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Poor Nicolas Cage. Literally.

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Celebrities are like the rest of us -- they hate paying taxes, too! The difference is that when we mere mortals get caught dodging the IRS, Perez Hilton doesn't blog our names through the mud.

The latest national treasure to fall victim to a public personal-finance shaming is actor Nicolas Cage. According to People magazine (perhaps the most reliable source for fact-checked celebrity gossip), Cage owes the IRS $6 million in unpaid taxes from 2007 and more than $350,000 for back taxes from 2002 to 2004.

Cue $20 million lawsuit
Cage's financial woes are the result of speculative real estate investments and shoddy accounting -- money maladies brought on by his former business manager, Samuel J. Levin, who worked for the actor from 2001 to 2008.

It's so hard to find good help these days. Cage is suing Levin on charges that Levin mismanaged the actor's assets and gouging him for several million dollars in management fees – the standard Hollywood 5% cut of the client's gross earnings.

According to the lawsuit: "He [Cage] is now forced to sell major assets and investments at a significant loss and is faced with huge tax liabilities because of Levin's incompetence, misrepresentations, and recklessness." The biggest boo-boo: failure to file his client's income taxes.

Sure, it's tempting to "tsk-tsk" Cage about failing to keep tabs on the hired help. But even due diligence might not have saved him from financial calamity. According to the Huffington Post, Levin had no disciplinary actions against him in the 25 years he has been a licensed certified public accountant in California.

Of course, neither did Bernie Madoff.

I'll pause here for dramatic effect.

The mother of all celebrity yard sales
Now the star of Leaving Las Vegas (for which he won an Oscar), National Treasure, Con Air, Adaptation, Moonstruck, and my personal favorite, Raising Arizona, is having a celebrity-sized yard sale. Literally.

To drum up cash to pay his tax tab, Cage is offering a real estate free-for-all. Well, not free, exactly, but according to CNN, some of the choice items up for offer include:

  • His Bel Air mansion for about $10 million.
  • His Las Vegas digs, also for roughly $10 million.
  • A $3.55 million mansion in New Orleans' Garden District. Described as "haunted."
  • A 24,000-square-foot $12 million mansion in Rhode Island.

An early-bird shopper already snagged one choice item: Cage sold his Bavarian castle -- 28 rooms on 395 wooded acres; needs renovations -- to German lawyer Konrad Wilfurth for $2.5 million.

I wasn't able to get any word on whether Cage's other castle -- Midford Castle in Somerset, England -- is going to be dragged out of the attic on yard-sale day.

Celebrity financial rehab is in session!
Cage has his choice of celebrity financial-support groups. There are those who have been duped by bad advice (Bernie Madoff clients Steven Spielberg, Kevin Bacon, and Kyra Sedgwick), those who are victims of their own excesses (reformed spendaholic Britney Spears and MC Hammer), and those who are survivors of the famed and unfortunate class (Michael Jackson and Anna Nicole Smith, alas, won't be attending those meetings).

I know it's hard to shed many tears for the airbrushed, augmented, and obscenely paid set. So go ahead and bring on the smug comments and unsubstantiated smears -- knock yourself out in the comments section below!

Meanwhile, since this isn't TMZ, I am obliged by my editors to find the "teaching moment" in this salacious story. So here goes:

  • Do a background check on the help: Although a background check isn't foolproof, the only way you'll discover any red flags is by looking for them. Here's advice on how to hire a financial pro in the know and get the resources to help you do a credentials cross-check.
  • Pay your pro the right way: Conflicts of interest are rampant in the financial field. (I hope that wasn't a spoiler for anyone reading this.) The best compensation structure is one that rewards good advice, not simply account activity. So, for example, look for a fee-only or flat-fee financial advisor, not a broker who gets paid per trade or who earns a commission by selling you insurance or other products. 
  • Double-check the help's work: Hiring someone does not absolve you of responsibility. (Sorry, Nic!) It's your John Hancock at the bottom of your tax return. Sign on the line, and you'll do the time.
  • Finally, don't die before reading this. Seriously. Follow the link.

What do you think of celebrities and their money woes? Tell us all about it with a comment below.

