Chapter 12b

He left the two kids in the pool and went back upstairs to his bedroom, where he brushed his teeth and combed his hair a little bit. By the time he made it back down to the lower level of the house, Jill, his accountant, and Pauline were waiting for him in what passed as his office. Jill had flown down from Heritage last night and she and Pauline had spent the day going over his financial picture, auditing each other, and putting things into easily digestible reports for his perusal. It would be the first such report for him this year, as he'd had to skip the usual mid-January meeting because of the tour.

Jill was dressed, as always when engaged in business, in a dark colored business dress. Her thick glasses were perched authoritatively on her face and her hair was in a tight bun. Pauline was dressed professionally as well, but her attire was much more flattering and fashionable, accenting her feminine charms instead of concealing them.

Jake greeted the two women and offered them drinks. They both declined. They sat down at his desk and both of them opened briefcases and began to pull documents from them. Jake stifled a yawn and spent a few moments telling them about his visit to Matt at the GGCI. He kept the details as PG-13 as he could in deference to Jill's prudish sensibilities.

"You're not making this up?" Pauline asked when he was done with the narrative.

"Not a single word," Jake assured her.

She shook her head in disbelief and consternation. "He's not going to learn a thing from this whole debacle," she said. "He's not being punished at all. He's staying in a luxury hotel with maid service."

Jake simply shrugged. "What can you do?" he asked. "Matt is Matt. He goes through his life just lucking into everything and never managing to get hurt from his mistakes."

"I find this whole thing appalling," Jill said. "A jail where they let you have beer? Where you can have... you know... in your room whenever you want to? Where you have room service? And he gets to do his time there just because he has money? He could've killed someone when he ran from those police and this is how they punish him?"

"I know," Jake said. "Life in America, right? Why don't we change the subject now? You two have been shut up in Pauline's office all the livelong day. What did you find out about me? Am I still rich?"

"Despite all of your attempts to whittle your money away on trivial pursuits," Jill said, "yes, you're still rich." She shook her head at him. "I can't believe you spent sixty-four thousand dollars for a car, Jake. A car! You can buy a house on ten acres of property in some parts of California for sixty-four thousand dollars."

"Ten acres of property doesn't go from zero to sixty in 3.8 seconds," Jake said, as if that explained everything.

"A car is a means of getting from one place to another," Jill told him. "I own a Honda Accord — a reliable, safe, fuel efficient vehicle that does the primary job of a car quite well. I bought it used when it was a year old so that the original owner was the one to eat the biggest chunk of depreciation. For this car, I paid eleven thousand dollars."

"Yes," Jake said, "but you're an accountant — a member of the most boring group of people on Earth. You're expected to be cheap and worry about things like who eats the first year's depreciation and how many miles per gallon you get. I'm a rich rock star who has an image to maintain. If people found out I was driving a Honda Accord — hell, if they found out I'd even been within ten feet of a Honda Accord — I would never sell another album as long as I lived."

Strangely, this seemed to make sense to Jill. "Oh," she said. "So you're saying that the money you spend on your automobile has a direct effect on the number of albums your band sells?"

"Uh... yeah," Jake said. "In a way, yes."

She nodded. "I wonder if I could find a way to make that car a write-off then."

"You do what you do," he told her. "That's why I pay you as much as I do. Just remember, if I get audited, your name is on the line too."

"Well, of course," she said. "In any case, despite your lavish spending habits while you were abroad on that last tour..."

"Hey now," Jake said. "I never once dressed as a broad on that last tour."

Pauline chuckled but Jill didn't get the joke. "Excuse me?" she said.

"Never mind, my twin," Jake told her. "Please continue."

"Right," she said, still puzzling over it. "So, despite your spending of eighty-three thousand, six hundred and twelve dollars and seventeen cents of your own money while abroad, the tour ultimately did just as expected to your primary revenue stream."

"So album sales went up?" Jake asked.

"Correct," Jill said. "Pauline has the exact figure with her."

Pauline referenced one of the papers before her. "International sales of every Intemperance album went through the roof in every country that you visited. If you look at this graph here..."

"I don't really want to look at the graph," Jake said with a shake of his head. "Just give me the condensed version."

