravado, the arrangements and agreements with Bravado for branded merchandise after he died; correct?

Te a

A. The ones that were signed after death, no.

Q. You didn't consider the fact that his career was reviving prior to his death?

ww

w.

A. I don't take .... I don't agree with that statement. His music career may have been reviving, but his name and likeness scores were at an all-time low.

Q. Did you take any of that into consideration?

n.c om

A. In our music valuation we sure did, yes. We know spent a day talking about spikes.

lJa ck so

Q. But not in your name and likeness; correct? Not in name and likeness; correct?

A. Name and likeness in the use for merchandising purposes there was no spike. That is my professional judgment.

Q. Did you .... you didn't consider any of this foreseeable post-death income opportunities in your

Mr. Toscher: Objection, asked and answered, Your Honor.

ich

Ms. Larson:

ae

Judge Holmes: Overruled.

mM

Q. You didn't consider any of the foreseeable post-death income opportunities in your appraisal?

A. What foreseeable post-death income are we talking about? That's a really broad question.

Q. The answer is no? The answer is no?

Te a

A. I don't think I can answer it, but I guess I'll go with no just to keep the Court moving.

Q. Yes or no.

w.

A. I just said no.

ww

Q. Okay, all right. You didn't consider comparable celebrity estates in coming up with the 2009 name and likeness value, did you?

n.c om

A. We considered it. I'm not aware of a single celebrity estate in which the allegations of child molestation. I don't find any comparability between things that have happened prior to death

lJa ck so

Q. But none of them were in your report?

A. We considered it and made a determination that there is no comparable to the situation in place on June 25th, 2009 involving Michael Jackson.

Q. Thank you. There was no analysis in your report comparing Michael analysis to ....

ae

Mr. Toscher: Objection. I didn't understand it and the other lawyer was talking. Would you rephrase the question?

ich

Judge Holmes: Overruled.

Ms. Larson:

mM

Q. There was no analysis in your report comparing Michael Jackson to any other deceased celebrities?

A. Actually, the Davie-Brown index does a very good job of comparing celebrities and ....

Te a

Q. That's .... is that in your report?

Judge Holmes: That wasn't the question, Mr. Dahl. Was there in the appraisal report attached to the Estate's tax return that you prepared any income attributable to the name and likeness?

ww

w.

A. Was that the question? I'm sorry. You asked if there was any income attributable to name and likeness.

n.c om

Mr. Toscher: Your Honor, I don't think that was the question. I think the question was, was there an analysis of other celebrities, and the response was it was done through the Davie-Brown index.

Ms. Larson:

lJa ck so

Q. The question was whether it was in his report?

A. We considered it and excluded it and did not include it in the report, because we feel that there is no comparison between the implications and allegations against Mr. Jackson and allegations against other deceased musicians.

ae

Q. Okay, thank you, thank you. In your report, you didn't mention any rights of publicity under California or other state laws?

A. What would those rights of publicity be?

mM

A. I'm not sure.

ich

Judge Holmes: Answer the question.

Judge Holmes: I'll .... did you when she leaves it like that. So did you consider the, specifically the rights that Mr. Jackson would have had under California Civil Code. What were the four digits again?

Te a

Ms. Larson: California Code 3343.

Judge Holmes: 3343.

w.

A. The right to use ....

ww

Judge Holmes: Image and likeness.

n.c om

A. Image and likeness. That is implicit in what we considered and the reason why there is no revenue ....

lJa ck so

Ms. Larson: Okay, thank you. So that's no, not in your report?

Mr. Toscher: Your Honor I think ....

A. I think I just said yes.

Judge Holmes: Hold on. That was implicit not explicit.

ae

A. It was implicit, yes.

Ms. Larson:

ich

Q. And what about did you consider other state laws?

mM

A. No.

Q. In your report, you didn't consider the value of any trademarks held by Michael Jackson?

Te a

A. The trademarks are synonymous with his name. They are incorporated in by default part of the valuation of the name and likeness.

Q. Did you mention trademarks in your report?

w.

A. I don't recall.

ww

Q. Did you consider any values of name and likeness under international laws?

n.c om

A. The question is no, but they're also embodied in the history of Mr. Jackson's works.

lJa ck so

Q. Thank you, thank you. Were you aware .... were you aware that the Estate was sending dozens of cease and desist letters in the first 90 days after Michael Jackson's death regarding name and likeness?

