"I said, 'This family has nothing and you're making millions from this and what are you going to do for this little family,"' the witness said of a conversation he had with someone he identified only as the "gentleman from Neverland," a reference to Jackson's ranch.
The stepfather, under questioning by the defense, said the person offered to give them "a college education and buy them a house." The stepfather was referred to as "Mr. Doe" to protect his identity and that of his stepson.
The so-called "rebuttal video" was meant to answer negative publicity surrounding a British TV documentary on Jackson that included the alleged victim and showed Jackson defending his practice of having young boys sleep in his bed. He said the contacts were non-sexual and "very sweet."
In the rebuttal video, the 12-year-old boy and his family reportedly vouch for Jackson's good character. Prosecutors say the family was coerced into making the video, which has not been released.
Thursday's questioning appeared to bolster defense contentions that the accuser's family tried to "shake down" Jackson for money. Lawyers for Jackson claim the molestation accusations came when no payment was made.
The stepfather also testified that he asked for compensation at some point from a British journalist who came to the family's home after the documentary on Jackson aired. He said the journalists eventually offered $15,000 for the interview.
Jackson, 45, is charged with committing a lewd act upon a child, administering an intoxicating agent and conspiring to commit child abduction, false imprisonment and extortion. He has pleaded not guilty and is free on $3 million bail.
During his testimony, the man refused to confirm much of the content of the rebuttal video, saying investigator Bradley Miller virtually ignored him while interviewing everyone else associated with the family.
"You heard Mrs. Doe say very positive things about Michael Jackson, didn't you?" asked Jackson attorney, Thomas Mesereau Jr.
"I don't know," the witness said. "I assume nice things were said. It wasn't about me."
Mesereau then said: "You heard Mrs. Doe talk about Mr. Jackson saving her son's life and being a father figure. Do you recall her saying, 'They filmed a beautiful story about Michael and my son?"'
"No," said the witness. "I don't recall that."
The stepfather and other witnesses at this week's proceedings said they did not know Miller was working for Mark Geragos, who was Jackson's lawyer at the time.
The defense is trying to determine whether authorities knew Miller was working for Geragos when they broke into Miller's office and seized the video. The defense contends that would violate Jackson's attorney-client privilege of confidentiality.
The stepfather acknowledged that the Santa Barbara County Sheriff's Department used him as a confidential agent at one point, sending him to scope out the location of Miller's office. But he insisted he didn't know Miller worked for Geragos, and he refused to look at documents to refresh his memory.
Also Thursday, the judge authorized the Sheriff's Department to release an investigation by the state attorney general's office that concluded that Jackson was not mistreated when he surrendered to authorities last year, as he had claimed.
Mesereau called the release of the report "a scam and a sham."
Posted on the court's Web site Wednesday was a request by Jackson to file an objection to the release of the sealed report. Superior Court Judge Rodney Melville on Thursday agreed to "entertain" a response by Jackson.
In a "60 Minutes" interview a month after his Nov. 20 arrest, Jackson said he was
Melville also has agreed to let Jackson file a request to make a public statement despite a gag order in the trial, according to papers posted on the Web site. Jackson's lawyers filed the request Aug. 13, with the proposed statement blacked out.
Jackson has asked the judge for permission to issue a statement in response to the attorney general's report.