NEWBERRY — Emails recently released under the Freedom of Information Act may offer insight into why there is a $95 million difference in the at-death valuation of James Brown’s music empire.
When entertainment legend James Brown died on Christmas Day 2006, his music empire was left to an education charity for needy students in South Carolina and Georgia — and his will and trust declared that anyone who contested either document would receive nothing.
Several will contests later, Attorney General Henry McMaster worked a settlement deal that gave will contestants over half of what Brown left to charity. In 2013 the deal was overturned by the S.C. Supreme Court and the case returned to Aiken for further proceedings. After almost nine years, a hearing has been scheduled in the Brown will contest for early 2016.
The hearing may leave unresolved the $95 million question of how much James Brown left for his “I Feel Good” Trust.
Brown’s music empire includes copyrights to over 850 songs and the rights to his image. Current trustee, Columbia CPA Russell Bauknight, has filed documents with the IRS that place the value at $4.7 million. Bauknight claims this figure was set by a professional appraiser, but he and the Attorney General have fought the release of the appraisal and supporting documents since 2011.
In a Freedom Of Information Act lawsuit filed by this reporter, the AG claimed he never saw the appraisal and it was not in his possession. Yet, in 2011 the AG argued that the South Carolina Supreme Court should accept the $4.7 million appraisal as the value of Brown’s music empire in Wilson v Dallas, the appeal in which the McMaster settlement was overturned.
Emails from 2010 and 2011, released under the FOIA in the past year, reveal that much of the $4.7 million valuation “strategy” for the Brown estate was developed by attorneys for Brown’s companion, Tommie Rae Hynie Brown, who was recently ruled Brown’s wife by an Aiken Court.
In the months before the Supreme Court heard oral arguments in Wilson v. Dallas on Nov. 1, 2011, an email sent to the AG by Hynie Brown’s attorney discussed why the trustees who had appealed the McMaster settlement were not provided with the appraisal.
Under the McMaster settlement deal, private parties received over half of the assets in Brown’s music empire. Under IRS regulations, no estate taxes are due on gifts to charity. The trustees who appealed the settlement claimed that $50 million would be subject to estate taxes under the McMaster settlement, but the IRS accepted Bauknight’s filings.
In a 2010 email Bauknight’s attorney wrote: “I propose that after the appraisal is accepted by the IRS for tax purposes…, we file an amended appraisement with the probate court…”
The Attorney General was kept informed by email of this developing tax strategy.
Even while claiming to the IRS that the at-death value of Brown’s estate was $4.7 million, in May of 2010 Bauknight, the AG and others filed a lawsuit in Richland County. The suit alleges that former trustees Adele Pope of Newberry and Robert Buchanan of Aiken damaged the estate by “tens of millions” when they failed to accept a $100 million offer for Brown’s music empire in 2007.
One of Brown’s grandchildren, William, in 2013 called the $4.7 million value “ridiculous” and “bogus.”
The original Brown trustees and the second set of Brown trustees set the at-death value of Brown’s music empire at about $100 million, minus a $15 million debt. In mid-2006, only months before Brown died, the Royal Bank of Scotland prepared loan documents that valued Brown’s 850+ copyrights at $42 million, a figure that did not include the rights to Brown’s image.
According to online news stories, Brown’s songs are heavily “sampled,” or used, in hip-hop recordings, and artists must pay a fee for the use of Brown’s intellectual property. The placement of a James Brown song in a commercial also brings in revenue.
The 2014 movie “Get On Up” and a documentary on Brown’s life were expected to bring revenues into the estate and create new interest in Brown’s music, but as of mid-August, no accounting for 2014 had been filed with the Aiken County Probate Court.
In the 2013 accounting, Bauknight still valued some of Brown’s assets at one dollar, ($1), a figure that is sometimes used as a placeholder when an estate is newly opened, until an appraisal can be completed.
David Bell of Georgia, attorney for Brown’s son Michael Deon and others, claims the at-death value is irrelevant. “Every estate planner wants the minimum value for estate taxes. When selling, you look at things differently. Russell Bauknight did exactly what every estate planner wants to do.”
The at-death valuation may, however, be important in determining the number of students who can be helped by Brown’s charity. According to the website foundationsource.com, the Internal Revenue Service requires a private foundation to make an annual minimum distribution of five percent from the foundation’s value for charitable purposes.
That means at $95 million the “I Feel Good” Trust would distribute almost $5 million in scholarships per year, but at a $5 million value, the scholarships awarded would be around $150,000 per year after the family education trust is funded.