An interesting crossover between two of my interests, securities law and Hollywood. The film business has been enjoying a renaissance overseas what with Bollywood and all. Of course China remains the ultimate new market for the industry. But the industry has to realize that without free speech or the rule of law it is not like moving into India. True cultural expression remains suppressed, just ask the Tibetans. And the reach of US securities law is long as this article on an investigation into possible bribery cases indicates.
Is Netflix’s remake of a British political thriller changing the structure of TV? It’s about time.
In a sign that there is more here than meets the eye, prominent litigator Greg Smith, who has a long track record of winning large claims on behalf of fired public sector employees especially police officers and firemen, has taken on the case of Craig Simmons, the fired senior staff member of SAG’s pension and health plan.
According to a copy of the complaint posted on the site of Deadline Hollywood, Smith has filed a suit against the plan and as yet unnamed individuals for wrongful termination in connection with Simmons’ complaints about wrongdoing by the CEO of the $2 billion Plan, Bruce Dow, and others. Smith was profiled in the Los Angeles Times recently in connection with his campaign for the position of Los Angeles city attorney. Smith is joined in representing Simmons by Los Angeles attorney Robert Stanford Brown. (Brown is the son of Hall of Fame football player Bob “The Boomer” Brown, who played for the Philadelphia Eagles, Los Angeles Rams and Oakland Raiders.)
The new lawsuit comes as SAG itself is being sued by its own members for failing to provide union members adequate information about the future of the pension and health care plan in connection with an ongoing vote to merge SAG with sister guild AFTRA. A decision on the latter suit is expected any day now as a planned hearing scheduled for Monday was recently vacated by the judge, which indicates that he is close to deciding the case based on the papers already in front of him. No doubt, a copy of the Simmons complaint will also be filed with the federal court considering the request for an injunction to stop the merger proposal.
Simmons was fired last year. A letter he wrote detailed numerous allegations about wrongdoing by Dow and others at the pension plan. Near the end of the year, CEO Dow left the fund temporarily on leave in connection with a health issue and has not yet returned to his position. There is speculation that the leave was aimed at easing him out of the fund.
Meanwhile, a report on Deadline that the Plan was the subject of a federal investigation led the Plan’s trustees, which include both labor and management representatives, to admit publicly that the Department of Labor was conducting a field audit of the fund, the toughest form of audit that the DOL can conduct of a pension plan. Deadline has reported that other federal agencies are looking at the fund, but the trustees appeared to deny that possibility.
Unconfirmed reports suggest that yet another senior official of the fund known to be an opponent of Dow was also fired today.
In light of this information it would not be surprising if the attorneys representing AFTRA in the merger would have some tough questions for SAG about the risks that AFTRA might be taking on board if the merger were to proceed.
As information comes out, this post will be updated.
After stories surfaced of a possible “raid” by federal agents on SAG’s pension and health plan, the Plan trustees themselves responded with an unusual statement denying that any such raid had taken place. They claimed that all that was happening was a “routine” field audit by the Department of Labor. This led pro-merger advocates to rush to a judgment that really there was nothing to see here, so move along.
The problem with this story is that audits by the Department of Labor and the IRS, which have regulatory authority to monitor employee benefits plans, may take place on a regular basis but they are never “routine.” And of course the Plan trustees do not know now what the outcome of the audit will be so it is a mistake for them to claim that this audit is “no different” than prior audits. If the employees of the SAG plan or the trustees are treating this multi-year investigation, the 10th in the last 25 years, as routine they are likely doing so only for public consumption. Otherwise, they would likely be in violation of their fiduciary obligation to the plan’s beneficiaries and participants.
Audits by a federal agency are not the same as the audits by a plan’s outside auditing firm. The latter are required every year in order to prepare reporting statements to federal agencies and to participants and beneficiaries. But audits by the DOL or the IRS are aimed at finding out if there is fraud or incompetence or weak internal plan controls at work. A “field” audit, where government agents come on site to review documents and meet with Plan staff, is the most stringent of the several forms that an audit can take. Other less demanding audits could include a questionnaire, compliance check or correspondence audit.
In other words, the SAG plan is now being subjected to the closest form of scrutiny allowed under ERISA which empowers both the DOL and the IRS to investigate benefits plans for civil and criminal violations.
