JACKSON V AEG LIVE July 18

th
2013
Dr. Formuzis (Ph.D in Economics)
(The following proceedings were held in open court, outside the presence of the
jurors):
Judge: Okay. Formuzis.
Mr. Boyle: Your honor, the basic issue is simply that we wanted him to be able to explain
what loss of earning capacity means from an economic perspective, and we think -- we're not
sure why -- we thought when we discussed the issue at oral argument for the motions in
limine, you said it was okay that he could do that, but that he couldn't give any numbers
because he didn't give numbers in his deposition as to him, you know, picking out a number
for what loss of earning capacity is. So that's what we were operating under. I think the
defense has a different view.
Ms. Strong: Your honor, your ruling on this is very clear, your honor. You said our motion was
granted as to the opinions about future lost earnings and earning capacity because this is
what Mr. Erk will testify about. So we understand that this witness is not to address earning
capacity. He's an economist, he's going to take the numbers that Mr. Erk projected and
reduce them to present value; and that's the scope of his opinion, your honor. You already
ruled on this, and you heard argument, extensive argument. I was berated for trying to raise
issues with respect to Mr. Erk the other day.
Judge: Did I hear the word "berated"?

Ms. Strong: Yes. Not by you your honor. Not by you at all. But just by raising the issues with
respect to Mr. Erk, and I think you considered this and made your decision, your honor, and
it's very clear in your ruling what you decided with respect to earning capacity, your honor.
Mr. Panish: Your honor, we discussed this the other day and we filed a brief on the issue of
3903(c) and 3903(d). I don't know if you recall that brief we filed. And under 3903(d) -- this
came with the issue of the movies and the other things that a specific number had not been
placed on. And 3903(d) allows loss of earning capacity as a general damage that the jury has
to assess. And you remember we did -- you did allow us to put that evidence on generally. All
I want Dr. Formuzis to do is discuss the concept; and I thought we discussed this in motions
in limine, that what a loss of earning capacity is -- and he is as knowledgeable as anyone in
the world on 3903(c) and (d), and that's the only thing. He's not going do give a figure for
money -- or for movies or any of that, and that's the only issue other than present value that
he's going to testify about.
Ms. Strong: Your honor, if they're suggesting that he's going to opine about what lost earning
capacity is and what's recoverable in this action, that's for your honor to instruct the jury on. I
believe there will be some debates about this at the time of jury instruction, your honor, as to
what the proper standard and measurement is. We don't believe the future earning capacity is
the measure of damages in this case. The case law is very clear that it's something different.
The measure of damages is the value of the benefits the heirs could reasonably expect to
receive from the deceased if he or she had lived. So there will be disputes about what the
measure -- the proper measure of damages is in this case, I anticipate in connection with jury
instructions; but that will be for you, your honor, to instruct the jury on the law and not for an
expert to opine about what he believes is recoverable in a wrongful death action.
Judge: What is the substance -- what will he say?
Mr. Panish: He's going to say exactly what it says. He's going to say here's --
Mr. Boyle: I can tell you. He's going to say loss of earning capacity is a economic concept.
He's a economist, so he's going to talk about how people have a capacity to earn throughout
their life, and how that capacity can be diminished, and the capacity to earn has a value, and
just explain that concept, because it's not the most straightforward of concepts from an
economic perspective. And so he's going to just explain that that's what that is; and then he's
going to present value the numbers that -- that Erk gave, but he's not going to come in and try
to put a number on what Mr. Jackson's lost earning capacity was. Just to be clear, we
disclosed him on that, we discussed it at the oral argument for the motions in limine, and it
was discussed at his deposition that he was going to do that, so it's no surprise.
Ms. Strong: Your honor, it wasn't; and I don't want to rehash the argument, because we
argued about this extensively, and I went through and pointed out to your honor the multiple
times in this deposition when he said he was not going to give an opinion on earning capacity.
I could repeat those for you, your honor. But that's, I believe, what you took into account when
you came up with your ruling indicating that he's not going to be testifying about earning
capacity. He can give his opinions about his present value calculations; and that's what you
ruled, your honor, with respect to the Motions In Limine already; so we're definitely retreading
ground here, your honor.

Mr. Boyle: Just for the record, your honor, at the oral argument, it's on 4/25 -- april 25th, AM
Session, page 1918, line 16 through 22. Mr. Panish said, "He's an expert in the field of what is
diminished earning capacity, and he can talk generally about how you go about measuring
diminished earning capacity. I don't think you're trying to exclude that. I -- and he'll also testify
about the present value of Mr. Erk's calculations." And then the court said, "Right, and that's
all -- and that's all permitted." So we thought that was all permitted. And then in his deposition,
he was asked, "Mr. Formuzis, is it fair to say that you think you can assist the jury in
understanding how lost earning capacity works, but that the final number is up to them?"
Answer, "yes."
Mr. Panish: And 3903(d) is a jury instruction that's given to the jury as to assessing loss of
earning capacity. That's what they do.
Ms. Strong: And of course, your honor, you will instruct the jury on the law with respect to
that. In terms of what Mr. Boyle just cited from the argument transcript, that was the very first
page of about 40 pages of argument on this issue, and then you issued your opinion and
ruling, your honor. And I'm reading from your opinion. "Granted only as to opinions about
future lost earnings and earning capacity because that is what Mr. Erk will testify about."
Judge: Well, didn't Mr. Erk give you a definition?
Mr. Panish: No.
Mr. Boyle: Exactly, your honor. The --
Judge: So who was going to give the definition, then?
Mr. Panish: Exactly.
Mr. Boyle: Formuzis. The motion in limine on Dr. Formuzis, their motion in limine, was about
one paragraph; and it just said Formuzis should be excluded if Erk is excluded. So that what
the whole motion. It didn't say he can't talk about earning capacity and what it is. This was just
simply never addressed. I mean, it's really a kelly v. New west problem from their motion to
begin with. And I think what -- I don't know what your honor is, you know -- you wrote the
ruling; but I thought what you were saying is excluded as to opinions, numbers, as to
earnings, earning capacity, because that's what Erk is doing, giving the numbers.
Judge: Is he giving an opinion as to what --
Mr. Panish: No.
Mr. Boyle: Right.
Ms. Strong: Your honor, to be clear, this was a long time ago; but we had a half-page motion
with respect to Mr. Erk -- I mean with respect to Mr. Formuzis. We did not address earning
capacity because it was very clear in his deposition that he was not going to give an opinion
on earning capacity. In the opposition, they raised this was inappropriate, he's going to testify
about all kinds of things, including earning capacity. In our reply, we had quote after quote

from his deposition explaining that he was not going to give an opinion on earning capacity,
so it was not fully explored at his deposition; and then your honor ruled at the end of that, your
honor, that you were not going to allow him to give an opinion on earning capacity.
Judge: You're giving a definition of earning capacity, basically what it is, correct?
Mr. Panish: That's all it is.
Ms. Strong: To the extent there's a definition of earning capacity, and it's relevant, your
honor -- we would argue it's not the measure of damages.
Judge: I know you're arguing it. They have a different view of it.
Ms. Strong: That's something for the judge to determine, and for your honor to instruct the
jury on at the end of the case. And we would argue that it's -- because it's not the measure of
damages, in addition to the fact that no expert should be opining
on the law. And I do have case law to support that; but you're familiar with that, your honor,
that no expert should opine on the law. In addition to that, we don't believe it's relevant; and
If there's any probative value to it, it's prejudicial to suggest to the jury that this is the
measure of damages in this case. We dispute that it's relevant, but it certainly is not the
ultimate relevant measure of damages in this case.
Judge: So you're not putting on anything about what you think the damages are, how it's to
be calculated?
Ms. Strong: Calculation of damages is what Mr. Erk just did yesterday.
Judge: What are you going to do?
Ms. Strong: There is a damages expert who will look at it from a different definition.
Judge: What definition is he going to use, or she going to use?
Ms. Strong: What the Plaintiffs could have reasonably expected to have earned. Received.
Sorry.
Judge: Okay. So that's your definition; and your expert is going to explain that, right?
Ms. Strong: No. The expert is going to explain what -- what the figures are, your honor, what
that would be. He's not going to opine about what the measure of damages in the case is.
That's for you to instruct the jury on, your honor. You will instruct them as to what they should
consider to determine the damages in this case, and they will consider the evidence. These
experts are opining --
Judge: I guess what I'm trying to figure out is how is the jury going to understand -- I just --
having done a lot of these trials, they have to give some context to the numbers that are put
up. An economist doesn't get up there and just say, "Here's a calculation, and that's the
damage number." I mean, they have to explain where they get the number, the formula,
where it all comes from.

