Sunday Review – Ben Schott – Assembling a Films Billing Block.

Is Netflix’s remake of a British political thriller changing the structure of TV? It’s about time.

TV streaming: six of the best shows.

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.

Handel wrote:

….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.