Fool.com writer Dayana Yochim is not related to Francis Ford Coppola. That may be one reason her film career hasn't taken off. The Motley Fool's disclosure policy paid taxes on the treasure it found buried beneath the Black Hills in South Dakota.


Read/Post Comments (34) | Recommend This Article (41)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 04, 2009, at 10:14 AM, miteycasey wrote:

    I think this happens daily, just not to people of this visibility.

  • Report this Comment On November 04, 2009, at 10:41 AM, noryakerson wrote:

    I was heartbroken to see that he will have to sell off one of his mansions in LA, one in Las Vegas, one in New Orleans, and his ocean-side estate in Rhode Island. Poor, poor guy...

  • Report this Comment On November 04, 2009, at 10:55 AM, DebtGazette wrote:

    It seems amazing to me that Nicolas Cage is facing this tax bill right now. Firstly because its his second time in trouble with them in less than a year, you'd think he'd learn the lesson the first time....Don't mess with the IRS.

    Secondly, the guy makes $12 million per film, you'd think he could easily come up with the $6 million and change to satisfy the IRS. Could there be problems we don't know about. Drugs? Gambling? Madoff?

    Check out my blog on Nick Cage and his IRS problems at..... http://www.thedebtgazette.com/2009/08/nick-cage-irs-again/

  • Report this Comment On November 04, 2009, at 11:08 AM, TMFMarlowe wrote:

    Worse than losing his home(s), he had to sell his Lamborghinis -- he had what might have been the best Lambo collection in the world. Heart-wrenching. Really.

  • Report this Comment On November 04, 2009, at 11:30 AM, crazy4swayze wrote:

    "i'll be taking these huggies...and whatever cash you've got in the register."

  • Report this Comment On November 04, 2009, at 11:45 AM, COMPLETFOOL wrote:

    What a jerk is allI can say. Hollywood get PAID too much for bad acting and being a crook.

  • Report this Comment On November 04, 2009, at 11:55 AM, Steve819 wrote:

    No Wesley Snipes?

  • Report this Comment On November 04, 2009, at 12:09 PM, handsanitizer wrote:

    I am certainly impressed by all the sympathetic comments. Truly excess leads to wisdom in Cage’s Case. The things needed to justify position in life, shocking. Oh and pay over taxes fool.

  • Report this Comment On November 04, 2009, at 12:14 PM, glinden9 wrote:

    With so many people out of work (and without the prospect of making $10 million for six months work like Nic Cage can) we shouldn't dwell on celebs who mismanage their money.

    But... schadenfreude is fun.

    http://debtbeat.com/2009/10/debtbeat-celebrity-edition.html

  • Report this Comment On November 04, 2009, at 12:17 PM, mikecart1 wrote:

    I feel sorry for him. Everyone in this thread is obviously your average 9-5er with no ambition and complains that your salary isn't high enough for sitting in a cubicle or office or manual labor doing nothing special.

    I hope Nick Cage gets his money back!

  • Report this Comment On November 04, 2009, at 12:25 PM, autoXpert wrote:

    Why is he selling things valued at way more than he owes? There are obviously other juicy details. I think he already sold off his crazy comic collection. I'll offer a dollar for the haunted mansion.

  • Report this Comment On November 04, 2009, at 1:29 PM, JudasTouch wrote:

    "Turn to the RIGHT!"

  • Report this Comment On November 04, 2009, at 1:38 PM, patdon wrote:

    I was just in London and vacation and there were articles about him selling his England property, which he apparently has spent a few million on renovating it to its former glory.

    So, he's got $35.55M of property for sale according to this. Even if he's heavily mortgaged, he'll probably get enough to pay the IRS bill. And he's still a millionaire and is rid of the headaches of all the property.

    I'd say he's getting his financial house in order. Has probably wisened up.

  • Report this Comment On November 04, 2009, at 1:54 PM, sungura2005 wrote:

    Oh man, what a shame. We still love you though. Maybe that's why Beyonce is managed by daddy.

  • Report this Comment On November 04, 2009, at 2:08 PM, theHedgehog wrote:

    <i>So, for example, look for a fee-only or flat-fee financial advisor, not a broker who gets paid per trade or who earns a commission by selling you insurance or other products. </i>

    Good advice, but it needs to be pointed out that "insurance" also goes by the name of "annuity".

