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Mark Ryan (The Prestige, Robin Hood, Transformers) joins in regarding sudden appearance of thousands of dollars in Residuals at SAG-AFTRA held since 2001 ..........
Eric Hughes Explains foreign Royalties and Residuals Scandal
Jan. 29th /20/20

April 20, 2017
Gabrielle Carteris, President
SAG-
AFTRA
5757 Wilshire Boulevard, 7th Floor
Los Angeles, California 90036
David White, Executive Director
SAG-
AFTRA
5757 Wilshire Boulevard, 7th Floor
Los Angeles, California 90036
Re: BREACH OF FIDUCIARY DUTIES
Dear Ms. Carteris and Mr. White:
For five years now, SAG
-AFTRA
has been redefining the method for keeping the members
hip
informed, resorting to communications which are like press rel
eases wherein
information is
managed, intentionally incomplete and misleading. With the recent release of the video
SAG
-
AFTRA Celebrates 5 Years
, this five
-year practice of spin in place of transparency must be
viewed in context of real events and actions prompting many questions that
require immediate
answers from not only yourselves but all union representatives whether elected, appointed or
employed.
Several events have transpired since v
arious members of SAG
-AFTRA utilized the lawsuit
brought before the Honorable Manuel Real to seek transparency within SAG
-AFTRA. In
addition to the untimely passing of Ken Howard, there have been 9th Circuit hearings and
decisions which have condemned the
thievery of members’ monies as well as copyrights, as
well as the federal indictment
of a supervisor in the Residuals Estates and Trust Department who
used the SAG identification number of members to embezzle their residuals.
However, we do not believe that the National Executive Board has been kept informed about
these matters or what our review of more than forty purported Collective Bargaining Agreements
governing the receipt and distribution of f
oreign royalties/foreign levies
has shown. Not only ar
e
the percentage distributions between producers and actors different than the50/50 split which
April 15, 2017
Re: Breach of
Fiduciary Duties
Page 2:
SAG advised the Honorable Margare
t Morrow was occurring, but more importantly, foreign
governments were falsely advised that Uni
on members individually signed Powers of Attorney
which authorized the Union and other entities to take possession of members’ foreign monies,
when no such Powers of Attorney have ever been signed, let alone circulated. And after the
Union failed to provide us its agreement with the Motion Picture Association of America,
claiming there is no such agreement, the MPAA confirmed its existence to
Variety
.
Nor does it appear any actions have been taken to ensure that the executive leadership of SAG
-
AFTRA stop treating the Union’
s Treasury as well as Residuals and Royalties/Levies, if not
Public Performances monies that SAG
-AFTRA has falsely denied receiving, as personal bank
accounts which can be accessed with impunity. The typical safeguards which are utilize
d by
labor organizations to protect their Treasuries do not appear to exist at SAG
-AFTRA, thereby
compromising the
safety of not simply the Union’
s coffers generated from dues, but monies
belonging to actors a
nd actresses, and now, musicians as well. Cont
emporaneously, SAG
-
AFTRA has inappropriately asserted superior rights of ownership of these monies, while also
borrowing from members and non-
members funds which have been deliberately stockpiled to
satisfy the personal pecuniary interests of its hired lea
dership.
Although undersigned would have hoped that the consequence of prior reviews and court
decisions would have resulted in accountability from within, it appears that the exact opposite
has occurred. Rather than file LM
-2s that fully account for resi
duals and royalties belonging
to members and non-
members alike, regression in reporting has occurred instead. The hired
leadership of SAG
-AFTRA has countenanced the prolif
eration of various funds to which
monies belonging to members and non-
member
s alike are now entrusted. What appeared to
be the improper handling of One Hundred and Fifty Million Dollars of monies held in trust is
now approaching at least a Billion Dollars, spread out between internal accounts, as well as
such entities as Sound Exchange, A
FM & SAG
-AFTRA Intellec
tual Property Rights Distribution
Fund, and a recent threat to allow a brand-
new enterprise, Exactuals, to become a part of the
process as well.
The recent announcement that Exactuals will soon be processing residuals and royalties is
disconcerting at best, particularly since SAG
-AFTRA has reported expending millions upgrading
its equipment and software -
presumably, for example, “residuals processing machines” named
Rocky, Bullwinkle, Natasha and Boris -
only to announce now that the solution is in the software
of an outside entity, intending to give Exactuals access to monies that the union has never had
authority to hold and holds only through fraudulent endorsement.
