February 25, 2016 Practice Points

Bankrupt or Busted?

By Michael L. Huggins

Rapper 50 Cent, legal name Curtis James Jackson III, has been ordered back to the United States Bankruptcy Court for the District of Connecticut by Judge Ann M. Nevins, after Mr. Jackson posted pictures of several stacks of cash in his refrigerator, on his bed, and spelling out "BROKE" on his floor. Mr. Jackson posted the photos to his Instagram account just months after filing for Chapter 11 bankruptcy in July 2015.

Judge Nevins stated that the photos raise questions of nondisclosure and lack of transparency regarding the truth of Mr. Jackson's financial situation. The purpose of transparency in bankruptcy, Judge Nevins explained, is in part, "to inspire confidence in the process." Bankruptcy is a vessel for "honest, but unfortunate" people to start over.

But James Berman, counsel for Mr. Jackson, stated that all of Mr. Jackson's income during the bankruptcy proceeding has been reported. And Berman argues that these pictures should be viewed in the context that "[Mr. Jackson] is in the entertainment and promotion business and must maintain his brand and image (or those of the products he is promoting)."

So, is Mr. Jackson engaging in bankruptcy fraud, or is he simply keeping up his image? The court has not yet decided. But this is an issue that likely any celebrity, or person who makes their living in the entertainment industry, might encounter when filing for Chapter 11 protections. In any case, attorneys should advise such clients of the risks of posting pictures that seem to imply financial well-being while undergoing bankruptcy proceedings.

A court may find compelling the argument that entertainers must keep up appearances for their brand and the brands they promote. Nevertheless, people like Mr. Jackson, who find themselves in such a situation, should strive for transparency with the court and ensure that all income during the bankruptcy has been reported.

Keywords: minority trial, litigation, 50 cent, bankruptcy fraud, branding

Michael L. Huggins is the deputy attorney general for the State of California in San Francisco, California.

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