Ms. Strong: That's what Mr. Erk has been doing over the past three days. Mr. Formuzis has
made clear that he doesn't have the expertise to talk about how much anybody could have
earned in the entertainment industry, which is why they had Mr. Erk come up with all the
numbers that he came up with, and Mr. Formuzis expressly indicated -- Mr. Erk could not take
it to present value. He's not an economist, he doesn't have that. So they needed to put the
two pieces together to have an industry expert talk about what they believed Michael Jackson
could have earned, and they need Mr. Formuzis to bring it down to present value. That is the
sole purpose -- that's a real purpose, it's a valuable opinion, important for them, but that's the
sole purpose of this expert. And he can say I'm taking the numbers, and I can rely on other
expert's evaluations as to the numbers and take it down to present value.
Judge: Basically what -- this is what it sounds like, what you're saying. "Yes, we're going to
do that, the Plaintiffs didn't do that with respect to Erk, too bad, they can't do it with this
expert." that's what it sounds like you're saying.
Ms. Strong: I think --
Judge: But I don't know.
Ms. Strong: What I'm saying is I think Mr. Erk put on his opinion about what he believed
Michael Jackson could have earned, and now Mr. Formuzis is going to come in as the
economist. He can add nothing to that, other than to say, "I am an economist, and I know how
to take the numbers that Mr. Erk projected and reduce them to present value because that's
what the jury needs to have them in." That's what he did at his dep- --
Judge: If Erk did everything that he needed to do, why do you need this from Formuzis?
Mr. Panish: Because he didn't do the earning capacity issue.
Judge: He didn't do it. Okay.
Ms. Strong: Your honor, at his deposition, from Mr. Formuzis, "you're not going to be offering
opinions on anything other than your present value calculations in this case, correct?" answer,
"right." I go on to ask what is -- the question -- he says, "what I was asked to do was to take
the projections that would be done by industry experts with respect to the future loss of
earnings, earning capacity, and to discount those to their present value. I was then provided,
beginning Wednesday of this week the foundation for the future lost earnings and its
components." and that was from Mr. Erk. "and then what I did is I -- I was -- what I did was to
have those discounted to present value." question, "and is that the full scope of your opinion
in this case?" answer, "yes, that's my core assignment, is to discount the opinions produced
by Mr. Erk and members of his firm to present cash --"
Judge: If he puts a definition in there, how is that changing the scope of his opinion?
Ms. Strong: On earning capacity? One, your honor, I believed it was excluded by your ruling.
Two, we've not explored it. He clearly said at his deposition that he was not going to opine on
earning capacity, so I didn't explore it. I don't know what he's going to say. I don't know that
we're going to agree with it. To the extent we're talking about what is earning capacity, that is

defined in the law, your honor; and the expert should not be opining on the law.
Judge: So your expert is not going to say anything -- they're just going to get up there and
throw some numbers up there and hope the jury figures it out? That's not how it works.
Ms. Strong: Mr. Erk said this is what Michael Jackson could have earned. Our expert going
to say here's what reasonably could have been expected to be received.
Mr. Putnam: Your honor, this is exactly what we did when we did the M.I.L.'s. What
happened was we went through in detail all the -- we said this is what he was not going to do,
and what you had determined, I believe, at the time -- I understand you can change, that's
why we have these arguments before each expert goes. I know we've been berated for doing
so. It's okay to change, I understand.
Judge: I don't understand this concept about being berated about anything.
Ms. Strong: I tried to raise Mr. Erk, and there was many comments that we argued this for
hours and hours, and how dare we do it again. Not by you, your honor.
Mr. Panish: That's their character- -- that's an inappropriate characterization. He specifically
addressed this in his deposition, and --
Mr. Boyle: I don't think this is even a changed ruling, your honor. I think we were very clear
about this. There might have been a misunderstanding between the counsel here, but he's
not giving an opinion as to the number for lost earning capacity. He's explaining -- and he was
asked in his deposition, again, page 202, "Mr. Formuzis, is it fair to say that you think you can
assist the jury in understanding how lost earning capacity works, but the final number is up to
them?" answer, "yes." this was disclosed, has all been on the table. I think they're trying to
maybe misread what your ruling says.
Ms. Strong: Your honor, we talked about that precise quote right there. You notice that he
says yes, there's no substantive -- you won't find anywhere in the deposition what supposedly
it is that he might say on the stand about this.
Judge: You didn't ask him.
Ms. Strong: Because I literally, your honor -- I had literally just said to him -- here's -- this is
at the very, very end of the deposition. And we had been back and forth, and I wanted to see
-- I wanted to make certain -- if there was anything to explore about an opinion in this case, I
was going to explore it, your honor. There's no way I was not going to explore it. I asked him
multiple times. We get to the end, and I started asking some questions. "And if one were to
assume that your opinion is that whether or not Michael Jackson had failed in past endeavors
would be relevant to an analysis of whether those shows were certain to occur or not --" I was
trying to dig in. He says, "You know, I don't know. I think --" he says "I don't think anyone could
just take that abstract fact and say, oh, yes." I said, "It's something that you would want to
look at, right?" "If I were involved in that stage of the analysis." So I said, "right. In fairness,
you're not intending to offer any opinion about Michael Jackson's future earning capacity in
this case. That's not what you are here to do, correct?" "Right." This is literally the last four
pages. He says, "Right. Not to the elements. There may be evidence with respect to those

items. I may be asked hypotheticals to put monetary values on them. I may not. They may
simply be presented to a jury, and they can use their own judgment as to what value, if any, to
place on it." Me, "right. And to the extent you're doing evaluations, it's merely present value
calculations?" Answer, "that's right." I follow up again. "You're not going to be offering opinions
on anything other than your present value calculations in this case, right?" "Correct."
Judge: Okay. So did the deposition stay in the present value calculations?
Mr. Panish: Contrary to what she says, he gave the exact testimony. It's -- remember we
filed this brief, the 3903(c) -- and "d" is the general damage issue of loss of earning capacity.
And he said in his deposition, when questioned by Ms. Strong at page 199, exactly that. And
they were into the difference between reasonable certainty and loss of earning capacity, and
he told her exactly what she's asking now. "I believe you testified earlier that I'm not talking
about this case when you're doing a lost income analysis for damages calculations, you're
doing damage calculations in full --"
Ms. Strong: That's a different, when you're doing it in full, because he's done it in full in other
cases, your honor.
Mr. Panish: Can I finish? Ms. Strong, is it okay if I have a minute here, please?
Ms. Strong: Absolutely, Mr. Panish.
Mr. Panish: And he says, "I'm instructed to go submit a case to the jury, they asked for the
instruction 3903(d). That's what I've been told. The word 'certainty' disappears. It's not in that
instruction. It's a different standard. That goes under general damages which you don't even
need expert testimony and the jury can infer that." So -- and then she says, "I'm talking about
when you're offering opinions on -- an expert on something." "Well, it could be opinion --
expert opinion. In other words, the expert on the destroyed earning capacity, what is the
power to earn." And that's all he's going to talk about. He's not putting any figures.
Judge: What is the power to earn. Okay.
Mr. Panish: And there's no dispute under the law in California what a loss of earning capacity
is, and they can -- I cited in the prior brief three cases that define specifically what the loss of
earning capacity is. There's no dispute in California what the law is on that.
Judge: There appears to be a dispute, but that doesn't preclude you from doing it. I'm going
to allow you to do -- have him present the definition, and then if he can give some meaning to
whatever has been presented -- and you have a different view, and your person will present
their calculations with their interpretation.
Ms. Strong: Can you instruct the jury, your honor, that he's not opining as to the legal
measure of damages in this case?
Judge: I'm going to do that at the end of the case when I decide what the appropriate
measure of damages is.
Ms. Strong: But that he's not opining on the law.

Judge: No. I'm going to do that at the end of the case.

Mr. Panish: Can I just go to the restroom for one minute and we'll be ready to go?
(3-minute recess taken)
(The following proceedings were held in open court, in the presence of the jurors):
Judge: You may call your next witness.
Mr. Panish: Yes, your honor. At this time the Plaintiffs would call Dr. Peter Formuzis.
The clerk: Thank you, sir. You may have a seat. And, sir, can you please state and spell your
first and last name for the record.
The witness: My name is Peter Formuzis; p-e-t-e-r, f-o-r-m-u-z-i-s.
Judge: Thank you. You may begin.
Direct examination by Brian Panish:
Q. Good afternoon.
A. Good afternoon.
Q. Dr. Formuzis, are you a medical doctor?
A. No.
Q. What are you a doctor in?
A. I have a Ph.D in economics.
Q. Could you tell us, sir, what is your educational background?
A. I have a BA Degree in economics, from Washington state university, and a Ph.D in
economics from Michigan state university. Both of my degrees are from the 1960's.
Q. While you were going to school and after, did you ever do any teaching?
A. Yes.
Q. Tell us about that, please.