A. I'm not aware of that.

Q. Okay. Were you aware that the Estate was filing multiple trademark applications in the U.S. and abroad in the first 90 days after his death?

A. I don't recall.

ae

Q. Were you aware that the Estate immediately engaged attorneys to protect name and likeness?

ich

A. It would be sensible, but I wasn't aware of that.

mM

Q. Did you know that they were actually spending at least hundreds of thousands of dollars during this 90 day period for protection of name and likeness?

A. Are you talking about post-death?

Te a

Q. I'm sorry?

A. Are you talking about post-death?

w.

Q. Post-death, yes.

ww

A. Yes. I'm not aware of what happened post- death.

n.c om

Q. Okay. …………………………………… Mr. Dahl, you were at your firm in charge of the production of valuation reports you testified?

A. That's correct.

lJa ck so

Q. And you were also in charge of policy and methodology for Ross Adams?

A. Technical policy and methodology for Ross Adams, correct.

Mr. Toscher: Can the witness speak up a little bit?

ae

A. I'm sorry.

Ms. Larson:

A. Yes, that's correct.

ich

Q. You advised clients in the acquisition and disposition of intellectual property assets?

mM

Q. In 2009, would you have advised the Estate to sell Michael Jackson's name and likeness for 2009

Te a

Mr. Toscher: Objection, not relevant Your Honor.

Judge Holmes: That one is not relevant. Sustained. Now you're getting into the expert testimony rather than the conditions of preparation and the contents of that which may have been reasonably relied on by the Estate. That one's overruled.

w.

Ms. Larson: Okay. In 2009, would you have advised the Estate to sell Michael Jackson's name and likeness.

ww

Ms. Herbert: I think that was ....

Judge Holmes: Sorry. That one was sustained.

Ms. Larson: Okay, okay.

lJa ck so

Mr. Toscher: Sustained.

n.c om

Judge Holmes: Oh, I'm sorry. That one was sustained.

Mr. Toscher: Got to stay awake in this courtroom.

ae

Judge Holmes: It's getting hotter and hotter.

ich

Mr. Toscher: Not the Court, of course. Your Honor, it's tag teaming. Objection.

Mr. Voth: If that had not taken place ....

mM

Judge Holmes: Don't talk Mr. Voth. It was sustained.

Mr. Toscher: I apologize. I drew Mr. Voth into a tag team.

Ms. Larson:

Te a

Q. Okay. After you presented your report to the Estate advisors, did they seek a second opinion?

w.

A. Eventually I understand they did, yes.

Q. Okay, thank you.

ww

A. You're welcome.

n.c om

Ms. Larson: No further questions.

lJa ck so

Judge Holmes: Redirect.

Mr. Toscher: Your Honor, could I have a few moments please?

Judge Holmes: Back on the record.

REDIRECT EXAMINATION

ae

Mr. Toscher:

mM

A. Yes, I sure was.

ich

Q. Thank you, Your Honor. Mr. Dahl, directing your attention to some of the questions raised by Ms. Larson, based upon information provided to you in your own independent investigation, were you able to determine whether there was any pre-death name and likeness income for the five years preceding death?

Q. And what was that determination?

Te a

A. It was zero.

Q. You were asked a question as to whether you consulted with an attorney. Did you feel you needed to consult with an attorney to render your opinion?

w.

A. No.

ww

Q. Okay. Ms. Larson went through a number of items, and maybe we can do this. For instance, the 02 concert. Was the 02 concert discussed in your report?

n.c om

A. I don't recall. It's certainly not germane to the name and likeness in 2009.

lJa ck so

Q. Okay. So did any .... so did the 02 concert, now that you mentioned it, that you said it's not germane, not relevant to your opinion; is that correct?

A. That's correct.

Q. And what about the Bravado transactions; relevant to your opinion?

A. The Bravado transactions completed post- death, they're not relevant to what was occurring on June 25th, 2009.

ich

ae

Q. Okay. Did you consider all reasonably foreseeable potential income on the name and likeness in connection with your report?