"Right," Pauline said. "In New Zealand and Australia, it started about three weeks before your arrival with increased sales of It's In The Book and In Action. These sales slowly went up as the time for the dates appeared and then shot up suddenly after your appearances there. Following this, there was a second wave that consisted of massive sales of every other Intemperance album in reverse chronological order."

"So," Jake said, "they started to buy the live album and our studio piece when the concerts were announced, bought them like mad after our shows, and then started buying up the older stuff one by one."

"Exactly," Pauline said. "It's the same pattern in every country you visited, although it was most dramatic in Japan and Taiwan. In all, during the course of your tour and continuing through the first of this month, Intemperance has sold a combined total of seven million studio albums and two million copies of In Action internationally. And this trend, though dying down a bit, is still going on today."

"So we're raking in a buttload on foreign sales," Jake summarized.

"Exactly how I would have put it," Jill said.

"These figures do not include domestic sales," Pauline said. "Now with the studio albums, you're still enjoying a steady stream of sales but nothing dramatic. In Action, however, is selling like hotcakes all across the country. It's been out for less than six months now and it's coming up on triple platinum domestically. People love it. And though Crow would never admit it, one of the main reasons for the high sales is the three previously unrecorded tunes you put on there. The radio stations are playing all three of them to death, especially This Life We Live and Life Of Toil. Both of those have been the most requested tunes in the nation for twelve straight weeks now."

"What about the video of In Action?" Jake asked. "How's that doing?"

"Pretty well," Pauline said. "I think we're being hamstrung a little by the fact that people can just go into a store and rent the video, but sales have topped nine hundred thousand as of this morning."

"Sweet," Jake said.

"And that," Jill said, "coupled with the endorsement fee you got from Gibson Guitars at the start of the tour, minus the money you've spent of late on things like airplanes and loans to flight schools and cars and living the good life abroad, has pushed your net worth into the vicinity of $3.4 million. I have the exact figure here if you're..."

"No, that's cool," Jake said. "So I'm still a rich bastard, right?"

"Well... you're rich, Jake," Jill told him. "That is true, but you're not quite as rich as you seem to think you are."

"What do you mean?" Jake asked her.

"Not all of that net worth is immediately liquid, you understand? A good chunk of it is in this house you own and in your other assets like your vehicles, your furnishings, your car, and your musical instrument collection. That Les Paul guitar you have, for instance, is worth nearly thirty thousand dollars alone. At least that's what it's insured for. Your wine collection is worth seventy-two thousand dollars."

"I understand," Jake said. "What's my house worth these days?"

"The house is now appraised at $1.1 million, but that is just a sterile figure based on comparable sales in the neighborhood. In reality, you could easily get a million and a half, maybe even as much as $1.7 million simply because this is Jake Kingsley's house. The fact that you own it and lived in it increases its value."

"So you're saying that one point five million of that three point four of my net worth is this house alone?" Jake asked.

"No," she said. "The figure I used to represent the value of your house in your total net worth is not what the house is worth, but how much equity you have in it. If you were to liquefy this particular asset, you would still have to pay the bank what you owe them. The equity is the difference between what you owe and how much you could sell the house for."

"I know what equity is," Jake said, irritated. "I'm not a complete idiot on financial matters."

"I'm sorry," Jill said. "I wasn't trying to be insulting."

"It's okay," Jake said. "So how much equity do I have in the house?"

"It's a considerable amount," she told him. "You originally purchased it for $850.000. You put down twenty percent and financed the rest, which was $683,235 — that includes the closing costs, of course."

"Of course," Jake said.

"Per your instructions, I've been paying double the required amount on the mortgage each month. That was a good move. The extra $4400.50 I pay each month goes directly to reducing the principal. So, in the twenty-six months since escrow closed, those extra payments reduced the principal by $114,413. The regular mortgage payments are, unfortunately, going mostly to interest at this stage of the game, but they reduced the principal another $11,212."

Jake's head was starting to spin from all the figures being thrown at him. "Okay, so what's the bottom line?" he asked.

"The bottom line is that the remaining principal on your loan is $557,610. That is how much you would have to pay the bank if you sold the house. Since the house is worth approximately $1.5 million, that means you have $942,390 in equity."

"So, you're saying like a quarter of my net worth is represented by this house?"

"Twenty-eight percent, actually," Jill said, "but, in general, yes, that's the point I'm trying to make. In addition to the twenty-eight percent for the house, another eight percent is represented by your personal belongings — your car, your airplane, your guitars, your clothes, the paintings on your wall, your wine collection — anything that you actually own that is not part of the house if it were sold. It all adds up to roughly $272,000."