A. When I finished my Ph.D, I was -- I had at that time a position as an assistant professor of
economics at the university of Montana, and I was on that faculty for nine years where I
taught both graduate and undergraduate classes in economy. And then in the middle 1970's, I
came to southern California and I was appointed as professor of economics and director of
the graduate program of economics at California State University Fullerton. I was a full-time
member on that faculty, again teaching both graduate and undergraduate courses for 15
years. I retired from Cal State Fullerton in 1991.
Q. Okay. Up to the time or before that you retired from Fullerton state, did you do any work in
the private or government sector?
A. I had a several-year association with the Federal Reserve System.
Q. What did you do for the -- what is the Federal Reserve?
A. I think my first contact with them was I was appointed as what they call a visiting summer
scholar at the Federal Reserve Bank in Indianapolis. I spent a summer in their Economic
Research Department. Following that, I was given a position as -- what they called a visiting
professor of economics at the Federal Reserve Board in Washington, DC, where they do
monetary policy. There's no teaching done there, it's just a position where somebody comes
in, say, from a university to undertake some research task, typically; and then at the end of
the term, we return to the university. So I was with the Federal Reserve Board for about two
years. And then when I returned from there, I then was appointed as an economic advisor to
the president and board of directors of the Federal Reserve Bank in Minneapolis, and I held
that position for another approximately five or six years.
Q. Okay. And what does the Federal Reserve Board do?
A. They are the quasi governmental agency that controls our country's monetary policy. They
do some other things, as well; regulation of our banking system. But in terms of economics,
they carry out monetary policy, so they're the ones that set our interest rate, buy and sell
bonds, control the money supply, and attempt to influence the pace of economic activity.
Q. Okay. And have you consulted with other agencies?
A. I have. Los Angeles planning commission, several commercial banks, one banking chain. I
think when I was in Montana, with their highway department, board of equalization. There
have been some short-term assignments like that over my career.
Q. Have you also consulted with attorneys like myself to assess economic losses sustained
in wrongful death and injury cases?
A. Yes, I have.
Q. And how long have you been doing that?
A. I think this is 40 years.

Q. How did you get involved in that?

A. Now an older man; but at that time, a young man who I used to wash dishes with in a
sorority making money going to college became a lawyer. And when he became a lawyer, and
I became an economist, he called me up and asked if I would assist in a case. And it was in
Seattle. And I said I would. And it was not a jury trial. It involved a settlement, what you might
call an annuity type of thing that the court had to approve, and they needed some testimony
on the concept of present cash value. And he thought I was in a position to offer at least some
guidance to the court with respect to present cash value and its concept and how one would
calculate it. And when he told me I would get paid, I did it.
Q. Since that time, have you consulted in many cases?
A. Yes, I've consulted in thousands of cases.
Q. Okay. Let's first talk about court. How many times have you come to court like this and
qualified as an expert witness to give opinions about economic losses suffered by people in
wrongful death cases and injury cases?
A. At least 1,000 times.
Q. Have you ever not been qualified as an expert?
A. No. I've always been qualified.
Q. How many times have you given depositions where you've stated your expert opinion in
the areas of economics and wrongful death, personal injury or litigation matters?
A. Somewhere between 2 and 3,000 times.
Q. Can you tell us the names of the different states in which you've been retained and hired
and gone to court and qualified as an expert in this field?
A. I may leave out some, but the ones I give you will be accurate. Washington, Oregon,
California, Arizona, Nevada, Montana, Wyoming -- I'm going through the Midwest -- North
Dakota, Colorado, Illinois, Kansas, New York, Ohio, Florida. Those, I recall.
Q. Never Hawaii?
A. Oh, you know, I -- I've had -- I've been retained on cases in Hawaii, but I've never testified
in a court in Hawaii.
Q. Now, have you ever been retained by me or any law firm that I have been working at?
A. Yes.
Q. Have you ever come to court and testified and qualified as an expert witness like this
where I was the attorney representing the Plaintiffs?

A. I have.
Q. How many times do you think?
A. For you personally? Coming to court, maybe 20 times, 30 times, in that range.
Q. How many times being retained?
A. I would say probably, both by you or members of your firm or the previous firm, 50
minimum, 100 maximum.
Q. Have you ever been retained on cases against me or my law firm?
A. Yeah, I think my office just finished one up a couple of days ago.
Q. And it was a trial?
A. Yes, it was a trial.
Q. Now, let's talk about some of the work that you did. First of all, have you been retained in
any high-profile or notoriety-type cases?
A. Over all these years, yes, some are of the type that, you know, are in the press or -- I don't
know if it's the right word, but the public domain, newsworthy.
Q. Let's talk the M.G.M. fire case. Were you retained to assess the damages in that case?
A. Yes.
Q. Who retained you in that case?
A. Defendants.
Q. Okay. Is it fair to say that 90 plus percent of the time that you're retained, come to court
and qualify as an expert, it's on behalf of the person bringing the lawsuit?
A. Yes, it is.
Q. Let's talk about cases that you and I have been involved in.
A. Okay.
Q. Have we been involved in wrongful death cases involving airlines?
A. Yes.
Q. Which ones?
A. The Alaska crash off Ventura, the Singapore crash. Those two come to mind.

Q. How about were you involved in an American Airlines DC-10 crash?

A. Yes, American Airlines DC-10; and I don't know if you were -- Silkair.
Q. How about entertainers, wrongful death cases, crashes? Were you involved in, for
example, Aaliyah, Aaliyah's crash case which I was involved in with the death of Aaliyah and
others?
A. Yes, I was.
Q. Were you involved in railroad or train cases where people have died and you've had to
assess their damages where I've been involved in the cases?
A. Yes. The most recent, I think, the union pacific train that collided head on with the
Metrolink train when the driver was texting.
Q. Chatsworth?
A. Right, Chatsworth.
Q. Do you remember how many cases you assessed in that case?
A. Over 50.
Q. And then other train -- Glendale?
A. Glendale Metrolink case.
Q. Placentia?
A. Yes.
Q. All cases that you and I have worked together on?
A. Yes.
Q. Let's take industrial accidents where people have died. The San Bruno explosion up in
San Bruno?
A. Yes.
Q. Did you work with me and assess the losses for the families who had lost relatives as a
result of the explosion caused by PG&E?
A. Yes, I did.
Ms. Strong: Objection, your honor; 352 and 350.

Mr. Panish: Qualifications.

Judge: Overruled.
Ms. Strong: We'll stipulate that he's worked extensively with Plaintiffs' counsel.
Mr. Panish: It goes to his qualifications.
Judge: Sustained. I think you've -- you got your point across.
Mr. Panish: Okay. Let's talk about ones that I'm not involved in.
Judge: You said notoriety?
Mr. Panish: I haven't even got to the regular ones yet.
Judge: All your cases are notorious.
Q. By Mr. Panish: Notorious B.I.G., right?
A. Yes, I was on that one, too.
Q. How about Erin Brockovich? Were you on that case?
A. Yes.
Judge: These are not your cases, right?
Mr. Panish: No. I'm off of that.
Judge: Okay.
The witness: Yes, I worked for the Plaintiffs on -- I call it the Erin Brockovich PG&E cases.
Q. How about other entertainers. Let's talk about some. Michael crawford, who is he?
A. Phantom.
Q. Phantom what?
A. He was phantom in the play here at the music center across the street.
Q. Did you work on a case for him in assessing loss of damages?
A. Yes. He was quite injured in Las Vegas.
Q. How about 9/11 cases that I was not involved in. Did you work on those wrongful death
cases?