A. We, in my opinion, absolutely did.

mM

Q. Okay. What about the fact of cease and desist letter, the fact that you heard they were sent by the Estate. Does that alter your opinion at all?

Te a

A. It changes nothing relative to June 25th, 2009. It shows that activities related to post-death actions were .... I mean I don't even know what I would do with that. They have no revenue basis. The Estate didn't make money because they sent cease and desist letters that I'm aware of. The opportunity or the right to send cease and desist letters seems to be me to be a pretty minimal or de minimis valued asset.

w.

Q. Were you aware that in connection with the 02 tour, there was a Bravado merchandising agreement being negotiated?

ww

A. In 2002 tour?

n.c om

Q. No, the 02 tour.

A. Oh, the 02 tour. I'm sorry. I understand there was a merchandise deal that was being contemplated, yes.

lJa ck so

Q. Okay, and did you .... how did you take that into consideration in your report?

A. Well, unlike spike which happens post- death, there's something else that happens, and that is the tours don't happen and those concert sales went away. They were gone. Without Michael Jackson the tour doesn't continue and merchandise sales cannot continue as well.

ae

Q. Okay. Were you aware that subsequently the Estate did enter into an agreement with Bravado?

ich

A. I'm aware, yes.

Q. And how did you take that into consideration?

Te a

mM

A. Well, the contract which was signed several weeks after death, I believe it has a lot of .... there's a lot of things going on after the death that led to that. The AEG, who was the original contractor with the tour, the 02 tour, had some very significant financial turmoil created by death and approached Bravado, and was instrumental in getting the Bravado deal signed. The Bravado deal is an offshoot of basically a salvation that occurred as a result of the failure of the 02 tour itself. But as of June 25th, 2009, all that was known was that the tour was not going forward and there was no merchandising deal.

Q. You testified before, I think it was on cross, that Moss Adams also did other music appraisals; is that correct?

w.

A. Yes, many.

ww

Q. And did you follow the same methodology or the same procedures in order to prepare those appraisals that we talked about with respect to the name and likeness appraisal?

Judge Holmes: Any pointed recross?

Ms. Larson: No, Your Honor.

lJa ck so

Mr. Toscher: Okay. No further questions, Your Honor.

n.c om

A. Yes, I would say without exception.

ae

Judge Holmes: Okay. I just want to stress for the record that I'm not taking into account Mr. Dahl's opinion on the value of the name and likeness except as it goes to penalties here. I know that the Petitioners have different experts for the actual value. In keeping with that, I have a few questions for you Mr. Dahl.

ich

A. Yes.

Judge Holmes: With whom did you .... who hired you on behalf of the Estate to do this appraisal?

mM

A. I know, I recall that the engagement letter itself was signed by Hoffman Sabban. I don't recall if .... exactly who signed it, but we were retained by counsel.

Te a

Judge Holmes: For what firm?

A. Hoffman Sabban.

w.

Judge Holmes: Oh, is it Sabban?

Ms. Herbert: Sabban.

ww

A. I'm sorry, Joel. It may have been Joel that signed the engagement letter, but I don't recall.

n.c om

Judge Holmes: The famous football league. So the Sabban firm, the Hoffman Sabban firm retained you. Did you have discussions on what they were looking for in the appraisal with them?

lJa ck so

A. We had .... yeah, we had several discussions. It's been years enough that I don't recall maybe all of the natures of them.

Judge Holmes: What did they tell you they were looking for in an appraisal?

A. A valuation of Mijac Music, of MJ Ventures and the masters and obviously the name and likeness.

ich

A. Sycamore Valley, I believe, as well.

ae

Judge Holmes: Did they specify those three assets or were there other assets as well, for which your firm or you were retained?

mM

Judge Holmes: And that's the Neverland ranch holding entity?

A. That's right, and it's been so many years I don't even recall the nature of that, which was more of a real estate asset.

Te a

Judge Holmes: Did they tell you what to look for in preparing the appraisal that they would use to report the Estate tax owed?

A. Specifically the name and likeness report or all of them, Your Honor?

w.

Judge Holmes: All of them.

ww

A. No.

n.c om

Judge Holmes: Did they give you .... did you discuss the numbers with them at the time of your engagement?

lJa ck so

A. Never.

Judge Holmes: Did you discuss the numbers that you arrived at after your engagement was over and you had prepared the appraisal?