While an audit’s existence does not mean that there is, in fact, a problem at the plan it usually is triggered, according to experts in the area, by one of several possibilities, including complaints by plan participants (and of course at the SAG plan there is the now infamous whistle blowing letter by Craig Simmons), red flags because of the way in which the plan has described its assets or benefits on its filings with the government or concerns about whether the plan’s own auditors have done an adequate job.
In the case of SAG, for example, the investigation into the Simmons complaint led to a disclosure of a multi-million dollar fraud that was not prevented by internal controls at the plan. Both the DOL and the IRS have become more aggressive in audits of benefits plans and in 2010, when the SAG plan says the current audit began, the DOL first set up its “Contributory Plans Criminal Project” to target fraud against participants and beneficiaries.
While no one can know now the outcome of the current audit, it is over the top to conclude that is it much ado about nothing or is simply routine. The weaknesses in internal controls admitted by the plan itself in response to the Simmons letter (the Plan told participants and beneficiaries that it had created a new board committee with its own independent counsel), a statement by pro-merger SAG Watch site that the Plan had to strengthen internal controls after a prior incident of malfeasance, the public declaration by Bob Carlson (a merger opponent and trustee) that the merger would place a “staggering burden” on the plan, and now the admission of an ongoing multi-year investigation by the Department of Labor all point to the fact that SAG went into the merger negotiations with AFTRA at a time of weakness. If the merger is approved there will be very difficult internal battles to resolve the problems that merger does not touch, including the future of the vitally important health care and pension plans built over so many years by the hard work of SAG members.
A controversial report earlier this week by SAG anti-merger activist Michele Santopietro posted on several social media sites that SAG general counsel Duncan Crabtree-Ireland and SAG Communications Director Pamela Greenwalt threatened Santopietro and a second SAG member, Samantha Hartson, with arrest has now collapsed as the two actors now differ significantly in their explanations of the event. It is no longer clear that anyone was ever threatened with arrest.
It does look as if an overly zealous property manager got a bit hot and bothered by the presence of leafletters outside his building but it’s not clear that this had anything to do with the ongoing merger debate in SAG.
The building manager’s name is John Carter, so maybe this was all part of a guerrilla marketing for that new movie. Who knows.
In light of the serious issues under discussion, however, it is unfortunate that this saga was played out here and on various social media. Obviously had there been any attempt to intimidate SAG members by SAG staff that would have been a very serious matter. Rather than try to sort out the constantly shifting stories from Hartson and Santopietro, I would like to apologize to my readers for the confusion I may have caused in trying to sort out what happened.
In another example of the value of digging into the details of the federal court suit filed to block the SAG-AFTRA merger, The Hollywood Reporter’s dogged labor journalist Jonathan Handel discovered that an actuarial expert with 35 years experience including an MBA from the prestigious Wharton School of Business believes that SAG members have not received the information they need to make an informed decision on the merger of the two unions.
….plaintiffs’ expert, actuary Patrick Byrnes, said on behalf of his firm [in a declaration filed with the Federal court where the SAG lawsuit is proceeding] that “it is at a minimum prudent to have the impact of the plan merger evaluated by a qualified actuarial organization under several different designs.”
Byrnes also said that “without performing a study to determine how the combined plans would be merged, there is no way to know precisely if or how much the benefits to SAG members would have to be reduced or if contributions by all members would have to be increased.”…
Even without a study, Byrnes concluded that “SAG pension plan is relatively richer and more beneficial to the SAG members, than the existing AFTRA plan” and said “in my experience, it is likely that combination of the existing SAG and AFTRA plans will either require additional funding or SAG benefits would have to be reduced.”
Byrnes also said that “it would be prudent for the Pension Trustees to meet before voting on merger of the unions to discuss cost and benefit implications to the pension plans associated with the merger.”
Handel also reports that an actuary who was involved in the 2003 Mercer Report done in connection with a proposed merger then of the unions does not believe that the plaintiffs can get an adequate study done in advance but he rests this conclusion on the fact that any new merged plan would have new trustees and it is hard to predict precisely what they would do.
It is clearly feasible to provide more information to SAG members than has been currently provided. The only report provided the SAG membership was prepared by lawyers who reviewed the legal questions rather than the actuarial issues examined by Byrnes.
In other words, both experts agree that the final house might look different than the original plans, but actors deserve to see the possible blueprints in advance. In 2003 they were given precisely that kind of report.
The Mercer Report concluded then that there were “key philosophical differences” between the SAG and AFTRA benefits plans that would cause trustees to have to wrestle with their resolution. Those differences remain, according to Byrnes, and are still a key issue in the merger today according to many on line reports by actors in both unions.
