Sarah Ferguson: Indebted Duchess Comes Clean

Sarah Ferguson admits to financial troubles.

September 30, 2009, 4:23 PM

Oct. 27, 2009 — -- Sarah Ferguson, the Duchess of York, has come clean about the financial problems that have led some to dub her the "Duchess of Debt."

Ferguson told the British magazine "Hello" that she owes 600,000 pounds -- roughly $889,000 -- after the collapse of her U.S.-based business, Hartmoor, a lifestyle company.

Ferguson said she started the company after meeting "someone who has masterminded the careers of several big entertainers," but didn't say who. She said she invested into Hartmoor all the money she earned from producing the film "The Young Victoria" and from her children's book series.

The idea for the company, she said, "seemed fantastic" but Ferguson told the magazine that the reality proved far different.

"I could write a really interesting book about finance for women, and the first bit of advice I would give is never sign away your intellectual property. You won't have any control over your own life. That's what happened to me," she said.

The company, she said, "spent money on offices and moving me into an apartment I didn't need."

"I wasn't on the management team, I was an employee and an investor and yes, I am of course very disappointed and upset at what happened," she said.

Despite her financial troubles, Ferguson said she is not filing for bankruptcy.

"Bankruptcy would be the easy option. I couldn't do that. You only go bankrupt when you have lost all hope," she said.

Ferguson said she had several projects in the works to "to keep the wolf from the door." She will be working with the National Geographic channel on six programs about female adventurers like Gertrude Bell; HandMade Films, a children's film company is turning one of her children's books into a movie and St. Martin's Press is publishing her first novel next year.

Ferguson has had a history of financial trouble.

In 1996, as she was divorcing Prince Andrew, British tabloids were abuzz with the news that she owed more than $4 million to British bankers Coutts and Co. and that the royal family, specifically Queen Elizabeth II, was fed up with Ferguson's free-spending ways and refused to pay her bills.

After the divorce, Ferguson moved to New York and is said to have slowly regained her financial footing. She wrote a successful series of children's books and signed a lucrative and high-profile deal to be the spokesperson for Weight Watchers International.

In addition, to The Sarah Ferguson Foundation, Ferguson also started the charity Children in Crisis. In an interview on "Larry King Live" in 2001, the Duchess admitted that there had been a time when she was financially "out of control" and that it took years to earn the money pay off her debt.

Celebrity Financial Troubles: Ferguson, Leibovitz and Jackson

Ferguson isn't the only well-known celebrity with a healthy income who's had trouble paying the bills. Celebrity photographer Annie Leibovitz took out a $24 million loan to cover some outstanding debts using her house and the copyrights of her work as collateral. When the loan came due and she was unable to pay, Leibovitz came close to losing her home and her life's work. Leibovitz's annual salary is estimated to be in the millions.

Leibovitz had put up several homes as well as copyrights to all her photos to secure a $24 million loan with Art Capital Group. But last July, Art Capital sued Leibovitz, claiming she breached an agreement with the lender, the Associated Press reported.

Leibovitz's fortunes changed for the better last month, however. The two sides reached an agreement Sept. 11. Art Capital dropped the lawsuit, extending Leibovitz's loan and selling her back the rights to act as exclusive agent in the sale of her real estate and the copyrights to all of her present and future works.

And then there's Michael Jackson who, despite being one of the most successful pop musicians of all-time, died deeply in debt.

"A lot of time they have no idea what things cost relative to what they have or what they make," said Barbara Culver, a financial and legacy planner based in Cincinnati, Ohio.

Culver explained that wealthy clients often don't pay close attention to money matters because they've never really had to. "As long as the money is available to them, and they can withdraw what they need, they don't have to think much beyond that," she said.

And yet, a prominent figure like Ferguson is a little like a CEO. She has a number of people -- agents, publicists etc. -- on the payroll and is marketing a product -- herself.

Just like a corporation, celebrities like Ferguson have monthly obligations to meet but may not have the training or skills needed to keep the business thriving, financial advisors say.

"Celebrities have many talents but running a business is likely not one of them. You have to know how to hire people, how to monitor their performance how to set benchmarks," said Douglas Freeman, the managing director of strategic planning for California-based First Foundation Advisors.

And then there's the business of keeping up appearances. The cost of flying first-class, paying for multiple homes and swanky vacations adds up quickly. And just like the rest of us, when the market goes sour or we lose a source of income, it can be hard to cut back.

"When you have a high income, many people think it will never end … they almost think the law of gravity was repealed and they don't do any planning," Freeman said. "That's when they get into trouble."

With reports from ABC News' Alice Gomstyn.

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