A. Yes, I did some wrongful death cases for the 9/11 disaster and appeared before special
master feinberg with regard to dealing with trying to analyze those losses.
Q. Have you assessed every possible type of case and damage claim for wrongful death and
injury cases?
A. Well, maybe -- that's a pretty broad statement, but I can't think of one that I have not. I
mean, it's probably every walk of life, I've probably had some involvement.
Q. Have you -- strike that. Are you aware of anyone in your field that is qualified more as an
expert witness than yourself on the issue of loss in a wrongful death case?
Ms. Strong: Objection; incomplete hypothetical, relevance.
Judge: I don't think it's irrelevant, but would he have a basis for knowing whether --
Q. Let me ask you, do you know the people that are involved in this field that you are in?
A. Yes. I was vice president for seven years of the national association of forensic
economists, and we have an organization. There are about 800 of us in the united states, and
I had a very significant involvement for several years with them.
Q. Do you know anyone, anyone, that's qualified more than you?
Ms. Strong: Objection; lacks foundation.
Judge: Overruled.
The witness: I don't know anyone.
Mr. Panish: Okay. Now, let's talk about this case. Did you have -- I'm sorry, Ms. Strong?
Ms. Strong: I didn't say anything.
Judge: Are we doing this again?
Mr. Panish: She's doing --
Judge: Now I have to tell you to keep --
Ms. Strong: I didn't say a word. I don't know what he's --
Judge: Just keep your eyes forward on me.
Ms. Strong: Love to.
Q. Doctor, the Michael Jackson case, did my law firm retain you?
A. Yes.

Q. Were you given certain assignments and work to do in this case?

A. Yes, I was.
Q. What were your assignments and work that you were going to do in this case?
A. My assignment was to take the income projections that would be created by Mr. Artie Erk
and to take those projections and discount them to their present cash value.
Q. Okay. Did you have another assignment and issue that you were going to address for us
here?
A. You also asked me to address the concept of destroyed or lost earning capacity.
Q. Let's talk about that first. Just generally speaking, is loss of earning capacity an economic
concept?
A. Yes.
Q. Just tell us generally what it is and what it -- how -- just what it is.
A. Most every individual has a capacity or an ability or a power to earn money through work.
That -- that ability or power to work is something which we can think of as being independent
of the exercise of that power. So there are some people who have the power to make money,
and the ability to make money and work, but are not doing so. When I was a young boy, my
mother was an example. She did not work outside the home. This goes back to 1940. At that
time, she didn't work outside the home; but she certainly had the power to work outside the
home if the need ever arose. It did not, and she never did; but she had an earning power or
an earning capacity. And almost any asset has a capacity to -- to produce some type of a -- of
a service or some type of a product. Even an antique watch you might have in your safety
deposit box has a capacity to be turned into money. You may never turn it into money, but it
has that capacity. You may pass it on to your children, whatever you want to do. But if that
antique watch is destroyed, lost, stolen, the individual who owns it has suffered a loss even
though that loss hasn't been effected in terms of money. That's the -- that's the concept of an
earning capacity, and each individual possesses that capacity as part of what economists call
our human capital. And it's at all varying levels from low-income people and people with
limited education to the very highest levels of education and ability that we have.
Q. So, for example, Michael Jackson in this case -- you said you've taken the figures of that
Mr. Erk testified to; is that right?
A. Yes.
Q. And movies and other things that Mr. Erk did not testify about, you're not giving an
opinion, are you, as to what that actual loss would be?
A. I am not.

Q. Okay. But what you're saying is there is the capacity to do that that has to be measured by
someone; is that right?
Ms. Strong: Objection; relevance.
Judge: Overruled.
A. It is a -- it's a capacity which there would be some measurement of, or somebody would
have to render an opinion regarding what that capacity is, looking at the individual, their
experience, their abilities, and to use that to say that this capacity is worth so much translated
into dollars.
Mr. Panish: Okay.
Q. So have you explained to us the concept of loss of earning capacity?
A. Yes. I think, if I didn't say it, it's that the earning capacity is something which is separate
and apart from the use of that capacity. I think -- just to draw a distinction between actual
earnings and the capacity to earn.
Q. Okay. So then that's one part of your assignment. The second part of the assignment, you
mentioned a term called present value; is that right?
A. Yes.
Q. Okay. First of all, how long have you been doing present value calculations?
A. Well, in like wrongful death or personal injury matters, for 40 years. But I've been doing
present value calculations from the time even before I received my Ph.D, so that probably
goes over 50 years.
Q. Okay. So let's talk about the concept of present value. First of all, under the law, is it your
understanding that any damages claimed must be claimed in present value dollars?
A. Yes.
Q. Okay. What does it mean, "present value dollars"?
A. The concept is that if we deal with a lump sum of money which could be invested today at
interest, how much money would it take to replace a loss. And the idea being that the higher
the interest that one is considering, the less money it takes today, so that if interest rates are
very low, say, zero, 1, 2 percent, interest does very little in terms of helping to -- to fund a
future economic loss. So the -- what we call the reduction from the total number, total dollars,
to its present value is relatively small. Alternatively, if the interest rate one uses is very high,
then it takes much, much -- a much smaller amount of dollars because the interest lends a --
a greater helping hand together with the principal to replicate the lost dollars.
Q. Okay. First of all, in lawsuits like this, there are two types of damages, economic and non-
economic. Which type of damages have to be reduced to present value dollars?

A. Economic.
Q. So you're only assessing in this case economic losses, like Mr. Erk, correct?
A. Yes.
Q. Okay. So can you give me an example of how you would determine the present value of
something?
A. Okay. I'm going to put it in two different groupings because it's going to be the second type
of grouping that I'm going to apply here. If I were assessing -- determining the present value
of, say, a typical worker employed in this country, somebody like myself, an economist,
bookkeeper, a lawyer, a truck driver, and so forth, that -- the present value is determined by
applying what we call the risk-free interest rate. That means what rate of interest can
somebody get by investing their money conservatively and safely so that the -- so that there is
no risk regarding the loss of principal. One of the reasons this is done like this is because in
setting out the income stream, it can be done in a relatively certain frame in this sense, that --
suppose somebody is -- is a truck driver. Truck drivers will make in a certain range of
incomes, and they can also work for several hundred, maybe even thousands of different
companies and employers. They lose their job at one place, they can go to work at another
place; and the incomes tend to be more closely bunched. In something like that, we can take
somebody who is a truck driver and say they would have been a truck driver for 30 more
years and we can give them, say, 50 weeks of employment a year, give them an average
workweek between 35 and 40 hours, and we can come up with a reasonable number that we
are projecting the loss on. Then we discount that to its present value. The second type of
cases, and that -- and it's this model which I'm going to apply here, is that Michael Jackson in
every economic regard, certainly, was unique. I mean, he was a superstar, and maybe one of
the -- if not the best in the world, one of them, at the very top. And that he -- besides the risk
you have to assess there, you have to assess some risk, some type of business risk -- all
kinds of things could happen. For example, somebody like goes on a tour like Mr. Jackson, he
has his business agents, he has his lawyers and so forth, and they negotiate contracts, deals,
and so forth. They can be better deals, worse deals. More people can come and fill the
stadium, fewer people can come. The weather can be good, can be bad. All kinds of things
can happen, and can have a very significant effect on the income. Something like a business
-- just like a business who is selling something. Every day in business is different. Some days
the customers come, some days the customers don't come. Sometimes there are bad
conditions that occur, say, weatherwise, or some other day, and business drops off. Or the
reverse can happen and, say, tourist business can -- can thrive. So we come to businesses,
we have to put in some type of a risk discount, some type of a -- of a risk rate that is a
component that attempts to reasonably adjust for all this uncertainty, which there isn't
anybody on this earth who can tell you exactly what that is going to be. We have to come to
that. So it's just like a business decision, and the way in which we do this is that we look to
see what kind of interest rates are charged to -- to borrowers at different levels of risk. Now --
Q. Okay. So --
A. So that -- so that's kind of the concept -- we applied that here.

Q. Well, let's talk about that. How do you assess the rates -- strike that. How does the
interest rate that you apply to the present value calculation affect the net present value?
A. It -- it -- it -- first of all, the interest rate reduces what the total earnings would have been to
a smaller number. So, for example, if Mr. Erk came up with a total number -- let me just round
it out and say $1 billion, when one goes to reduce that to its present value, it may come out to
be $900 million. That would depend on the interest rate. If one uses the higher interest rate, it
may come out to be $800 million. It will take less money because you're assuming that the
money will -- the future income has greater risk in its actual receipt.
Q. Well, let's assume that a truck driver -- how much do they earn, approximately?
A. Say 50,000.
Q. Okay. We're going to exclude benefits and all that.
A. Right.
Q. Let's just say they're earning 50,000, and they died when they were 30, and they had a
family.
A. Yes.
Q. And you are now going to project out what would the loss of that be. How would you go
about doing that?
A. What I would do is I would take the $50,000 a year, and I would assume it would have
some type of a growth in its -- in the 50,000 each year, say for the next --
Q. What do you mean by that?
A. Wages go up over time, mostly because of inflation.
Q. So he would get a raise?
A. So they'd get a raise, maybe 2 percent, maybe 3 percent. But you take the 50,000, and
each year we raise it 2 or 3 percent a year. We take that on out to when the decedent would
have been about age 65. And then what we do is we say, well, how much money can -- how
much interest can money make? And let's suppose we assume that money can make, say, 3
percent interest. If it can make 3 percent interest, then we take all of those future lost dollars
and discount them back to present value using 3 percent. And we finally come up with the
present value.
Q. Okay. So let's just say that there were 30, years and 50,000 times 30 is 1.5 million. Maybe
you can -- do you got a calculator there?
A. I do.
Q. Let's take the truck driver, 50,000, say 2 percent raises every year, and then -- what would