Federal labor law mandates that SAG leaders provide rank and file union members all relevant information prior to a vote on a key union decision such as merger. A hearing on the matter is scheduled for the end of March prior to the counting of the ballots now in the hands of union members.
The Byrnes statement can be found here.
In what some SAG activists claim is a violation of core SAG bargaining principles, SAG apparently negotiated a new labor deal with TV Land some time last year, a production company owned by Sumner Redstone controlled media conglomerate Viacom.
As a cable company TV Land should be subject to the master “basic cable” agreement that SAG negotiates with cable companies. That agreement incorporates by reference the other major relevant agreements SAG does with larger producers. That means actors on basic cable benefit from the weight SAG brings to bear in its major negotiations.
However, SAG broke with that practice here, according to online reports and negotiated an individual agreement with TV Land. This approach is consistent with that of AFTRA in the cable environment. While many SAG activists claim that cable is SAG territory AFTRA has nonetheless succeeded in getting producers to sign on to deals with them using a variation of one of four different contract templates that reportedly offer far more attractive terms to producers. Roberta Reardon defends this approach as being “flexible” and helping keep jobs in the US. SAG activists maintain that it is a race to the bottom in working conditions and pay.
A key give away in the new SAG deal reportedly is an agreement to allow TV Land exhibitions of their shows for up to one year free of residual payments to actors. Of course, the producers have been attacking the residuals system for some years. SAG activists point out that it is critical to the entire entertainment industry to maintain residuals because it keeps actors and their families afloat in between employment.
A second complaint about this particular deal is that it was not discussed at the entire National Board or sent to the membership for approval which is the case with many of SAG’s agreements. Instead it was agreed to, with some opposition, by a standing committee of SAG. Some SAG activists believe that SAG’s leaders were fearful of a full debate about the deal while there is a full scale push by SAG leaders for merger with AFTRA.
Since this deal with TV Land looks like an AFTRA-style deal it suggests that merger will result in SAG compromising its core bargaining standards, such as a defense of residuals on new distribution platforms, membership voting on major contracts and the use of master agreements to insure uniformity of collective bargaining standards across the industry.
Some defenders of SAG argue that the deal is an indication of why merger makes sense but that seems a challenging conclusion to reach. Surely this should have been seen by SAG’s pro-merger leaders as precisely the time to demonstrate the new leverage that they claim merger will represent. Instead, it looks like they took a page out of the AFTRA play book when they cut a cut rate deal in secret with TV Land.
UPDATE: This post has been updated in the wake of reports that the TV Land deal was, in fact, made last year and kept under wraps by SAG rather than recently negotiated as originally was reported on various blogs.
Pro-merger websites like SAG Watch, alleged by some to be managed by an AFTRA official, are celebrating endorsements from two unions that are not exactly heavy weights in the film and TV business, the Musicians and Actors’ Equity, but there is no word there of support from two guilds that matter a great deal, the Writers’ and Directors’ Guilds.
Equity has had its own internal problems with intense battles for control of the top positions in the union breaking out periodically. They likely hope to merge themselves into the new SAG-AFTRA if it emerges after the ongoing merger vote and survives legal challenge by former Membership First activists.
The Musicians, too, have been the subject of merger speculation. They have to have been the most dramatic victims of new media technology so perhaps if they were also to join the new union conglomerate they could share their horror stories.
Of course, the WGA itself remains internally divided between its east and west coast branches and that suggests that merger is not critical to success as a union.
Meanwhile the DGA may be anxious that it will lose its historic role as the most producer-friendly guild if SAG members give in to the new conservative merger proposal.
SAG comic, Allen Lulu, has never, as far as I know, played a lawyer in reality or on TV, but that has not stopped him from misinterpreting federal labor law in pursuit of his goal of promoting the SAG-AFTRA merger.
Let’s take a closer look at Mr. Lulu’s argument. Maybe we can stop him from bombing during his next appearance in a SAG video. (Click here to see how Mr. Lulu misleads his own brothers and sisters in a video promoting the merger.)
Some time ago merger opponents proposed that SAG pursue something they called a “global bargaining unit” to cover actors working in digital cable. Their hope has been to enable actors in cable pilots to have a genuine choice about which union, SAG or AFTRA, should represent them. Alternatively, they contend that these same actors should be able to petition the NLRB for a “unit clarification” which would mandate that the NLRB place them inside already existing bargaining units where SAG is the exclusive bargaining representative.
