The Gossip Machines Churning Out Cash

Written by New York Times | Los Angeles | Updated: May 30 2011, 07:24am hrs
In late July 2010, the Southampton, New York, police charged Michael Lohan, the father of the actress Lindsay Lohan, with physically harassing his fiancee. When the news hit on the gossip web site TMZ, Lohan was at the Sunset Tower in Los Angeles, where he had been on the interview circuit discussing his daughters imprisonment stemming from drunken-driving charges.

Lohan was hardly morose about his own legal troubles. His hotel room and the hallway outside it buzzed with giddy deal-making as he and his entourage, which included two beefy, bejewelled bodyguards, conducted business with the door open. It could all be overheard by passers-by or, by coincidence, a New York Times reporter staying in a room across the way.

An associate of Lohans ran through the plan: ignite a bidding war between TMZ and its rival website Radar for Lohans side of the story and for embarrassing recordings he claimed to have of his fiancee, Kate Major. What you have to do is monetise this, the associate said, adding, What you want is to make them pay for that exclusivity.

Sure enough, Radar went on to post four exclusives quoting Lohan denying the charges and threatening to release tapes of Major.

This is how it works in the new world of round-the-clock gossip, where even a B-list celebritys tangle with the law can be spun into easy money, feeding the publics seemingly bottomless appetite for dirt about the famous.

A growing constellation of websites, magazines and television programmes serve it up minute by minute, creating a river of cash for secrets of the stars, or near-stars. An analysis of advertising estimates from those outlets shows that the revenue stream now tops more than $3 billion annually, driving the gossip industry to ferret out salacious tidbits on a scale not seen since the California courts effectively shut down the scandal sheets of the 1950s.

It all kicked in with a vengeance last week when news broke that former California governor Arnold Schwarzenegger had fathered a child with his familys housekeeper. Radar was the first to reveal the mothers identity, in a joint report with Star magazine. TMZ quickly flooded its site with her pictures. Several gossip outlets were prepared to bid big dollars for any new video or photographs of the mistress.

On Friday, TMZ posted the most confidential document of the entire affair: the bank form that Schwarzenegger signed last year giving her a down payment for her house.

This new secrets exchange has its own set of bankable stars and one-hit wonders, high-rolling power brokers and low-level scammers, many of whom follow a fluid set of rules that do not always comport with those of state and federal law, let alone those of family or friendship.

Now there is a growing effort to stop the flow of private information. In the past few years, a federal Department of Justice team in Los Angeles has conducted a wide-ranging investigation into illegal leaks of celebrity health records and other confidential files, according to officials involved. Working in secret, they have plumbed cases involving Tiger Woods, Britney Spears and Farrah Fawcett, among others.

That inquiry is just one of at least six here into whether workers at hospitals, the coroners office or the Police Department have accepted money for private information, according to officials, most of whom spoke on the condition of anonymity. But payment often comes in cash, making it hard to track, officials say, and new laws meant to plug the geyser, many of them promoted by Schwarzenegger, have hardly worked.

Increasingly, celebrities are not just victims. With only so many big-time personalities in rehab, facing indictment or a la Charlie Sheen in public crack-up mode, a raft of reality stars, former reality stars and would-be reality stars have filled the breach with attention-grabbing antics of their own.

Some law enforcement officials who handled the Southampton criminal complaint against Lohan questioned whether they might have played bit parts in an endless script the Lohans were writing about themselves. After all, one official noted in an interview, the alleged harassment took place in the home where Lohan and his fiancee, Major, were filming a proposed reality show called Celebrity House NY.

Majors incident report, which was not publicly available, found its way onto TMZ, and the websites photographers just happened to encounter her as she left her lawyers Manhattan offices. It does lead you to wonder, the official said, after Major dropped the complaint.

Enticing To Steal

The computer screen flashed as David Perel, the managing editor of Radar Online, worked from his darkened home office in Delray Beach, Florida. Reporters were filing a torrent of items one about the amputation of the actress Zsa Zsa Gabors right leg; another about Charlie Sheen cavorting with escorts; and an interview with the former baseball star Lenny Dykstra in which he defended himself against a sex-film stars accusations that he paid for her companionship with a bad check. This is a slow day, Perel observed.

Perel has played a big role in the gossip industrys evolution. He started as a reporter at The National Enquirer in 1985, rising to editor in chief before joining Radar, which is owned by the same company. When Perel began at The Enquirer, he said, We were never, ever outbid on a story there was no such thing.

Today, competitors willing to pay for photographs or information come from all corners. Gossip magazines have proliferated over the past several years, with additions like the United States edition of the British gossip magazine OK! and In Touch Weekly.

Network news divisions sometimes pay interview subjects licensing fees, ostensibly for photographs or video. ABC News, whose rules allow payment for material used on air but not for interviews, acknowledged paying the family of Casey Anthony, a murder suspect, $200,000 for home video and pictures. A lawyer for Anthony said in court that the money went toward her defence against charges that she had killed her two-year-old daughter.

Online sites like TMZ and Radar are credited with giving the industry a turbo engine. Neither would divulge how much they pay, and they both have played down the frequency with which they do it. People who have worked with them said fees ranged from a few hundred dollars to several thousand and much more for bigger scores. Posting more than 30 exclusive items a day is common. Were trying to build what they call addicts online, Perel said.

TMZ, owned by Time Warner, created the model in 2005, upending the entertainment news business by proving that a huge audience exists for continuous gossip updates. Its founding followed the emergence of savvy celebutantes like Paris Hilton, who were happy to invite selected paparazzi to track their every move whether it led to a shopping spree or an arrest for drunken driving.