that gross number be? 2 percent raise every year for 50 years at 50,000, excluding benefits?
A. About $2,450,000.
Q. Okay. And, now, how would you reduce -- that's the gross number. Now what do you have
to take out of that number?
A. Now what we have to do is we have to reduce it back to its presents value, because that --
those -- each year's worth of 50,000 growing each year at, say, 3 percent hasn't all been lost
all in one year; so in other words, the 30th year, the idea would be to -- how much money
would you have to put today -- away today with interest so you would have enough money to
take care of the 30th year.
Q. So at the end of year 30, there's no money left?
A. Right.
Q. All right. Now, how do you determine what discount rate you should use to get to the
present value?
A. Okay. As I say, if we're dealing with a truck driver, I would use around 2 or 3 percent today,
because that's the safe government rate.
Q. What do you mean by the safe government --
A. Government securities have essentially zero risk of default. If you put your money into it,
you're going to get your money back out.
Q. And what -- I mean, how long do you have to put it in to get 2 to 3 percent?
A. Today you have to put it in for ten years.
Q. So if you buy -- what do they call those, treasury bills?
A. Yes, that's right.
Q. So if you buy a ten-year treasury bill for $100, you're going to get -- actually, you don't pay
$100, right?
A. No. You -- well, you can say 100, but the treasury bill might be $1,000, if that's right. You
pay $1,000 at 2 percent, you get $20 a year.
Q. Okay. So -- and you figure that's safe?
A. That's safe because you hold that -- that treasury bill and at this end of 10 years, you will
get back your $10,000. You won't get back 7,000, the government is not going to default, not
pay you.
Q. We hope.

A. You're going to get that money, and you'll got the $20 every single year. Well, we hope, but
--
Q. But like the stock market, does that have any effect on it?
A. No. Essentially, I would say not in a practical way. There's always interconnections of
markets. But the stock market goes up and down; and with the stock market, one can't
guarantee in any reasonable way how much somebody's asset is going to be worth, the stock
is going to be worth each year over the next ten years. It may go way up and it may crash.
And so that -- but you can't do that when you're doing present value because you're supposed
to be drawing out of the principal sum each year enough to replace the loss.
Q. Okay. So let's go back to our truck driver example. This truck driver now, you've given us
the gross number.
A. Right.
Q. How do you reduce it down to the present value?
A. Okay. What I would do then is that I would probably assume in this case probably around
4 percent interest, so I would take the $50,000 a year, I would run that for 30 years. Calculator
doesn't want to work. Okay. It would come down to $1,300,000. So in other words, the total
number of dollars the truck driver would have around would have been about $2,400,000, but
one only has to invest today $1,300,000 in order to generate over that full 30-year period 2.4
million. So the -- the interest is going to make about $1.1 million over that period.
Q. Okay. Is there anything else that you have to do, or does that give us the net present
value?
A. Well, it's a wrongful death matter. Some allowance of a component should be put in for
what we call the personal consumption of the decedent.
Q. Okay. What is that?
A. At least in -- in theory, what it means is that if we had our truck driver, and he's making
$50,000 a year, some of that 50,000, he uses just for his own maintenance. I mean, he eats,
he wears clothes, he drives a car, he entertains himself, he does various things, goes fishing,
one thing or another, goes to the doctor, he has -- there are certain expenses which are
personal to him which is not of a benefit to his family. Not a direct benefit to his family. So that
if we're trying to find the benefit to the family, we have to subtract out those dollars that would
have been just a benefit to himself. We call that the personal consumption. So, for example,
maybe for the $50,000-a-year truck driver, it might have been, say, 15,000. So we take the
15,000 out, which means then we're really only projecting 35,000 as -- to come up with --
Q. So once you got to that 1 million, 3- --
A. Yes, you take out 15, 20 percent or so for the consumption. That would be for our truck
driver.

Q. Okay. Now let's talk about this case. You relied on the figures that Mr. Erk prepared,
correct?
A. Yes.
Q. And did you then take those figures and do various things to reduce them to present
value?
A. Yes, I did.
Q. Both Tier 1 and Tier 2?
A. Right.
Q. Okay. And what kind of interest rate did you use for purposes of conducting your present
value assessment in this case?
A. You know, I -- I ended up using rates all the way from 7 to 18 percent.
Q. Why?
A. But in my opinion, something in the area of 7 to 10 percent is -- is the most reasonable.
Q. Why -- why did you use 7 to 18 -- or did you say 20?
A. Okay. I used -- I used 7 -- 7 up to 10 percent because I believed that that was reasonable
in relation to the information I had with respect to Mr. Jackson. I went as high as 18 percent
because you had advised me that there may be another expert in this case who assumed the
discount rate should be that high, and I wanted to test to see to what -- to what extent, if one
accepted
that -- what extent it would diminish the numbers.
Q. Did I ask you to assume that one of the Defendants hired -- one of the experts hired by
AEG Had testified that he would use a discount rate of 18 percent?
A. Yes.
Q. And did I ask you also to then calculate for us at various stages your present value
calculations using
From 7 to 18 percent?
A. Yes.
Q. And you said that you believed that 7 to 10 percent would be the best to use. Why do you
say that?
A. Well, there are a lot of -- many factors which I considered. The first was that I read the
deposition of Mr. Jackson's business manager at the time that he died, Mr. Michael kane. And

Mr. Kane testified when he took over that role that Mr. Jackson was paying, in his words, high
rates, high interest rates for the rates that were in existence at that time. And they were rates
of 7 percent, 8 percent, 9 percent, 10 percent. And I think one of them, although it wasn't
there yet, it was scheduled to jump up to 15 percent I think in september of 2009, if that
particular loan were not renegotiated or refinanced. So he was paying high rates, let's say for
most of the debt in the 7 to 10 percent area. So that's kind of one -- one parameter. These are
-- these are lenders lending, trying to measure some anticipation of getting repaid. Another
factor I considered was that at least at the present time, that companies which are in a
relatively risky posture, what they call high yield, high yield investments, I try to follow in the
wall street journal; and 10 percent will be an interest rate paid by a company which is --
maybe they're not in a bankruptcy, but it -- they're flirting with it. They're a fairly risky place.
That would be around 10 percent. And the overall average for those kinds of companies might
be closer to 6. So we can think of 10 percent as being a risk rate where there probably isn't a
whole lot of security behind it.
Q. Okay.
A. So -- and the other factor I considered was that -- that AEG Had invested approximately
$34 million, to my knowledge, of their own funds, so they -- they actually were -- they had that
degree of confidence financially in a positive outcome, and a ability to get their $34 million
back.
Mr. Panish: Okay. Your honor, may I approach the witness?
Judge: You may.
Mr. Panish: Just I want to give these to the court. Rather than keep going up there, I'm just
going to give you all the exhibits; and I've given them to Ms. Strong. Those are for the judge,
peter. You don't get to keep that.
Q. Okay. So did you then go about making the various calculations using different discount
rates?
A. Yes, I did.
Q. Okay. Let's -- what is the low -- okay. The lower the discount rate, the higher the net
number; is that right?
A. Yes.
Q. Okay. What is the lowest discount rate that you used?
A. 7 percent.
Q. Okay. And when you did the -- did you do an analysis for each one of these -- I think you
used 7, 10, 15 and 18 percent.
A. Yes, I did.

Q. Okay. Now, let's -- let's look first -- and you prepared up

A. Separate schedule and report for each one?
A. Yes, I did.
Q. Okay. I would like to look at the 7 percent one, go through the analysis; and then we'll just
quickly do the other ones. So we'll just do the first one. Okay? So do you have in front of you,
which would be --
A. I can help you. It's exhibit 756.1 towards the end of the volume.
Q. Thank you. Okay. So let's just, if we could -- okay. Now, what factors did you factor into the
analysis?
A. Okay. Well, the factors will be the loss of earnings from touring, merchandising,
endorsement, the las vegas show, and the royalty earnings from the las vegas show.
Q. Okay.
A. Minus the -- some personal consumption.
Q. All right. Let's take a look first at 756-1. Now -- okay. So we have -- first we have 7
percent, and then we have -- is that the right one?
A. Yes.
Q. Present value -- this is as of may 1st. Is that when you did this?
A. That's right.
Q. Okay. And then we have the tour, earnings, merchandise, endorsements, las vegas show
earnings, royalties, and then we have personal consumption. Personal consumption, again,
remind us what that is.
A. That would be a component for the monies Michael Jackson would have used personally
for himself.
Q. Now, this only has ten years; is that right?
A. Yes.
Q. Why is this only for ten years?
A. It has ten years because that, in Mr. Erk's schedule, is then the end of the ten-year run for
the las vegas show.
Q. Okay. So in other words, when you're taking -- you know, you don't take a consumption for
20 years if you're only calculating damages for 10 years?

