SAG Ship Taking on Water – UPDATE Monday 3/2

Updates below in bold

SAG is in full damage control mode these days. Its new majority is still reeling from the cold bucket of water they got from the AMPTP in what was likely Nick Counter’s swan song. (Block that mixed metaphor!) Counter has announced his retirement as long time President of the Producers collective bargaining arm to be effective in a few weeks. Carole Lombardini will serve in the interim while a search is on for a permanent replacement.

As readers might recall, SAG’s new majority walked into the negotiations convinced that simply offering to drop SAG’s demands on new media would lead to a deal. No advance steps to increase leverage seem to have been even attempted. Apparently, task force members were just told to show up at the AMPTP without any advance meetings or preparations. They were shocked when Counter and co. demanded a full three year term to the new deal that would leave SAG last in line once again.

Update: SAG did hold “preliminary meetings” of the task force prior to the rescheduled negotiations, according to a source familiar with the process from whom I heard after this post was made.

We all know how that worked out last time – of course, one could blame Doug Allen and Membership First for that disaster. They decided SAG’s real enemy was AFTRA not the AMPTP and so the WGA was forced into a 100 day strike just to win modest improvements over what was on the table when they walked out!  

The new majority wants to avoid that fate like there is no tomorrow.  But how?

Unfortunately, they are now being distracted by a controversy involving the new SAG Interim NED, David White, whose consulting firm, Entertainment Strategies Group (ESG), was shut down after an asset freeze ordered by a federal court pursuant to a request by the Securities and Exchange Commission. ESG’s revenues were controlled by Marc Dreier, now under house arrest for securities fraud, who had invested in the firm sometime last year. According to an affidavit filed by the SEC in federal court, all of ESG’s revenues were deposited in a bank account controlled by Dreier who, in turn, paid ESG employees their salaries.

Dreier was building up a small empire in Los Angeles that included the law firm hired by SAG officers Alan Rosenberg and Anne-Marie Johnson to sue SAG in order to overturn the decision to hire White.

Small world.

There is no evidence or even a suggestion that White had any relationship with the securities fraud that Dreier engaged in. In fact, it appears that White as well as the lawyers hired by Rosenberg and Johnson were victims of Dreier.

There are, however, some remaining problems. First, White, as well as the lawyers who represented Rosenberg and Johnson, might be found to be “partners” of Dreier and thus liable for the money he lost in his $400 million fraud. The National Law Journal wrote:

The recent events could create complications for anyone affiliated with Dreier, said Lawrence Mullman, managing director and co-lead of the partner practice group at Major, Lindsey & Africa. 

“If you hold out to the world that you are a partner, you can create liability,” he said. 

To non-lawyers such an argument may seem a stretch. But it is important to keep in mind that the finding of a partnership in legal terms does not require that individuals actually call each other partners. In fact, they might and yet may not be a partnership. A partnership is a legal form that you can stumble into, and thus find your self liable for, torts and contracts that you might not otherwise have thought were going to end up being your responsibility.

Thus, a partnership is simply an association of two or more persons to carry on as co-owners a business for profit. Can creditors hang that label on either White or Rosenberg’s lawyer, Eric George? Maybe, maybe not. But to dismiss it outright would be a risk. No doubt, both White and George are seeking their own legal counsel in these circumstances.

In addition, SAG did not allow a full vetting of these issues prior to the confirmation of White by SAG’s National Board and that has given Membership First leaders an opportunity to attack White and the new majority.

Update: It is only fair to add however that the relationship between Dreier and White was public long before the NB and Hollywood Board meetings. Thus, MF could have raised the issue at any point. But they did not. Only after the piece in The Wrap did they even seem to notice.

White has made statements about his relationship with Dreier and the nature of his disclosure to SAG that leave some room for confusion. In December he told the National Law Journal that Dreier is “not involved in the operations at all” in his consulting firm, which advised entertainment lawyers and producers on how to deal with SAG’s labor agreements. But that statement seems to be inconsistent with the SEC affidavit. It is also inconsistent with the description by another member of an LA Dreier firm, John Mason of Mason Miller, a talent side law firm. Mason described a working relationship between his firm, White’s firm and a sports sector firm controlled by Dreier. 