"I have $272,000 worth of shit?" Jake asked, surprised at the amount.

"That is correct," she said. "So what we're looking at is that a full thirty-six percent of your net worth is composed of real estate and personal property. This means that $1,224,000 of that $3.4 million I mentioned is money that cannot be spent at all because it resides in property. The only way to tap into it is to sell the property in question. And of the $2.8 million that remains, $1.1 million of it is invested in the stock market."

"$1.1 million?" Jake asked. "I thought I only authorized you to invest thirty percent of my free and clear income there."

"Jake," Pauline said, "that is how much she invests. She's picked some very good stocks for you. You're getting well over a twenty percent return on that investment."

"Really?" Jake asked.

"Don't you pay attention when I go over your investment portfolio with you?" Jill asked him, exasperated.

"Well... yeah... but... you know."

"I've got you heavily invested in Microsoft, Intel, IBM, and several other technology stocks that have gone through the roof since the start of this personal computer craze. Of course, the bulk of the stock investments are in the S&P 500, which is a relatively safe investment with good long term return potential, otherwise your overall stock return would have been closer to forty percent."

"Wow," Jake said. He was only vaguely aware of what the S&P 500 actually was. "Am I paying you enough?"

"We'll get to that later," Jill said. "So you have $1.1 million invested in stocks and growing quite nicely there, thank you very much. Another $500,000 is tied up in various tax shelters I've set up for you — the windmill project, some overseas investment, monthly support obligations to those charities you picked for me, donation obligations to the Heritage Philharmonic and the CSUH and the Heritage Community College music departments. The rest of your money, which equals about $1.2 million, currently, is your actual spending money. I keep it mostly in treasury bills, treasury notes, and certificates of deposit for safe holding. I keep $100,000 in your personal bank account and replenish it from the CDs as you spend. I also keep another account open to pay for all of your monthly obligations. These obligations are your mortgage, Elsa's salary, my salary, your household grocery and alcohol budget, the loan payments and other recurring expenses involving your airplane, your car insurance, your health insurance, your property tax, your utilities, your gardening and pool service, and various other recurring debts. As of this moment, the monthly outgoing amount from this account is $21,200."

Jake whistled. "That is a lot," he admitted.

"It's $254,000 a year," Jill told him. "And yes, it is a lot. Like with your personal spending account, I replenish the recurring obligations account once a month from the CDs and adjust the amount as you acquire new obligations."

"Okay," Jake said, not quite sure where she was going with this.

He soon found out. "My point to this whole discussion is to talk about your personal spending," Jill said. "Now that you have a breakdown of your outgoing obligations and where your money is actually stored, I'm hoping that maybe you'll think twice before making some of these purchases you make."

"You mean like the car?" Jake asked.

"The car, the luxury hotels abroad, the first class air travel all over the European continent, the sixteen thousand dollars worth of French wine, the twenty thousand dollar check you wrote to Helen's father for that down payment on a new plane, the eighteen thousand dollar Lear Jet charters. These are the things that are going to get you into trouble, Jake. You're eating pretty heavily into your liquid assets. Do you know how much you spent out of your personal account last year?"

"No," Jake said, "but I'm sure you do."

"I do," she said. "You spent $212,567 during the course of last year. And you didn't even buy a car that year. You add together the $254,000 paid out from the recurring obligations account, and we're talking... $466,567."

"How much money did I make, though?" Jake asked.

She sighed. They had had this discussion before. "You know the answer to that," she said. "You signed your tax forms, after all. After taxes were paid, you made $1,233,000."

"So I made $1.2 million and I spent almost half a million. Doesn't that leave me with about seven hundred grand left over?"

"Yes, Jake," she said. "It does."

"So I'm not spending more than I make, right?"

"Not yet, you're not," she said. "But you're moving in that direction. Your personal spending goes up every year. So far this year, you've already spent more than $145,000 and it's only May. You keep going at this rate and you're sure to break three hundred thousand by the end of the year."

"But I'm also going to pull in about a million and a half of free and clear profit, right?"