A. No, I -- the standard practice of economists is to -- you take the consumption out of the
years that you're putting in the earnings to say what is the -- what's the net loss after the
consumption from the earning in each year where there are earnings.
Q. All right. Now, on the tour, did you do an analysis at 7 percent for various ticket prices?
A. Yes, I did.
Q. Okay. Let's -- okay. Why don't you tell us what -- this is at the lowest ticket price, I think it's
$108?
A. $108 a ticket.
Q. Okay. So let's just look at here, if -- can you tell us what each category is assuming $108
concert ticket price, as -- this is reduced to present value?
A. These are reduced to present value.
Q. And I think Mr. Erk -- what was his gross figure, do you remember?
A. No, I don't; but I think it was -- it was about close to 1.2 billion. Probably above that. I don't
-- I don't recall what it was.
Q. I don't, either; but it was -- anyway, it's in the record. So why don't you tell us exactly how
you came up with this.
A. Okay. So what I did was that starting out with the touring earnings, they would run for
three years. It follows Mr. Erk's schedule where he had the 260 shows and selling the tickets
that he has in his schedule. So it includes the -- the 50 in london and then goes for the rest of
the period, I think, until we get to July of -- of 2012. And so we have -- I have his earnings with
the income --
Q. Why don't we look at the next page. I think it will help us.
A. Page 2?
Q. 756, dash, 2.
A. Right. So on page 756, I first copied down the earnings that Mr. Erk has in his -- from his
charts; so in the later half of 2009, it's $11,685,000. For 2010, it's $188,485,553. In 2011, it's
$115,702,153; and in 2012, it's $136,282,193. So I take those figures and I discount them to
their present value. And that came -- I did it as of -- of when I did these -- as of the date of
death, and I can say the end of june 2009. I get $401,152,946. Now, that would have been in
2009. So trying to bring things forward until today, I believe that some interest should be
added; and over this period, I think a reasonable interest rate is around 2 percent, so I just
added 2 percent for 3.83 years, and that will kind of bring us basically to that current time. So
it would come to present value dollars today of about $432,761,526.

Q. Now, did you do that for each category?

A. I did that -- I followed exactly the same procedure for each -- each category on this
summary page.
Q. And those are contained in pages 1 through 7?
A. Yes.
Q. Okay. Let's go back to 756-1.
A. Okay.
Q. I don't think we need to go through every one. But each -- each number, 1 through 6,
there's a corresponding page that shows the exact calculations, the interest rate and the
reduction to present value, correct?
A. Yes.
Q. Or increase to present --
A. Well, it's reduced to present value back to the date of death, and then it's increased 2
percent a year just to bring us current until today.
Q. Okay. So then -- so that's at $108 a ticket, and that's for 7 percent, right?
A. Yes.
Q. Did you do the same thing for 10 percent?
A. Yes, I did.
Q. All right. And that is exhibit 756, dash, 8; is that right?
A. Yes.
Q. Okay. And that's page 1 through 14?
A. Correct.
Q. Same thing, same tour -- same price -- ticket price?
A. Yes, $108 ticket.
Q. Okay. And how does that affect the difference if you use 10 percent?
A. What happens is that present value becomes $1,015,018,904, so it reduces this about --
about $75 million, takes it from a million -- round numbers, 1,015,000,000 from
1,089,000,000.

Q. So in other words, by increasing 3 percent in the discount, it reduces it about $74 million?
A. Right. I think it's kind of a rule of thumb, because I went through all of these, that for every
1 percent -- percentage point you increase the discount rate from 7 to 8 to 9 to 10 and so
forth, you reduce present value by just -- just about 2 percent. Actually, it comes to about 1.9
something. Let's call it 2 percent. So as a rule of thumb, if you take what we have at 7
percent, you want to know what it is for 8 percent discount rate, just take 2 percentage points
off of it. If you want to know for 9, take another 2 percentage points off, and that will get you
within -- give you a very reasonable measure without doing all the fine math.
Q. Okay. And then you did also 15 percent?
A. I did 15 percent.
Q. And that's documented in exhibit 756-15 through 21; is that right?
A. That's right, it is.
Q. And then if we again look at -- everything is the same except for the discount rate?
A. Right, everything is the same.
Q. All right. And then that would come out to $911,517,653?
A. Yes.
Q. Again, that's down about 26 million, approximately?
A. That's right.
Q. Then you did the same thing at 18 percent?
A. I did.
Q. And if we could look at that, identify 656-22 to 28, everything is the same except the
discount rate, correct?
A. That's right.
Q. And that's $859,161,848?
A. Yes, it is.
Q. And all the pages contained
here are the work and how you get to those figures?
A. Yes.

Mr. Panish: Okay. Now, let's -- I'm going to kind of go fast forward a little and then come
back. But for the Tier 2 damages -- okay. Let's identify exhibit 1030, dash, 1 through 4. Wait a
minute. Did I already have a 1030?
Ms. Stebbins: You're up to 1032 or 3, I think.
Mr. Panish: Did I already have a 1030?
The clerk: I have 1031.
Mr. Panish: Not
1030, huh? Okay. I'm just checking. I want to make sure I have the right number, don't have
an issue with that. 1030 -- what's that? Do you have a question? Did you want to know what it
is? Here. You have it. What happened?
Judge: We're trying to find out if 1030 is available.
Mr. Panish: I sure hope so, because --
The clerk: Yes, your honor, I haven't -- I don't --
Judge: We're not showing it. Ms. Bina, you're shaking your head.
Ms. Stebbins: I think it is. We jumped to 1031, because I had thought 1030 was used, but I
think it's not.
Judge: All right. So 1030 is available.
Mr. Panish: All right. Thank you very much. 1030, let's put that up. We're looking now at
1030, dash, 1. This is just the Tier 2.
Q. And how did you do this? You've broken out Tier 1 and Tier 2?
A. Right. Tier 1 is the first -- the three years of touring and then the -- the las vegas show.
Q. All right.
A. And the Tier 2 is -- in Mr. Erk's schedule in the Tier 2, Mr. Jackson does some more tours
over the remainder of his life, he -- he has -- he would rest for a while, comes back in 2015
and 2016, and then in 2019, 2022, and then 2025. And --
Q. So you took consumption all the way up for another -- up to 2025?
A. Right. So then I took consumption out of -- out of those -- what those tour earnings would
have been.
Q. And then in this one, you used, again, the 7 percent discount rate?
A. This is the 7 percent discount rate.

Q. Okay. And then if we -- what's the total now?

A. It's $225,249,402.
Q. And then if we look at 1030 -- did you do the same thing, 7, 10, 15, 18 percent?
A. Yes, I did.
Q. Okay. So let's just identify exhibit 1030. 5 through 8, is that a 10 percent discount rate?
A. Yes.
Q. And let's just see what's the difference on that. It's about 33 million less?
A. Yes, it's --
Q. $189,585,219.
A. Right.
Q. Okay. And then I want to identify exhibit 1030, 9 through 12. And that would be the 15
percent. I don't have to keep showing all these because I have a summary sheet, so we'll get
to that. But I want to get these marked for identification for evidence. So 1039 through 12 is
the 15 percent calculation?
A. Yes, it is.
Q. And then 1030, exhibit 13 through 16, is the 18 percent calculation?
A. Yes, it is.
Q. Same -- same methodology you used?
A. Yes.
Q. Okay. Now, you did a lot of documents here. Then you did, like Mr. Erk, a different ticket
price?
A. Yes.
Q. So what we've just looked at, is that the lowest or highest ticket price?
A. The lowest.
Q. Okay. So then what was the next ticket price you used?
A. $125 per ticket.