One of TMZs first blockbusters was the leaked report on Mel Gibsons arrest on drunken-driving charges in 2006 that recounted his anti-Semitic, misogynistic rant. Authorities investigated a sheriffs deputy who they suspected had been paid for the report, but they did not press charges. Both the deputy and TMZ have denied any transaction occurred. TMZ declined to comment for this article.

Feeding the Machine

In this overheated gossip marketplace, where the need for fresh fodder routinely turns bad behaviour into news, the Lohans are prototypes of new Hollywood characters celebrities famous for being infamous.

Lindsay Lohan, who first impressed critics in 1998 by playing 11-year-old twins in The Parent Trap, had a bright acting future but began struggling with drugs, alcohol and the law, often in public view. Now she is on the gossip sites daily, alternately as a comeback-in-waiting and a onetime prodigy gone wrong. She has had several legal cases going on at once, the latest being her arrest in February on jewellery theft charges, to which she recently pleaded no contest. During her arraignment, the Los Angeles courthouse was surrounded by 12 satellite trucks, 150 reporters and 4 helicopters hovering overhead.

Theres this unbelievable hunger for a constant flow of information about these people, said Lohans lawyer, Shawn Chapman Holley. So everybody has to feed this machine all the time.

Often, that ends up being Lohans father. A former commodities trader who was jailed in the 1990s in a securities fraud scandal, he has made a second career hawking morsels about his family, himself and others in the celebrity sphere in which he travels.

When asked in an interview about his attempt to monetise his harassment charge last summer, Lohan answered, You have to.

Its a business, he said, adding, If they want to write stories about me, why shouldnt I get paid to tell the truth

Records in a lawsuit between TLC and one of its former top reality stars, Jon Gosselin of the show Jon and Kate Plus Eight, provide a peek at the flow of cash that finances exclusive content.

Gosselin, an information technology specialist before he and his wife at the time became reality stars with their large brood, met Lohan in 2009 and lamented that he was struggling to land lucrative interviews, according to depositions shared with The Times on the condition that their source not be disclosed.

Lohan said in a deposition that he set up Gosselin with a talent broker who has helped my daughter out tremendously. The broker, Lohan said, arranged paid interviews and appearances for Gosselin in exchange for a 20% commission. Lohan was also paid. The broker, Michael Heller, did not dispute the account.

Gosselin generated interview offers worth at least $365,000 that year, according to the depositions. That did not include fees for appearances and other events that, Lohan testified, are paid in cash, not checques, so there wont be a record of some of them.

According to the legal papers, Gosselin was offered $100,000 by E! Television and received roughly $40,000 from In Touch, at least $120,000 from Entertainment Tonight and about $100,000 from ABC News. That was in addition to the $25,000 he and his wife made per episode.

Hidden Money Trail

If Lohan is something less than an A-lister and Gosselin is a notch or two below, it is hard to know how to categorise Jenelle Evans. To the police in Oak Island, North Carolina, she was another person suspected of breaking the law for the gossip business.

Evans was an anonymous high school student until her pregnancy won her roles on MTVs 16 and Pregnant and Teen Mom 2. This March, she was involved in a fight in which she wrestled a young woman to the ground and pounded her face. Evans and a friend accused each other of selling the SplashNews photo agency a tape of the fight, which then showed up on TMZ.

Greg Jordan, assistant chief of the Oak Island Police Department, which arrested Evans for public fighting, said they had begun investigating whether the fight was instigated to profit from Evanss minor celebrity and whether the outlets that handled the tape could have been culpable.

The Los Angeles Coroners Department has investigated two major leaks the actress Brittany Murphys preliminary autopsy report in December 2009 and Michael Jacksons preliminary death certificate. Heres what were facing: the offer for pictures of Michael Jackson in our building was worth $2 million the day after he died, said Ed Winter, the deputy coroner. We had to shut down public access to our building. We had people literally climb the back fence trying to break in and get what they could.

The federal law enforcement team established the clearest link between private records and a gossip outlet two years ago by following the trail of Farrah Fawcetts medical file.

After The National Enquirer report that Fawcetts cancer had returned, investigators tracked the leak to a low-level employee at the UCLA Medical Center, Lawanda Jackson, who disclosed her involvement with the paper as part of a plea agreement.

The Enquirer initially asked Jackson to find out whether celebrities were in the hospital and then moved on to requests requiring more intrusive forays into medical files, paying each time.

The Enquirer paid Jackson $4,600 for information about Fawcetts cancer, court records show. That and other payments investigators say they believe that Jackson reaped many thousands of dollars over the years were deposited into an account that the authorities said they would not have found without her help.

The official said agents were investigating The National Enquirers conduct, although no charges had been filed when Jackson and Fawcett died, effectively ending the case.

A $10,000 Payday

Dawn Holland, a $22,000-a-year worker at the Betty Ford Center, has a similar explanation.

The drug and alcohol addiction treatment center, tucked away in Rancho Mirage, California, some 120 miles east of Los Angeles, takes its patients privacy seriously. Visitors must sign a statement acknowledging that it is illegal to publicly share anything witnessed there. In its nearly 30-year history, the center had never lost control of a patient file until it brushed up against the Lindsay Lohan story.

Lohan was there last fall as part of her sentence for violating probation in a drunken-driving case. One night when Holland tried to administer a breathalyzer test, Lohan refused and threw a phone at her, Holland alleged in an internal report, resulting in a criminal battery investigation that did not lead to charges. That report, part of Lohans confidential file, wound up on TMZ.

Holland quickly told Radar that TMZ had paid her at least $10,000 for an interview and the report, which drew the interest of the federal investigators.