Mason told the Journal:

“Marc’s goal is that where an affiliate needs legal work, they should be able to and ought to send it to an affiliate that does that kind of work. For example, Dreier Sports does refer to Mason Miller sponsorships and endorsement agreements of the athletes they represent,” Mason said at the time. “When I have union questions for one of my clients, I just call David White,” he said, “and find out where I should go.”

This suggests some level of coordination and cooperation among the firms and what they all have in common, of course, is Dreier. This, too, is the kind of fact that strengthens the risk that all of the principals in the Dreier enterprises could be held to be partners. Certainly any aggressive representative of the creditors trying to get some of their money back from Dreier will look to any possible source.

White also told the new blog, The Wrap, that he had discussed the Dreier issue in a meeting with SAG’s Hollywood board, which is where Membership First’s national board members also sit, prior to the National Board meeting. But a review of the minutes  of the meeting indicated that was not the case and White then issued a correction confirming this. He has committed to answering any questions that board members may have about the issue.

For some reason, one of the SAG sources cited in The Wrap dragged my name into this debate, too. This individual argued that I went through a full day of “vetting” before being offered a contract as SAG NED back in 2006. Not quite right. The process took weeks and included a 2 hour meeting with each of the three boards (Hollywood, Regional and New York) on two separate days.

But none of these was in front of the entire National Board. I was more than happy to engage in a discussion with the entire board or with any board member on an individual or small group basis. But Anne-Marie Johnson furiously opposed this. In fact, at one point, I was contacted by Bob Carlson of Membership First who asked me to meet with a group of MF activists and while I was more than willing, Johnson intervened and stopped the discussion from taking place.

Ironically, Kent McCord and David Jolliffe of Membership First were not interested in meeting with me at all. They decided to go on a vacation when the meeting with the Hollywood Division took place.

In any case, as has been pointed out White is an “interim” NED hired to guide the Guild through its current crisis. Presumably the Guild will establish a search process for a permanent NED after the fall elections.

Meanwhile, in a single ray of light in an otherwise dark week, the WGA-West’s executive director David Young stated he supported SAG’s efforts to win a 2011 contract expiration date. That suggests a strategy that SAG could follow: since the studios know that the production pipeline is running dry, a strong push by SAG backed publicly by the other unions in town for a 2011 expiration date just might bring the studios around.

The risk for the Producers is that this situation continues to drag on into the spring. Without a resolution of the contract negotiations, those firms that provide completion bonds for films might be unwilling to take on the risk of a labor disruption. No doubt that message has been heard by the AMPTP.  While they would like to lock down the gift handed to them by the disastrous “go it alone/last in line” strategy of Membership First, they may not be willing to pay the price needed.

But to win on this issue will take some savvy and speedy discussions among the major industry unions. Going it alone is not an option now any more than it was under the “leadership” of the now ousted Doug Allen.

Thus, it was not a good sign to see that Anne-Marie Johnson, not content to attack AFTRA, is now also publicly attacking the IATSE contract proposal. While there appear to be good reasons to be concerned about the changes being proposed between the IA and the studios with respect to health care eligibility, it seems dangerous for Johnson, a top SAG officer to stick her hand into a sister AFL-CIO union’s internal business. Certainly, IA members are more than capable of deciding for themselves whether or not to accept the deal on the table.

3 thoughts on “SAG Ship Taking on Water – UPDATE Monday 3/2”

  1. Yes, I believe that is right. And there would have been ample time, but, purposely, MF didn’t want to vet or ask questions. Possibly to be able to torpedo him now..or try to. Thanks again, good read. Let’s keep our fingers crossed that this contract can go out so it can be ratified asap.

    My prediction is that members will ratify immediately and in larger numbers than ever before. That’s what I hear from my circle. Most of us think this is not a bad contract at all. The slant and spin about it is so untrue once you take the time to look at it.

  2. All I know about the marathon NB meeting is that the proposal to hire David White was brought to the floor together with the proposal to fire Doug Allen. There certainly should have been time to explore any possible questions board members had at that time.

  3. Thanks for the thorough and well researched article. I would just add that the 28 hour filibuster circus meeting was supposed to address Mr. White. Can you verify this? A second MF waste of members dues and time came at a second full board meeting where MF frittered away the time and refused to extend so the contract of Mr. White could be discussed.

    Thanks again. Glad to see that the “vetting” issue is more a vendetta than a vet.

Comments are closed.