  • Report this Comment On November 04, 2009, at 2:28 PM, thelion44 wrote:

    Just another story about poor personal spending habits having finally hitting that proverbial wall. Nice properties, but frankly, total excess. I like Cage, and hope that this will help him focus on what's really important in life; surely not what he has previously focused on. I feel sorry for his former business manager, as he probably suffered just trying to keep all those properties' bills paid and their staff from fiddling the governor; coming from one who knows all too well. Nick, keep making your great movies, and enjoy life a bit more without all the excessiveness.

  • Report this Comment On November 04, 2009, at 4:16 PM, artist28 wrote:

    OH, for Heaven's Sake. Another " Star" with too much money and absolutely no practical sense!!!

    How many mansions can you live in at one time???

    I have no sympathy. He is a mediocre

    Actor, with poor fiancial awardness, too large of an Ego and just plain stupid,

    You cannot fix stupid.

    Just add him to the list.

  • Report this Comment On November 04, 2009, at 4:18 PM, JLuz wrote:

    Mr. Cage... put... down... the bunny.

  • Report this Comment On November 04, 2009, at 4:24 PM, mikecart1 wrote:

    artist28,

    Mediocre? There are very few people that have more blockbuster movies than Cage. How you think he got $40 mil for his last blockbuster? He is one of the most underrated actors in history.

    Add yourself to the list btw.

  • Report this Comment On November 04, 2009, at 4:50 PM, Sovestor wrote:

    Nicholas Cage and any other investors should read this to prevent and avoid frauds:

    http://sovestor.com/content/whatinvestorsshouldasktheirfundm...

  • Report this Comment On November 04, 2009, at 5:42 PM, oscarpinion wrote:

    "So, he's got $35.55M of property for sale according to this. Even if he's heavily mortgaged, he'll probably get enough to pay the IRS bill. And he's still a millionaire and is rid of the headaches of all the property."

    A lot of this property he is selling at a loss, it all depends on how much he put down, 20% after commisions and price reductions would be around 6 million. Maybe he needs to sell it all to pay the bill, why else would he sell everything in a down market, including his primary residence. And unless he works something out with his lenders, the loss in equity comes out of what he put down not what he borrowed. he's hurting for sure but 1 or 2 movies and hes back in the poitive again. my advice, spend some money on rogaine etc, because Nick needs his hair if he wants to keep getting leading man money.

  • Report this Comment On November 04, 2009, at 8:07 PM, sellsior wrote:

    Stardom sounds glorious. Money is fantastic.

    But getting there is hell. How many times a day

    do young actors get rejected. How many cattle calls.

    How many phony agents, managers, accountants, and lawyers try to manipulate an actors life. Friends are few and far between, hangers on are everywhere. So who can you trust? There is no privacy - photographers, and writers of every ilk are in their face everytime they take a step out of their house. Every time someone wants you want to do a deal you are stalked. I can't think why anyone would want that life stile. But if you love your work you put up with a lot.. . even the money.

  • Report this Comment On November 05, 2009, at 4:20 PM, hctwins2 wrote:

    These money managers should have to be BONDED

  • Report this Comment On November 06, 2009, at 7:31 AM, Clint35 wrote:

    Just goes to show ya, it pays to be Foolish with your money by handling it yourself.

  • Report this Comment On November 06, 2009, at 10:34 AM, SteveTheInvestor wrote:

    Part of the problem is the idiotic fee structure. Getting 5% of gross income really doesn't motivate a manager to take care of current assets. It only motivates him/her to hope for bigger and bigger income. I would think a better arrangement would be to get 5% of the annual gains on his current assets/portfolio. So, if they lose money, they get no cut.

    It's pathetic when an "advisor" gives destructive advice but then still gets paid. In my mind, a financial advisor should tie his fortunes to mine. Otherwise, he obviously doesn't have faith in what he is dishing out.

  • Report this Comment On November 06, 2009, at 11:56 AM, khoonie wrote:

    Mr Cage isn't alone here - plenty of follow citizens follow advice from "qualified advisors" to financial ruins but don't get media coverage.

