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Secrets at SAG: Where's the Money?

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Forget the Pellicano trial. The documents emerging in another case in downtown L.A. raise serious questions of dubious dealings between Hollywood's labor unions and the studios, on the eve of negotiations over a new contract.

A lawsuit brought last fall against the Screen Actors Guild by actor Ken Osmond, a member of the guild who played Eddie Haskell on "Leave it to Beaver" in the 1950s, has revealed the existence of a secret 2002 agreement between the studios and the guild, granting the major studios half of the money collected abroad on behalf of actors from the sale of DVDs, blank VHS tapes and cable transmissions. Half!

European governments levy taxes on such sales, and allot this money to writers, directors and actors. But SAG, just like the directors guild and the writers guild, has generously chosen to share this money with the studios. (So far they acknowledge collecting $8 million since 1989, a figure that seems preposterously low.) Why give up the money? I asked this question to the guild. "It's not a giveaway," explained SAG's general counsel, Duncan Crabtree-Ireland. Under U.S. copyright law, the studios "had a viable argument that they were entitled to 100 percent of the monies, and they would take steps to collect it. From our point of view we negotiated a very favorable resolution." In other words, it's not a giveaway, it's a backroom deal.

But this raises many more questions than answers. Let's start with the math. Eight million dollars? The European market is dominated by Hollywood films to the tune of 80 percent. DVD sales and rentals run in the hundreds of millions of dollars every year. What might possibly be owed? Lots and lots. The French collecting society, SACEM, took in 52.5 million Euros worth of foreign levies in 2005, and 50 million Euros again in 2006 (details here). If only half of that were from American films (and 60 percent of the French film market is American), that would be about $50 million owed to writers, directors and actors from foreign levies already collected.

Another question: Why wouldn't the guild challenge the studio's argument in court? After all, they have an international convention - the 1989 Berne agreement governing intellectual property - on their side. For another, why the secrecy? SAG only revealed the existence of the fund last summer in an article in its magazine. That article also raised more questions than answers. The original agreement in 1992 gave the guild only seven percent of the foreign levies, which the article does not mention. Why would the guild agree to that? Who got the studios to agree to raise the ratio to 50%? And why has it taken the guild so long to strike agreements with foreign countries over foreign levies? Crabtree-Ireland said that SAG just reached a deal with Germany a few months ago. Huh?

The guild's responses to these questions do not add up. Crabtree-Ireland told me that by last summer only $250,000 of foreign levy money had been disbursed to SAG members, all from France. He also said that $4 million has been sitting around since 1998, and the other $4 million has come in over the past four years.

It's bewildering. What is the precise tally of that $8 million? Where did it come from - which movies? Which countries? What about 'Titanic'? Wouldn't a tax on the DVD sales of that movie along have made Kate Winslett a fortune?

For the moment I have more questions than answers. This issue has been around since 1989, and only now is it beginning to be aired. Indeed, it appears that only lawsuits and the efforts of a dissident and rather determined member of the writer's guild, Eric Hughes, has shone some light on these dealings. Hughes, by the way, has a website where he is busily posting documents. The secret agreement "gave the guild a license to steal, because they were never going to tell any actors about it," he told me. "And they took it all. It's all gone." Confused? Welcome to the club. I welcome tips, thoughts and comments on this issue to my email, and everyone else, stay tuned, I will be following through.