A. I did, yes.

Judge Holmes: And what was their reaction to those numbers?

ae

A. They thought the name and likeness valuation was too low.

ich

Judge Holmes: Did you change your report in response to that objection?

mM

A. No.

Judge Holmes: Did they have any other objections or comments on the report related to the numbers you had arrived at for the assets which you had valued?

Te a

A. None that I recall, Your Honor.

Judge Holmes: Were other people at your firm involved in conversations with the Hoffman Sabban firm or anyone else on behalf of the Estate in connection with the appraisal?

ww

w.

A. There are two sides to that question. Post-release, myself and probably my partner Allen Hungate would have been involved in conversations. Prior to release, my staff would have had regular contact with certain members of the Estate as well as myself.

n.c om

Judge Holmes: Did any of your staff or Mr. Hungate tell you that the Estate was looking for a particular number?

A. Never.

lJa ck so

Judge Holmes: Did any .... did Mr. Hungate or anybody else on your staff who worked on the appraisal that was attached to the Estate tax return discuss with you whether the appraisal was too high or too low?

A. Never, with the exception of the name and likeness report. I think there was surprise by the Estate that the number was as low as it was.

Judge Holmes: Or before.

ich

A. At the time of the 706 filing?

ae

Judge Holmes: Did anyone other than the Hoffman Sabban firm or its representatives discuss the appraisal with you on behalf of the Estate?

mM

A. I don't recall. It's possible that Karen Langford may have provided commentary, but I don't recall the nature of it. I know she was on a couple of phone calls that we discussed our findings and our rationales.

Te a

Judge Holmes: And what was her response to the appraisals that you had prepared or were about to prepare on behalf of the Estate?

w.

A. I don't remember .... sorry about that. I don't remember a response one way or the other from her. I think the general consensus was that it was too low, but that there was no other information that would provide any evidence for an appraiser to consider anything different.

ww

Judge Holmes: Did you discuss the appraisal that was attached to the Estate tax return with Mr. Branca?

n.c om

A. Again, I don't recall. I have a very vivid recollection that he may have been involved in a single phone call.

lJa ck so

Judge Holmes: Did he object or have any comment whatsoever on the numbers in the appraisal?

A. None that I recall.

Judge Holmes: Did you discuss the appraisal of Mr. McClain?

A. Never.

ich

A. The name and likeness return, no.

ae

Judge Holmes: Did you discuss the appraisal of anyone else who has been used by the Estate to manage its assets?

mM

Judge Holmes: Or any of the other appraisals?

A. I certainly had ongoing conversations over the year with David Dunn involving data and collection of data.

Te a

Judge Holmes: Did he convey to you anything from the Estate about whether the appraisals were too high or too low?

A. No, never.

w.

Judge Holmes: Or how they were to be conducted?

ww

A. Never.

A. It sounds like I've heard it once, but not really.

n.c om

Judge Holmes: Does the name Fatty Arbuckle mean anything to you?

A. I believe they did, Your Honor, yes.

Judge Holmes: On what basis do you say that?

lJa ck so

Judge Holmes: Long ago. Do you know did the Estate rely on your appraisal in preparing the return?

ae

A. Conversations with counsel. I have never personally reviewed the 706.

Judge Holmes: Okay. Do you have any follow- up questions, Mr. Toscher?

ich

Mr. Toscher: No, Your Honor.

mM

Judge Holmes: Do you have any follow-up questions, Ms. Larson?

Ms. Larson: No, Your Honor.

Te a

Judge Holmes: Lunch?

Mr. Toscher: Yes, Your Honor.

w.

Judge Holmes: You have Mr. Phillips after lunch?

Mr. Weitzman: No, we have one witness before, Mr. Sebacious.

ww

Judge Holmes: Oh him.

n.c om

Mr. Weitzman: I asked him to be here at 1:30.

Mr. Weitzman: Off the top of my head.

lJa ck so

Judge Holmes: That's perfect timing, isn't it?

Judge Holmes: The gift of foresight, Mr. Weitzman.

ww

w.

Te a

mM

ich

ae

Mr. Toscher: Thank you, Your Honor.