This issue is important because merger proponents claim that if merger fails there is no end to the growing tensions between SAG and AFTRA. Of course, that argument has been to some extent self-perpetuating. AFTRA has been the beneficiary of so-called “promulgated” agreements with cable producers over the last several years. Thus, cable pilots have been awarded overwhelmingly to AFTRA most likely because the producers were angered and frustrated by the strategy that SAG’s former Membership First leadership implemented in 2008.
If merger were to fail, however, a campaign for either unit clarification or a new bargaining unit that would allow actors self-determination makes eminent sense. Then SAG and AFTRA would be forced to compete to convince actors which union would be the better representative. Union competition often results in stronger outcomes for workers and of course it minimizes the chances for the third option, No Union, to be voted in.
But is there really a basis in labor law for these approaches? Non-lawyer Mr. Lulu says no. He argues that bargaining units must be implemented on an individual “employer-by-employer” basis and thus there is no such thing as a “global” bargaining unit. (Apparently joining Mr. Lulu in this conclusion, if reports of a recent SAG town hall are accurate, is SAG General Counsel Duncan Crabtree-Ireland.)
Unfortunately for Mr. Lulu his understanding of federal labor law is barely an improvement over his understanding of the impact of merger on actors’ benefit plans. While the NLRB does not use the term “global” bargaining unit, it does, with frequency, recognize the existence of multi-employer bargaining units.
In fact, Mr. Lulu, if he works in the film or TV business under a SAG contract, is a member of such a multi-employer bargaining unit. The AMPTP, the bargaining agent for multiple production companies, negotiates on behalf of the employer side of a multi-employer bargaining unit and SAG and AFTRA represent the employee side of that same unit. You can find multi-employer bargaining units in many industries, including trucking and professional sports.
When TV first emerged in the 1950s this is exactly how SAG and AFTRA (actually, its predecessor the Television Authority) resolved their conflict over films made for distribution on TV. In one case, for example, AFTRA/TVA wanted actors included in an already existing bargaining unit it had established at CBS. SAG, however, succeeded, as it had in other similar cases in having those film for TV actors assigned to a separate new bargaining unit. AFTRA was free to contest for the allegiance of those workers in an election.
In another case, much more significant, SAG also prevailed in winning rights to represent actors in a multi-employer bargaining unit in negotiations with the employers organizations of that period representing “almost all the motion picture producers in this country.” The NLRB decision noted the existence of a “multiple-employer bargaining pattern” going back to the 1930s. The decision went on to agree with SAG that actors made up the constituency of a number of multiple-employer units. Elections in those units were ordered and SAG prevailed.
More recently, other unions in the entertainment industry have used “unit clarification” petitions to defend their jurisdiction successfully. NABET, a division of CWA which represents some writers and editors working for NBC succeeded recently in front of the NLRB when NBC tried to recast these workers as so-called “content producers” who fell outside the NABET bargaining unit.
So there is nothing preventing the NLRB from considering a petition either:
1) to clarify the existing multi-employer bargaining unit so that it is understood that actors on cable pilots, to take one example, should be part of that existing unit; OR
2) to consider the argument for the creation of a new multi-employer bargaining unit consisting of all actors who work in cable scripted drama.
A SAG filed petition for clarification might have to be linked back to those original NLRB bargaining units in order to succeed. While some of the original production companies have likely disappeared and there may be legal objections to including others, there is likely also some continuity with today’s producers. Among the employers then were Columbia, Fox and Universal, for example, which exist today as well. If these same production companies are now employing actors on cable pilots those actors arguably are still part of that original bargaining unit.
For those actors who fall outside of the existing multiple-employer bargaining unit or units, it is feasible to consider a new multi-employer bargaining unit. In fact, SAG attempts to use a master agreement with a group of cable companies now and that would provide some precedent for the logic of a new multi-employer bargaining unit.
Of course, the map of bargaining units is separate from whatever jurisdictional agreement competing labor unions may have reached amongst themselves. Jurisdictional allocation is an issue within the labor movement. There have been in the past attempts to allocate jurisdiction between AFTRA and SAG that may or may not cover the current battleground over cable pilots. But that is an internal political issue for the labor movement not a question of federal labor law.
In any case, there is nothing in federal labor law that creates any per se barrier to the resolution of this issue either with a petition for unit clarification or a petition to establish a new bargaining unit leading to a union election.
Perhaps Mr. Lulu should stick to his own material.