Just as disconcerting is the improper expenditure of Union funds which have lined the
pocketbooks of highly compensated officials of SAG
-AFTRA. Prefatory to commencing a
federal lawsuit to address breaches of fiduciary duties, we are compelled to give the National
Executive Board an opportunity to c
onsider the breaches which have taken place and to timely
redress same, including by demanding that the accused officials and high level executives
reimburse the Union, forthwith. Absent doing so, an action seeking same will in fact be filed.
April 15, 2017
Re: Breach of Fiduciary Duties
Page 3:
The elected Union leadership plays little if any role in scrutinizing the expenditure of
Union funds.
Rather than implement procedures to ensure that i
ts leadership is not improperly ex
pending
members’ dues
, David White approves the expenses of Chief Financial Officer Arianna
Ozzanto while she approves White’s expenses. White approves the expenses of Duncan
Crabtree
-Ireland and John McGuire. McGuire, a senior advisor based in New York, approves
expenses incurred by Robert Hadl, based in Los Angeles, who is reported in LM
-2 filings to
be a
“
legal consultant
”
but who is not licensed to practice law. McGu
ire’s “advisor” duties
appear
exclusively to concern how the union can claim
, as its own, foreign monies which are the
property of U.S. Performers, members and non-
members alike. Hadl’s duties appear to include
negotiating bogus collective bargaining
agreements which bargain awa
y members’ rights under
the law.
Notes from internal staff about “lunch bills in which more than half the charges are for alcoholic
beverages” were routinely removed from our review after being brought to the attention of SAG
-
AFTRA legal counsel and the now deceased
National Controller David Metz.
1) Executive Leadership has Misused Union Funds, as follows:
National Executive Director David White
,
who recei
ves a salary well in excess of
a half
million dollars and is no longer licensed to practice law has, since assuming office:
a) Charged SAG
-AFTRA for excessive cell phone usage, including requiring the
Union to pay for, at various times, seven different numbers, including ones
entrusted
to his (White’
s) family members;
b) Ordered and routinely uses Limousines to attend Gala Events, which are stocked by
aged Vodka and other beverages;
c) Used Hotel and Airline Reward Programs for his personal use, while continuing
to bill SAG
-AFTRA for travel and lodging nationally and abroad;
April 15, 2017
Re: Breach of Fiduciary Duties
Page 4:
White continued:
d) Donated purportedly Unclaimed Residuals/Royalties to Not
-for-
Profit
Organizations which have in turn honored David White for his philanthropic
endeavors;
e)
Failed to report to the federal government that, in the months preceding merger, SAG
as well as AFTRA became members of Creative America Campaign,
Inc and in
turn
AFTRA Executive Director Kim Hedgpeth as well as David White became
members of Creative America’
s Board of Directors, in exchange for both
Labor Organizations contributing in excess of $500,000 of union funds to the
entity;
f)
Flown First and Business Class throughout the World to attend Conferences,
without advance approval from the Executive Board, let alone notice to
the membership, while utilizing frequent flier mileage to cover members
of his fam
ily to
accompany him to various foreign
destination
s such
as
Ireland, Belgium
, Beijing, Cuba
and the like;
g) Authorized expenditure of millions of dollars for hotels in New York and
Los Angeles, where non-
members, including relatives
, were provide
d
lodging and were wined and dined at Union expense, and,
h) Routinely had SAG
-AFTRA pay for David White to attend Conferences
at which he served
as a Panelist, enhancing his Resume rather than inuring
to the benefit of t
he Union’
s membership.