Jill lowered her head to the desk for a few moments and took a deep breath. She always got frustrated by Jake's flippant attitude about money. "Look, Jake," she said when she finally brought her head back up, "I understand that right now you're making much more money than you're spending. But the trend I'm looking at here is that eventually your spending will surpass your yearly income. This will happen even faster if — God forbid — you have a year where you don't have a successful album or where you don't go out on tour. If something like that occurs, your income will be drastically reduced but your spending will not. At that point you'll be in a negative spiral and I'll be forced to start selling off the T-bills, the T-notes, and the CDs before they mature. If it keeps up, I'll be forced to start selling off stocks — something I would really hate to do with the market the way it is right now. You're living a lifestyle that you simply cannot maintain forever."

"So what is your suggestion?" Jake asked. "Buy Honda Accords? Fire Elsa? Get rid of my airplane?"

"You don't have to go quite that far," she said. "You just need to learn not to be so extravagant in your spending. You're not as rich as you think you are. You're spending money like someone who has twenty million in net worth. Just try to avoid buying multiple big ticket items in one tax year. Wait a year between major purchases."

Jake nodded, feeling like he did when the dentist told him to floss more or the doctor told him not to smoke and drink so much — things he had no intention of actually changing. He gave Jill the same answer he gave the dentist and the doctor. "I'll see what I can do, doc."

"Doc?" she said.

"I mean Jill," he corrected with a grin. "I'll try to change my evil ways. One question though."

"What's that?"

"What if my income were to significantly increase? Would you feel better about me spending like mad?"

"I'm sure I would," she said. "Are you expecting your income to significantly increase?"

"The next album we release will fulfill our contractual obligations to National. After that, we're wide open to renegotiation."

"That is true," Pauline had to agree.

"And the terms of your next contract will be better?" Jill asked.

"As long as we finish up on top," Jake said, "there will be a bidding war over who gets to sign us next."

"Interesting," Jill said. "I'll adjust my nagging accordingly when that happens."

"Thanks," Jake said. "Oh, and there's one other thing you can do for me."

"What's that?"

"Can you do some research on the ins and outs of Americans buying property in New Zealand?"

"New Zealand?" she asked. "We were just talking about fiscal responsibility and now you want to buy land in New Zealand."

"I liked it there," Jake said. "I want to own a summer place eventually. See what's available in the Christchurch area on the South Island, something just outside the city itself, up in the hills, near the airport if possible. And if there's a view of either the city or the ocean or both, so much the better."

"You're serious about this?" Jill asked.

"I've never been more serious," he said. "Real estate's an investment, isn't it?"

"Well... yes, but..."

"I'm not gonna buy it this year," he said. "I just want to know if it's possible and, if so, what the base prices for land and dwelling are."

"All right," she said with a sigh. "I'll see what I can find out."

"And how about a five hundred dollar a month raise for you?" he suggested next. "I think you deserve it."

"Well... I'm not going to argue with you on that one."

"Done," he said. "Pencil it in, effective immediately and retroactive to the first of the year."

She smiled. "Thanks, Jake."

"No need to thank me," he said. "You earned it."

"Any more financial stuff to go over with him?" Pauline asked next.

"Usually we give him a breakdown of his portfolio, how it performed over the last quarter, and what the projections are for the next quarter," Jill said. "After that, we give him our audit results on each other."

"All of that stock stuff is like Latin to me," Jake said. "Why don't we skip that part?"

"What about the audit results?" Jill asked.

"Pauline," Jake said, turning to her, "Is Jill screwing me in any way?"

"No," she said. "She's not."

"And Jill, is Pauline screwing me in any way?"

"No," Jill said with a little shake of the head. "She's not."

"Is National doing anything funny with the revenue stream?" he asked next.

"No," Jill said, "they seem to be abiding to the letter of the contract. The random audits we do keep them honest."

"Very good," Jake said. "And now here's the hard part. Are the two of you conspiring with each other to screw me and siphon my funds into Swiss accounts for your own use and pleasure?"

Jill looked shocked at the very suggestion. Pauline, however, simply gave another chuckle. "No, Jake," she said. "We're not doing that."

"Well all right then," Jake said. "I guess that covers the audit, doesn't it?"

"I guess so," Pauline said. "Now I have a few things I need to talk to you about."

"Lay 'em on me, sis," he said. "But make it fast. Dinner is in twenty minutes."

"Right," she said. "The first thing is your plan to appear in Celia Valdez's wedding."

"What about it?"