Q. So that's $17 more per ticket?

A. Yes.
Q. Okay. And that's going to be identified -- this will be the 7 percent discount rate at $125
per ticket. That's the only thing that changes?
A. Yes, just the ticket price.
Q. And that's 752-1 through 7. And I'm going to get to the summary sheet. I think I just want
to mark these and then we'll talk about them. Okay? And that's all the work papers and
worksheets for what you did for that?
A. Yes.
Q. And then if we get to 752, dash, 8 through 14, that's at the $125 ticket price. And what is
the present value discount rate in that one?
A. Could you give me that number again?
Q. 752-8 through 14. I think it's 10 percent.
A. It's a 10 percent discount rate.
Q. Okay. And then if we go to 752-15 to 21, what's the discount rate for that?
A. 15 percent.
Q. And 752-22 to 28, again, all the papers that you prepared in your report, what is that
discount rate?
A. 18 percent.
Q. Okay. So now we've covered 125 -- did you do the same thing for $150 a ticket?
A. Yes, I did.
Q. All right. And I want to just -- I'm not going to show them all. I want to identify them for the
record in evidence. Exhibit 753-1 through 7, what ticket price is that?
A. That is 1 -- ticket price is $150.
Q. And what is the discount rate?
A. 7 percent.
Q. Okay. 753-8 through 14, what would be the ticket price on that?
A. $175.

Q. No. I'm going fast, I know.

A. Give me that number.
Q. 753, dash, 8, I think we're staying the same thing, we're going 150, 7, 10, 15, 18 percent
discounts?
A. It's a $150 ticket price, 10 percent discount rate.
Q. 8 through 14. And then 753-15 through 21, that's the $150 ticket price, and what is the
discount rate?
A. 15 percent.
Q. And then 753-22 through 28, $150 a ticket, what's the discount rate?
A. 18 percent.
Q. Okay. Now -- oh, one more. 754-1 through 7, is that at $175 a ticket?
A. Yes.
Q. Okay. And that's pages 1 through 7, same thing, right?
A. Right.
Q. And 754-8 through 14, $175 a ticket, what's the discount rate?
A. 10 percent.
Q. And next, 754-15 through 21, $175, what's the discount rate?
A. 15 percent.
Q. 754-22 to 28, the discount rate is what?
A. 18 percent.
Q. With a $175 ticket?
A. Right.
Q. Finally, if we get to the $200 ticket, that's exhibit 755-1 through 7? What's the discount
rate?
A. 7 percent.
Q. Okay. And then 755-8 through 14, what's the discount rate there?

A. 10 percent.
Q. 755-15 through 21, ticket price $200, what's the discount rate there?
A. 15 percent.
Q. And 755-22 to 28, $200 ticket, what's the discount rate?
A. 18 percent.
Q. Okay. Now have I identified for the record all of the documents in the analysis that you did
for the four ticket prices; $108, $125, $150, $175, $200? Is that right?
A. Yes.
Q. Five. I'm sorry. Let me do that again.
A. Right.
Q. You did five different analyses with different ticket prices from $108, $125, $150, $175 and
$200; is that correct?
A. Yes.
Q. And then you used discount rates for each ticket price between -- for 7 percent, 10
percent, 15 percent and 18 percent?
A. Yes.
Q. And all the exhibits we've just identified are the -- first is the summary sheet and the
backup for each one that you prepared?
A. Correct.
Q. Okay. Now -- okay. I want to show you the summary sheet, which is exhibit 1032. All right.
Now, can you explain this to me?
A. Okay. I've tried to put all the results --
Judge: Did you make copies of this, by any chance, to give to the jurors?
Mr. Panish: No. I could, though. I have some, I'll give them mine --
Judge: This is just way too --
Mr. Panish: I hear you. We're not going to take a break, are we?
Judge: No.

Mr. Panish: That's fine. Can I ask Ms. Strong a question in private?
(Mr. Panish and Ms. Strong confer in undertone)
Mr. Panish: All right. Thank you.
Judge: Are you printing them out?
Mr. Panish: We are.
Judge: It's just easier to follow along.
Mr. Panish: I understand.
Judge: So everyone is going to need to start doing this. Okay? Defense, too.
The bailiff: They can mark on them, right, your honor?
Judge: Sure, they can do what they want with them.
Mr. Panish: Can I have one? Everybody has got one. Okay. Now, hopefully, this will be a lot
easier. Thank you, your honor.
Q. So what I'm seeing on exhibit 1031 is Tier 1 analysis --
Judge: 1032. 1032.
Mr. Panish: What did I call it? I'm sorry, your honor. 1032.
Judge: Okay.
Q. By Mr. Panish: Five categories under Tier 1, right?
A. Yes.
Q. Okay. And across the top, we have the various discount rates?
A. Yes, we do.
Q. 7, 10, 15, 18, right?
A. Yes.
Q. And then the first one, you've done 108 ticket price?
A. Yes.
Q. Okay. And then I see in addition to the professional -- excuse me -- personal consumption,

you put professional fees, 15 percent?

A. Yes.
Q. What is that for?
A. Mr. Erk testified that in addition to -- an additional cost that so far had not been considered
would be that Mr. Jackson would have to hire various professionals, attorneys and so forth,
for conducting his business. And he estimated 10 to 20 percent would be the range. So what I
did to try and simplify things is take the mid point, 15 percent, figuring sometimes it might be
closer to 10, sometimes it might be closer to 20, so I took 15, and that's a deduction. So for all
of the figures that we have just gone through in the various exhibits, I'm here going to deduct
another 15 percent from everything; from the touring, merchandising, endorsements, las
vegas show earnings and the las vegas royalty earnings.
Q. Okay. So out of the gross figures, you've deducted for the first category 215 million; is that
right?
A. That's right, putting together the consumption together with the personal -- the
professional fees together with the personal consumption.
Q. So that's a lot of deductions?
A. Well, the professional -- professionals aren't cheap.
Q. All right. So you use the same formula, same methodology across the board, right?
A. Yes.
Q. Okay. And the Tier 1 analysis, using $108 a ticket, deducting professional fees at 15
percent, personal consumption, what are the figures across the board?
A. Okay. At 7 percent, $919,366,479. Raising the discount rate to 10 percent, present value
is $856,002,240. Further raising the discount rate to 15 percent, present value is
$768,026,177. And finally, raising the discount rate to 18 percent, present value is
$723,523,742.
Q. Okay. And in your opinion, the appropriate discount rate to use would be what?
A. I would say probably -- in the range of 7 to 10 percent. So if I take it to the top -- let's take
10 percent. I have no problem with 10 percent. That would give us, at the lowest ticket price,
$856,002,240.
Q. Okay. Let's -- I'm not going to go through every one of these; but let's just look at the chart
so we know. Well, everybody actually has it now. So what you've done is then you've gone
$125 a ticket, 150, 175, $200, with the various discount rates, and it ranges all the way from --
oh, I see. So what happens is the higher the ticket price, the higher the total number is going
to be?

A. Right. The higher the ticket price, the higher the total number is going to be, but the only
number that's affected in this chart are the tour earnings. The merchandising, the
endorsements, all that is staying the same. So he's going to sell the same amount, make the
same amount off merchandising whether people are paying $108 a ticket or whether they're
paying $125 a ticket.
Q. But the professional fees will actually -- the more that the ticket price is, they're going to go
up more?
A. Right, they go up more because the -- because the touring fees are higher, right.
Q. Okay. And then let's just look at the bottom there, Tier 2. We've gone through this, but the
range is -- again, you did the same thing, tour 2, taking out consumption and personal --
professional fees, and you get a range from $187,564,227 at 7 percent all the way to
$101,639,514 at 18 percent?
A. Yes.
Q. Now, have I, in somewhat of a fast fashion, gone through the opinions that you have
regarding the reduction to present value of the loss of income suffered by the heirs and as a
result of the death of Michael Jackson?
A. Yes. The only thing I would add, just for a clarification, is if one looks at this chart, one
sees that the effect of raising the discount rate is greater on the Tier 2 than on the Tier 1.
Q. Why is that?
A. And the reason is is because these Tier 2 earnings stretch out to the year 2025. They're
far -- they're more into the distant future, so the effect of having a compounding discount rate
going that long into the future -- they have a more significant effect. The discount rate does
not have, in my view, a large effect when we're dealing only with the Tier 1 because the
majority of those earnings were all occurring within three years, so if you're just talking about
three years, it doesn't really -- to put it in terms of making money, it doesn't make a lot of
difference whether you have your money earning at 7 percent or earning at 10 or 15 percent
because the effect of that compounding interest rate hasn't really been able to grab hold. But,
you know, if you're talking about investing it for 15 years or 20 years, then the effect is greater.
So the discount rate does have a bigger role to play in the Tier 2 than in the Tier 1.
Q. Okay. And when you say "compounding discount rate," could you explain that for us,
please?
A. Well, the compounding discount rate is that if -- you know, if somebody takes -- if you have
-- if somebody is going to make $1,000, and you're going to say -- let's take 10 percent. You're
going to discount that at 10 percent. Well, today you would invest $909, and you let it sit 12
months, and it will turn into 1,000. But suppose, though, that we are going to have that money
sit for three years. Then it takes only $816 to do that because you put the money in today, you
let it sit for 12 months at 7 percent and don't touch it. Then you let it sit another 12 months,
and you don't touch it; and then you let it sit another 12 months; then finally you take it out. So
it has three years; and each year, it makes 10 percent and then it earns interest on the

interest, is what happens, so that the effect grows at a -- at an escalating rate.