General Counsel Duncan Crabtree
-Ireland
, who also receives a substantial salary
and benefits
, has since assuming office:
a) Purchased expensive tickets to events with Union funds and submitted
invoices and obtained reimbursement for same, without obtaining
advance approval for said functions from the National Executive Board;
b) Charged mileage to travel by vehic
le, in lieu of using airlines, or alternative and
less costly travel, including to attend conferences in San Francisco and San
Diego, as well as depositions in California,
c) Used Hotel and Airline Reward Programs for his personal use, while continui
ng
to bill SAG
-AFTRA for travel and lodging nationally and abroad;
April 15, 2017
Re: Breach of Fiduciary Duties
Page 5:
Crabtree
-Ireland continued:
d) Approved the gifting of Unclaimed Residuals/Royalties to Not-
for-
Profit
Organizations
whic
h have in turn honored David White and John McGuire
for their purported philanthropic endeavors;
e) Flown throughout t
he World to attend Conferences without advance approval
from the Executive Board, let alone notice to the membership, while utilizing
frequent flier mileage to cover members of his family to accompany him to
various exotic destinations such as Ireland, Spain, Mexico, China, Argentina,
Cuba and
the like;
f) Routinely submits and has SAG
-AFTRA pay for not only mandatory Bar Dues, but
for Crabtree-
Ireland’s participation in numerous Bar Associations, Copyright,
Patent, Intellectual Property and Pa
rliamentarian Organizations, to enhance
Crabtree
-Ireland’s Personal Resume;
g) Routinely had SAG
-AFTRA pay for Crabtree
-Ireland to attend Conferences at
which he served as a Panelist, enhancing his reputation rather than inuring
to the benefit of the Union’s membership; and
h) Swore under oath as
the Manager of
SAG
-AFTRA Real Property Holdings,
LLC
to affirm
the purchase price of t
he Nashville Local building as
$824,800, even
though under the terms of merger, SAG
-AFTRA already owned said building.
John McGuire,
purportedly as an Advisor, has received substantial remu
neration while
he has
:
a) Been instrumental in causing SAG
-AFTRA to donate Unclaimed Residuals/Royalties
to Not
-for-
Profit Organizations, i.e. Museum of the Moving Image,
so that John
McGuire and others coul
d in turn be honored for their “philanthropic”
endeavors;
b) Fail
ed to recover losses relative to closure of Guild offices in New York;
c) Submitted and been paid expenses for First and Business Class Airfare throughout the
World to attend Conferences
without advance approval from the Executive
Board, let alone notice to the membership, while utilizing for his own benefit all
frequent flier mileage
earned for trips to Ireland, Belgium, Morocco, Beijing and
the like;
April 15, 2017
Re: Breach of Fiduciary Duties
Page 6:
McGuire continued:
d) Submitted expenses for his participation as a Panelist at Conferences, nationally and
i
nternationally, even though such
participation is unnecessary
and does not inure
to the benefit of the Union.
Robert Hadl,
after being accused of not filing reports with the Department of Labor for services
purportedly rendered to SAG
-AFTRA and its predecessors as a Consultant, now
claims h
e is Legal C
ounsel to SAG
-AFTRA, although not licensed to practice law.
Hadl has ch
arged SAG
-AFTRA for:
a) First Class Airfare and upgraded lodging to attend Conferences
throughout
the World, while billing other Unions if not Producers and the Moti
on Picture
Association of America
for the same trips;
b) Utilizing frequent flier mileage and Hotel Rewards earned at the Union's expense
for his own benefit.
c) Routinely submitted and had SAG
-AFTRA pay for Robert Hadl to attend
Conferences on which he was serving as a Panelist.
Considering the above, undersigned conservatively believe that the losses to the Union Treasury
in these regards well exceed $200,000.00 annually, with the total loss easily exceeding several
million dollars. The fa
ct that these inappropriate expenditures have taken place at a time when
Union officials advised the Convention of Delegates that it needed to borrow monies belonging
to the Members, smacks of a blatant disregard of fiduciary duties and inappropriately sou
ght to
enmesh delegates in financial improprieties, without full disclosure let alone transparency since.
Purchase of Buildings:
Since the merger, the Union appears to have used Union Funds, or
monies belonging to the membership, to purchase at least two properties, in Nashville and in
the San Fernando Valley. With respect to Nashville, AFTRA had purchased the building in 1981
but did not report the purchase in federal filings. In 2005, the corporate name of Nashville Local
- AFTRA was changed to Nashville Performers Building Corporation but not reported in federal
filings. Instead, LM
-2 filings showed that AFTRA was a “tenant” of
a real estate firm known as
the NASHVILLE PERFORMERS BUILDING CORPORATION to which it was disbursing
monies. After merger, SAG
-AFTRA continued this fraud for over two and a half years, then in
late 2014 filed SAG
-AFTRA as a foreign nonprofit corporation i
n Tennessee and purchased the
building it already owned, paying itself $824,800. We have ample reason to believe this
transaction was never reported to the Board while shortly thereafter General Counsel Crabtree-
Ireland orchestrated the dissolution of the
Nashville Performers Building Corporation.
