Howard Altman sounds like a bodyguard for the host of celebrities, entertainers and high-net-worth individuals who employ him.
And, in a way, he is. "They're always a target," says Altman, a partner at Beverly Hills-based Grant, Tani, Barash & Altman LLC, which manages the business and personal assets of high-net-worth individuals?in Altman's case, a list of celebrities and entertainers as long as the credits for a major motion picture.
"It's our job to protect them financially," he says. "In the end, it's about liability. You have to be prepared for a diverse group of issues and have plans that include contingency provisions. You'd be short-sighted if you didn't. Every day is different."
At 40, Altman, a CPA, personally handles the financial affairs of celebrities in feature films, television, commercials and videos, and the firm works with several sports stars as well. GTB&A's resources and reach were expanded in 2004 when Wilmington Trust purchased a majority interest in the firm as part of its efforts to enhance its services for high-net-worth individuals.
And the designation of "celebrity status" is growing exponentially, as more and more roles in the entertainment business become highly visible and take on a heightened public cache--and thus attendant insurance concerns. This widening net is increasingly catching up to producers, directors, script and music-score writers, and most recently, key celebrities from the literary world.
Altman, who worked as a senior tax consultant in the entertainment division for Arthur Andersen before joining GTB&A in 1990 as vice president, treasurer and CFO, becomes deeply involved in all aspects of his celebrity clients' financial affairs--from advice on buying expensive jewelry, a mansion or an airplane, to the complex tax, liability and other economic issues involved when a star signs a contract with an entertainment company.
In managing a celebrity's insurance needs, Altman and his partners use an "umbrella" approach to insuring the client's needs, with both business and personal coverage under the outstretched canopy. The umbrella coverage needs are determined in assessing risk and in defining the client's asset base that could be at risk.
"The underlying layer is the coverage you put in place for most high-net-worth individuals," he says. "There are a number of coverage options on personal lines, and of course the greater a celebrity's status grows, the more the security and insurance needs grow. That's why you can't be caught off-guard: in some cases, an entertainer becomes a huge, overnight success, and you have to be ready for that."
Under the umbrella on the business side, commercial/business policies are put in force. Altman's firm also helps celebrities establish "loan-out" companies, which have no real assets, but which are business entities designed just to handle the services offered by a celebrity.
There are certain tax-benefit possibilities for a celebrity using a loan-out company, but usually the overriding impetus for creating such a business is the hope of providing a wall of liability protection between the celebrity and anybody who might be pursuing legal action against them.
EPLI AND E&O FOR THE STARS
In the past few years, Altman, who received a business/economics degree from UCLA, has seen a greatly heightened awareness of employment-practice coverage. "This has become an essential layer of protection for celebrities who employ personal staff or have employees for any business they control," he says. "The goal usually is to have in place enough insurance to protect our clients' assets from a claim and to pay for any presumed attorney fees that might arise in this area."
EPLI isn't the only cover celebrities now have a need for."Everyone has awakened in the last couple of years to the importance of carefully analyzing various kinds of E&O [errors and omissions] coverage in all parts of the entertainment business," says Altman.
How about the mention of premiums? Not a "good news" subject with Altman on behalf of his clients. "You can find the coverage," he says, "but it's getting more expensive each year. We are telling our brokers and advisers to go to the carriers with the message that is of serious concern to us."
Certainly determining risk for celebrities is an art unto itself, but how so?
"One such example is that it can be a bit more difficult to place disability coverage, in that defining and determining what types of disabilities would limit one's ability to perform and act, and what would be covered, requires a lot of homework," says Altman. "Also, the required benefit, based on monthly and annual financial need, could be quite large and would thus make the policies very costly. There are instances in situations like that in which some celebrities elect to self-insure."
For a further exploration of how he and his firm handle risk-management considerations for their celebrity clients, Altman agreed to answer a handful of questions from Risk & Insurance®.
On behalf of your celebrity clients, do you use means other than traditional insurance to mitigate any impending or anticipated financial losses your clients may confront? Such as hedge funds, for example?
Many of our clients are invested in different asset classes and do use hedged or alternative investments. I don't know if this relates to the risks and liabilities we discussed, but it does serve to attempt to mitigate the risks of their investments in general.
Since many of your clients operate on a global basis, do you actively hedge their currency exposures, especially given the current unattractive condition of the U.S. dollar?
Unless our clients direct us to do so, or where we have clients that are truly living and maintaining material funds both inside and outside the United States, we generally do not hedge currencies. For those clients who do maintain large balances and do spend and invest material sums of money inside and outside the country, we have found strategies to help guard against currency risks.
Are there any especially creative methods that celebrities can use to reduce and lock in financial yield, say in the way in which rock star David Bowie reportedly sold the rights to his song royalties in favor of some form of guaranteed-return arrangement?
The David Bowie method is one way to obtain a fixed income-like return with an unknown but estimated income stream. Though it does not fix the returns on the funds, many artists will take an advance against their future income/royalty stream. They can then invest the funds in fixed income or other investment vehicles.
In some cases, the artist's royalties earned over the period that the advance related to are less than the upfront advance, in which case, depending on the terms of the deal, the artist may come out way ahead. On the other hand, if those funds were to be invested poorly with unfavorable results, clearly the artist would have been better served in not taking the advance and earning the royalties/income over time.
Are offshore tax bases a major factor in handling the business arrangements of celebrities?
Offshore arrangements can be helpful for non-U.S. celebrities, though the opportunities are limited depending on the positions one is willing to take.
How do you help protect your celebrity clients against "reputational risks," such as inaccurate and damaging "tell-all" books?
Confidentiality agreements are required of all employees, service providers, vendors, so that they cannot release certain information. Also, if someone would expect to work in Hollywood in the future, and they were to write a "tell-all" book, this would limit their access, acceptance and relationships in town. Publicists are engaged year-round on a retainer basis in an attempt to control the information and the spin to the public. But even with all the agreements and people in place, certainly the "tell-all" books and the gossip sheets are filled with information.
Is insuring against moral turpitude a standard practice?
No, I do not believe so, though there may be a few provisions in the employer's liability or directors' and officers' policies.However, there are clauses in certain agreements, endorsement deals and the like, that require that the client adhere to certain ethical, moral and legal standards.
a former editor and publisher, is a frequent contributor to Risk & Insurance®.
April 15, 2005
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