    When it comes to personal finance, gotta make sure you keep an eagle eye locked on to your money and make sure you pay the IRS what you owe. No advisor, 5% gross income fee or not, should be left to handle your finances as he wishes. Somehow I suspect some people mistakenly think expensive advisors must be good, if not they wouldn't be so expensive anyway.

  • Report this Comment On November 06, 2009, at 12:01 PM, whereaminow wrote:

    Well, at least he's in better financial shape than Antione Walker.

  • Report this Comment On November 08, 2009, at 11:09 PM, radicalaccountin wrote:

    One thing Mr. Cage might do is to get that guy's CPA license revoked.

    I do that kind of work, and it has to come from within to not lie,cheat, or steal, as there is no compensation package that measures up to the kind of opportunities one gets when one handles someone else's money. (Running a credit check on your accountant is a good idea probably).

    And how may people have true spiritual values? Very few people, especially people that are also interested in money. Do we even have a spiritual hero alive today?

    Plus, the whole hiring process is a problem for the super rich. Anyway, I'm open for a new big client these days and that hasn't been true for 7 years. Google my website from my handle. In my spare time, I'm hoping to empower people to learn how to read their financial reports, so they can fire the person in time!

    And, thank you Mr. Cage for paying US taxes!

  • Report this Comment On November 09, 2009, at 8:17 AM, Ibeatmykids wrote:

    He is the worst actor I have ever seen. Him and Kevin Costner. Oddly I like most of the movies both those guys do.

  • Report this Comment On November 09, 2009, at 8:55 PM, bound4mountain wrote:

    He can join the ranks of Motley Fools that have lost big in the last 5 years.

    After reading the list of assets he has to unload then it becomes apparent that too much has been purchased by this man. There are only a few that can afford to spend an infinite amount.

    Those few need $500 mil to $1 bil and beyond for modest interest to keep a positive cash flow that can support these kinds of investments and losses without hitting the pages of the net for us to ponder.

    I mean Buffet lost $7 bil in the last few years but none of us care...because it didn't dent and it can be made back quickly...... Such is not the same for Hollywood employees.

  • Report this Comment On November 10, 2009, at 6:24 PM, Cindy4076 wrote:

    At least he is owning up and paying the back taxes. A lot of celbrities just cut and run when they get in trouble with the IRS. Then a few years later someone negotiates and then end up getting a HUGE break that rest of us pay for. I wish him well and hope he is ok emotionally and that his ego recovers from the losses. Financial ruin or even financial downturns can really be a stress, even for the famous who are obviously not struggling to feed their kids. It takes its toll. I work from home now and I'm LOVING it!

    Cindy

    http://www.healthierandhappier.info

  • Report this Comment On November 11, 2009, at 11:58 AM, cntroxlens wrote:

    To think having $6 mio in the bank is considered "poor" iin some circles. Give me $1mio and you'd never hear or see from me again.

  • Report this Comment On December 30, 2009, at 10:05 PM, hooya wrote:

    The article focuses on the possibility of an incompetent business manager. I'm not sure if that is so. From what I have read, the actor has purchased much more stuff than anyone could possibly need in 100 lifetimes. This may be more of a story of a shopaholic. No one can use that many cars or homes.

    I would think the real story is how not to let fame go to your head and live a reasonable lifestyle while investing the rest of the money for future goals like eradicating world hunger, etc.

    As for the accountant, we will see after the court case if he advised or tried to advise poor Nicholas. I doubt he prompted him to go around buying all this stuff. There is no motivation that I can see.

    In any case, the byword on hiring an accountant is: "Trust & verify"

  • Report this Comment On January 12, 2010, at 8:52 PM, sucksforallofus wrote:

    OMG! When will hollywood quit blaming there accountants for there troubles! Don't get me wrong I like Nick Cage pay my hard earned money to see his movies, I live in RI where he owes a butt(won't let me put sh..) load of money. Take responsiblity of your own money and check things out. To busy traveling to all his houses. Always somebody elses fault. How many damn houses does one need? Need is the question here. Won't spend another dollar on his movies till paid up. Avitar.. won't need high paid actors soon! Think about that hollywood. They all need to pay their bills. In these times can't think to many really feel to bad for them.

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