April 15, 2017
Re: Breach of Fiduciary Duties
Page 7:
In light hereof, the Board is expected to demand an accounting of and the source of all monies
used in the Nashville real estate transaction, let alone
to e
xplain the source of funds to purchase
,
for $9.68 million, the building in which the AFM
-AFTRA Intellectual Property Distribution
Funds is now located. Undersigned have reason to believe the monies utilized belong to the
members and should never have been utilized to fund excessive salaries let alone vineyard
purchases inuring to the benefit of current and former executive staff, while distributions to the
membership have remained largely dismal instead.
The Board should likewise investigate failures to recover losses associated with closure of Guild
offices, including in but not limited to New York.
Criminal Prosecution:
More than $250,000.00 was stolen in checks issued to Union members.
The National Executive Board must reassure undersigned that these monies have been returned
entirely to the aggrieved Union members, while also compensating Union me
mbers whose
identity was stolen and/or compromised.
Settlement Monies:
During prior meetings with SAG
-AFTRA leadership, it was reported that
SAG-
AFTRA had recovered monies owing to Members in Litigation, including Bankruptcy,
while undersigned are also aw
are that SAG
-AFTRA has purchased rights to movies on which
residuals are owed
. The National Executive Board must reassure undersigned that all monie
s
recovered in these regards have
been restored to aggrieved members and that SAG
-AFTRA, now
assuming the r
ole of Producer, has paid Residuals as well as contributions into the SAG
-AFTRA
Health and Welfare and Pension Funds, notwithstanding the inherent conflict of interest in these
situations.
Exactuals and Related Conflicts Due to Handling of Distributions i
n Past:
Because SAG
-
AFTRA has sent out notice to a select few about the rollout of Exactuals, it is imperative that
you provide greater information so the membership may make an informed decision about the
mechanics of how Exactuals will work, to eliminate
the necessity for seeking injunctive relief.
Direct deposit of wages is allowed under California Labor Code § 213 if the wages are deposited
by the employer into a financial institution of the employee’s choosing. Based upon the limited
announcement whi
ch has been made to some but not all Union members, the wages implicated
herein, namely residuals, will be deposited by the employer into a City National Bank account
and not into the performer’s account. We understand that, thereafter, when there is a deposit of
residuals into a performer’s account, it will be from City National Bank and not the performer’s
employer. And City National Bank will be holding not only unpaid wages in that account but
unpaid royalties from around the globe belonging to audiovis
ual performers and musicians.
Undersigned are concerned because there is a conflict stemming from your former business
interests. The daily operations of your company Entertainment Strategies Group (ESG) were
financed by an account at City National Bank, funded by now imprisoned ex
-lawyer Marc
Dreier
. ESG and City National Bank co
-sponsored industry events. City National Bank is not
April 15, 2017
Re: Breach of Fiduciary Duties
Page 8:
only one of Exactuals’ partners but its lea
d investor. Other partners include the Motion Picture
Association of America (MPAA). The MPAA was a client of ESG, as were others who are now
partners of Exactuals. The model Exactuals has built will save studios a tremendous amount of
time and money
, whic
h you have not disclosed, but the benefit being sold to members is not
what you claim. There will not be direct deposit of wages from studios to performers’ bank
accounts.
The National Executive Board should immediately require an explanation of the sourc
e of
monies and/or securities used to set up Exactuals. If any monies or investments of SAG
-AFTRA
have been used
, then a full accounting should be required, including when those monies were
allocated to support the startup expenses of Exactuals.
By switch
ing to Exactuals, it would appear millions of dollars which have been investe
d at the
direction of the Union’
s executive leadership and high level managers to upgrade and streamline
the processing of residuals and foreign levies/royalties within SAG
-AFTRA will have been
needless
and profligate
acts. Since high level Union officials and managers have expended
millions of dollars for computer upgrades and software over the course of the past several years
it would be appropriate for the Board to require responsible individuals to divulge any famil
y
holdings in the IT entities and software companies which have been utilized.