Q. Okay. In your calculations, have you put any money in there for loss of love, care, comfort,
society and affection for Mrs. Jackson or Mr. Jackson's children?
A. No.
Mr. Panish: That's all I have. Thank you.
Judge: Okay. Cross-examination?
Cross examination by Sabrina Strong:
Q. Good afternoon, Mr. Formuzis.
A. Good afternoon to you.
Q. So you're here essentially to calculate the present value of Mr. Erk's calculations, correct?
A. Yes, I am.
Q. And so in doing that, you put Mr. Erk's numbers essentially into the present value formula,
correct?
A. Yes.
Q. Essentially did the math that's required at that point?
A. That's right.
Q. And so all of the numbers that you're plugging into that formula come from Mr. Erk,
correct?
A. Yes, they do.
Q. And so if Mr. Erk's projections are wrong, then your calculations here may have no
meaning, right?
A. It depends how wrong they are. If they're wrong by a little teeny bit, then it would have a
little teeny effect. But if they're grossly in error, then my numbers would -- would be in
proportion. Maybe that's the best way to put it. It would be in proportion to what was there.
Q. Right. Because your numbers are entirely dependent on Mr. Erk's numbers?
A. Yes, they are.
Ms. Strong: No further questions, your honor.

Judge: Thank you.

Mr. Panish: Thank you. Can we go home early? Otherwise, I might have more questions.
Judge: Let's discuss that outside the presence of the jury. Thank you. You may step down.
Yes, let's go home; but let me find out a time we can come back. 9:30 tomorrow. Okay?
Thank you. Except juror number 6, if you'll hold on a minute, because we have some answers
to some of your questions. Keep the exhibit 1032. Just leave it on your chair.
(The following proceedings were held in open court, outside the presence of the jurors
except juror number 6):
Judge: Okay. My clerk called the d.A. ., and it turns out what they'll do is they'll have you
appear at 9:00 o'clock, and we can start our proceedings at 10:30, and then you can do what
you need to do because you'll be first, and we can do what we need to do here. So kind of a
compromise. I think your subpoena says you need to be there at 11:00, but they're going to
rearrange you so if you're there at 9:00 o'clock, they'll take you first, you'll be done, you can
come here. Eastlake is not that far from here, it's about 15 minutes from here. So I think it will
work out. Okay?
Juror number 6: Okay.
Judge: Thank you. So I'll see you tomorrow at 9:00.
Juror number 6: Thank you.
(juror number 6 leaves the courtroom)
Judge: Okay. And then tomorrow?
Mr. Panish: Tomorrow, Mrs. Jackson is going to be here; and I wanted to discuss a couple of
issues with the court.
Judge: Okay.
Mr. Panish: One is due to Ms. Jackson's age, and she is hard of hearing, that we may need
to take more frequent breaks.
Judge: Okay.
Mr. Panish: And I don't know how long she'll be able to go. I'm hoping as long as we can go.
I have no idea how long they'll be cross-examining her; so my hope would be to finish her
tomorrow, if possible; but I don't have any idea what would be happening. But it may be late in
the day, she may not be able to go the full day. And Mr. Putnam did accommodate her at the
deposition regarding the times.
Judge: What was the amount of time typically that she could go?
Mr. Panish: You know, I just don't know. When I ask her, of course she's going to say she's

fine; and I think we're just going to have to play it by ear. But I just wanted to put that out for
the court.
Judge: Okay. During depo, though, what was her typical --
Ms. Stebbins: Most of her depositions were three and a half to four hours, so roughly the
length of a typical court day with breaks.
Judge: But I mean how long did she need --
Mr. Panish: About an hour, or so.
Judge: An hour, then break, an hour, then break?
Mr. Panish: Something like that. And sometimes the breaks were longer than others, and I
don't know that Mr. Putnam went much past 4:00, but I'm not positive of that. Do you
remember?
Mr. Putnam: How long do you have tomorrow? Do you know?
Mr. Panish: Not that long. But, I mean, I just want to, you know, advise you. It may not be an
issue, but I don't want to come up and ask for a break -- and I don't know how long she's
going to be crossed. I would like to get her done in one day, if possible. Possibly counsel
needs time to cross-examine. That's all.
Ms. Stebbins: There was one other issue I think the court had asked about this morning in
arguments; so if there's a break tomorrow, we can --
Mr. Panish: We can deal with that, too, Mr. Taylor.
Judge: The thing about her hearing issue, does she have something --
Mr. Panish: She has hearing aids. I just don't know what's going to happen with the
feedback. I know she just had them checked. That's where she's been, to get those checked;
and I know because of the hearing problem, she listens really hard, and that kind of tires her.
So I think it should be okay, but I just wanted to advise the court of those potential issues, and
I'm sure counsel will be accommodating.
Mr. Putnam: We never had any issue with her. Sometimes every once in a while, perhaps,
she couldn't hear; and she was more than happy to let us know when she couldn't. And a few
times, she needed a break, we took a break. I actually can't remember taking a very long one.
So I don't foresee any problems; but, again, I haven't seen her in quite some time, maybe
things are in a different state. But she seemed fine.
Mr. Panish: She's nearly 84 years old. That is a factor in the issues.
Judge: The depo went about three hours?
Mr. Panish: We did three separate dates, and I couldn't tell you --

Mr. Putnam: These were about four hours each, your honor; and just like here, that's about
the time of the depo itself. You know, we had a break for lunch,
we had breaks in between, she can go about -- but, again, we'll do what she needs.
Judge: Okay. I'm just trying to figure out how much time Plaintiffs' counsel is going to have
with her so that we can figure out when to start.
Mr. Panish: I think earlier is better for her. So the 9:30 is good, because she weeks up really,
really early in the morning. So yes, Mr. Putnam, the first day we went to about 4:00. The
second day was about the same, actually. It's about --
Mr. Putnam: So it tended to be the same, your honor.
Mr. Panish: 3:45 the second day, so about -- what Mr. Putnam is saying is about right. The
last day only went
Until 3:00, about; so it's just that she gets tired in the afternoon. That's, I think, what's going
to be an issue. So we'll just see where we're at at that point and try to play it by ear.
Judge: All right. So you'll be done in the morning, you think, and he'll start in with the cross in
the afternoon?
Mr. Panish: I think mine will probably go a little bit into the afternoon. I haven't finished it
completely, but I think we would.
Mr. Putnam: Then we may end up going to Monday.
Mr. Panish: If that's going to be the case, then we should just pick a time to -- if he has
extensive cross, that's fine. It would be better for her to do that first thing in the morning. She's
better in the morning.
Mr. Putnam: Again, I would prefer that we finish on Friday. My understanding, she's your last
witness, right? If we can finish on Friday, we'd like to, obviously, in terms of scheduling. I'd
rather we didn't set a time to finish and instead tried to finish.
Mr. Panish: That's what I don't want to happen is now it's a quarter of 4:00, Mr. Putnam
wants to keep crossing her, and she's tired, and that is what I'm concerned about.
Mr. Putnam: We've never had an issue, your honor. If she wants to end, we can end.
Mr. Panish: Well, she's never been testifying in a trial in her life of 84 years on this earth, so
it's a little different than being in a trial in the heat of this. Although the first day was pretty hot
at Mr. Putnam's office. We had some heating issue. But we'll see. I just want to let the court
know and we'll play it by ear and see how it goes.
Judge: Okay. We'll see what we do, it might go to Monday.
Mr. Putnam: Yes, if it's necessary, your honor.

Judge: It seems like there's some flexibility.

Mr. Putnam: Thank you.
Judge: So this taylor thing, you want to talk about it during a break tomorrow at some point?
Mr. Panish: Yes, sure. And your calendar is not too bad, and we don't have the afternoon
calendar tomorrow, right?
Judge: No. I'm done with the afternoon calendar, thank god.
Mr. Panish: You're done forever?
Judge: I don't know about forever, but --
(Court adjourned to Friday, July 19, 2013, at 9:30 AM)