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Anti-SAG-AFTRA Lawsuit Raises Many Issues, Targets Union Leadership (Analysis)

* Failure to Locate People who are Allegedly Easy to Locate. The complaint asserts that SAG-AFTRA retains residuals owed to people who are easy to locate: “SAG (sic) leadership, including CRABTREE-IRELAND has sought to justify the burgeoning retention of Residuals on the premise that SAG cannot locate the heirs or estates of such well known entertainment and/or political icons as Frank Sinatra, John F. Kennedy, Larry Hagman or Sonny Bono, while lacking the ability to send checks owing to the parents of television personality Anderson Cooper, including his mother, Gloria Vanderbilt, or his now deceased father, Wyatt Cooper, let alone Ed Asner's son, Matthew Asner who is now the Southern California Executive Director of Autism Speaks.”

The union responds that “unclaimed funds can linger for high profile individuals (for) a variety of reasons, including:

“(1) If the individual is deceased, their estate can be subject to probate proceedings, there may be a dispute among heirs and beneficiaries as to who is entitled to the money, or the estate may simply be taking their time in providing us the necessary documentation to establish who is entitled to the money.

“(2) Family law disputes (divorces, conservatorships, other proceedings) can require us to hold funds pending the resolution of those issues.

“(3) Occasionally members will attempt to assign (sell) their interest in future residuals, and the buyer of those rights will attempt to claim the residuals despite a dispute from the member, raising legal issues under statutes like Cal. Labor Code Sec. 300. Such residuals must be held until the dispute is resolved.

“(4) Well known people may move or change representation and not tell us. Even when we locate them, we have to receive confirming documentation so we can be certain we are not sending substantial sums of money to an unauthorized person or address. Sometimes getting those documents back to us is not their highest priority, and the funds are held.”

In addition, according to the union, approximately 94 percent of SAG residuals checks on average are mailed to and received by performers in a given year, and 6 percent of the checks are undeliverable. The union said that corresponds to an average of 99 percent of the SAG residuals dollars mailed to performers annually, with 1 percent undeliverable. AFTRA-side figures were not immediately available.

* Diminution of Residuals and Foreign Royalty Payments. The complaint says that “not long after the DGA and the WGA were threatened with suit because of their withholding of Foreign Royalties, SAG grossly diminished its payment of Residuals and Foreign Royalties, if not suspended payments completely to mask an (u)lterior covert motive to stockpile as part of SAG's own assets undistributed Residuals and Foreign Royalties.”

Regarding residuals, the union told THR, “The dollar amount of residuals that come in the door is dependent on employment and distribution of projects. It’s a fluctuating number, with a general upward trend. Residuals checks are payable directly to the member, and they are processed as quickly as possible and mailed -- uncashed -- to the member. The member receives exactly the amount of money payrolled by the producer or distributor.”

Regarding foreign royalties, the union responded: “Since distributions began in 2007, we have been engaged in a continuous process of distributing foreign royalties as quickly as possible, and have gone from around $250,000 total distributed in 2007 to an aggregate total distributed since inception of more than $16.6 million today. The only diminution of the performers share of these sums is the Board- and Court-approved administrative fee of 10%. Note that members do not pay dues on foreign royalties collected for them by the union.”

The audited foreign royalties report shows disbursements increasing year over year, except for one year when both receipts and disbursements declined, and another year when disbursements declined by about $2,000. The plaintiffs dispute the nature and accuracy of the report.

* Growth of Trust Fund. The complaint asserts that “SAG has in turn converted Residuals and Foreign Royalties to its own use. …  As evidence of same, Plaintiffs note that in 2002, SAG reported on its LM-2, that it was holding only $12,085,425, in trust for its members. As of 2011, SAG reported on its LM-2 that said monies had grown to in excess of $95,205,672, while SAG-AFTRA, after one month of operation, purported that the sum being held in these regards, presumably in different accounts, was now in excess of $110,000,000.”

The union responded to THR that the amounts listed include funds held in trust for producers as well as residuals, foreign royalties and other deposits. The union added that all of the funds were audited by the external auditors each year including all the years in question and that growth in trust amounts is largely due to additional deposits for increased production activity and other factors.

* Unions’ “Wrongfully Endorsing” Residuals Checks. The complaint says that SAG-AFTRA wrongfully endorses residuals checks.

The union’s response is that since 1960, its collective bargaining agreement has provided for this; that its constitution and bylaws expressly authorize it (and that SAG’s did also); and that it only endorses checks when performers cannot be located, or there is a lack of clarity or dispute as to the beneficiary of a deceased performer or of a performer who has assigned his residuals income to another entity.

In these circumstances, the union told THR, failing to endorse and deposit the checks would allow the checks to go stale and become non-negotiable, meaning that new checks would have to be requested from the producer when the matter was resolved -- which could be years later. At that point, the producer might resist reissuing the check, or the producer itself (in the case of small entities) may no longer exist or be locatable.