We would suggest immediate implementation of Disclosure Forms which would obligate staff to
disclose interests held, if any,
including by blood or marriage, in the multiple bus
inesses utilized
to purportedly upgrade computer equipment and software to ensure that a timelier distribution of
residuals and foreign royalties/levies could occur, particularly in light of the millions invested
when storage closets were first discovered holding checks issued to performers. Thereafter, the
Board should review same and demand, if applicable, return of monies where conflicts exist. As
preposterous as this sounds, undersigned are mindf
ul of the recent scandals and prosecution of
key players in entertainment industry ERISA funds.
In light, hereof, the questions we seek answers to are as follows:
a) Is Exactuals bonded and will it be filing reports with the Department of Labor
relative to all monies entrusted to it by SAG
-AFTRA and presum
ably
various Producers
?
b) Which Producers, if any, ha
ve entered into Agreements that
will allow Exactuals
to obtain possession of residuals (wages) belonging to members and non-
members
alike?
c) Will SAG
-AFTRA be sending to Exactuals checks payable d
irectly to members or
will the Studios be doing so?
April 15, 2017
Re: Breach of Fiduciary Duties
Page 9:
d) If SAG
-AFTRA will be sending the monies in question to Exactuals, does SAG
-
AFTRA intend to continue depositing the original che
cks into its bank
accounts first, followed by issuance of a SAG
-AFTRA check to Exactuals?
f) How will this arrangement alter the tax rep
orting obligations of Producers?
g) W
ho will be responsible for reporting these monies to the
Industry Funds?
h) If SAG
-AFTRA remains involved in the handling of monies, what surcharges will
it c
ontinue to extract?
i)
How will monies issued by Studios be reunited with heirs of deceased performers?
Formula for Distributions of For
eign Royalties:
When inquiries were previously made by
certain of the undersigned about the percentage formula utilized to distribute foreign royalties,
different stories were proffered
as to how distributions were accomplished. Initially, USAC was
told t
hat distributions were made in equal shares regardless of whether one was a principal or a
background performer, with SAG
-AFTRA counsel claiming this decision was made by the
Board of Directors. However, when it was discovered that on common films amongst
certain of
the undersigned the distribution was not equal, requests for a copy of the Board Minutes were
tendered to SAG
-AFTRA counsel. In light hereof, please confirm the true distribution formula
that has governed these matters and when if at all the B
oard of Directors approved of same.
Hiring of Brad Keenan:
Lastly, with no press release announcing it, there has also been the
recent hiring of Brad Keenan. As the director of the ACTRA (Alliance of Canadian Cinema,
Television and Radio Artists) Perfor
mers’ Rights Society, Keenan was responsible for
overseeing all aspects of that union’s bookkeeping branch but his title at SAG
-AFTRA
inexplicably began as
Contracts Administration and Enforcement
–
Managing Advisor.
This
has occurred without any disclos
ure that contemporaneously Keenan was the
Chairman of the
Board
of SCAPR (Societies’ Council for the Collective Management of Performers’ Rights) in
Brussels, Belgium. After ten months, and again without notice, his title became
Managing
Advisor
. His decad
es-long history administering foreign funds available to music, film and
television performers remains under
-the
-radar. He is being paid hundreds of thousands of dollars
-- but for what exactly?
Suffice it to say that a failure to promptly provide a respon
se to this letter within the next forty
-
five days, including to answer the questions posed herein will be viewed as a refusal on the
part of the National Executive Board to cure the fiduciary breaches identified and the
potential for egregious abuses in th
e future.
At a time when the membership of SAG
-AFTRA
is gracefully aging, we are most concerned that SAG
-AFTRA has forgotten its role to protect its
members, let alone to ensure that monies which have come into the possession of the Union
April 15, 2017
Re: Breach of Fiduciary Duties
Page 10:
through artifice or misrepresentations are promptly restored to their rightful owners, namely
living members and non
-members alike, let alo
ne their beneficiaries upon one’
s death.
In September 2012, USAC demanded transparency as well as an opportunity to address the
Board. Efforts to speak about these critical matters fell upon deaf ears. Although more than one
year later, in the midst of litigation, SAG
-AFTRA opened some of its books, the activi
ties of its
retained leadershi
p ever since suggest a callous
indifference to what was discovered, let alone
what it means to be a Union governed by federal labor laws, let alone foreign treaties.
Kindly provide your response forthwith, including to our le
gal counsel, the Law Offices of
Helena S. Wise, 1907 W. Burbank, Suite A, Burbank, CA 91506, on or before June 1, 2017.
Fraternally,