Eric Hughes to inform judge of his findings

A potential roadblock has emerged in the proposed settlement of Ken Osmond’s class-action suit over how the Screen Actors Guild disburses money collected from foreign tax revenues.

SAG, which reached a deal to settle in August, has been accused of misrepresenting terms of the settlement in its court filings and communications with class members. SAG’s refusing to comment on the allegations.

The guild is due back before Los Angeles Superior Court Judge Carl West on Jan. 28 to finalize the settlement while actors have until Dec. 15 to opt out. Agreement calls for SAG to make its best efforts to distribute the $7.9 million that the guild’s holding; hire an independent consultant to perform a one-time review of the program; and provide for an annual review of the program by a Big Four accounting firm.

But SAG and WGA member Eric Hughes, who has tracked the issue on his site, will notify West within a week that SAG has allegedly misrepresented the settlement to members in several areas. That notification will include a Nov. 22 letter from Hughes to SAG national exec director David White.

SAG reached a preliminary agreement in August to settle Osmond’s 2007 suit over “foreign levies” collected from countries through mechanisms such as taxes on video sales and rentals to compensate copyright holders for reuse. The suit alleged SAG mishandled those funds and lacked authority to oversee them in the first place. SAG has long denied that it has done anything wrong in how it’s handled the foreign levies for American creatives. Those funds began to flow in 1989 after the U.S. agreed to the terms of the Berne Convention, which established the right of authorship for individuals who create works of art.

Hughes asserted in his letter to White that SAG is allegedly concealing its 1992 agreement with the Alliance of Motion Picture & Television Producers, which authorizes SAG to collect the foreign funds and provides that the companies and SAG split the performer’s share.

“Members of SAG are unaware that such an agreement exists,” the letter said. “The foreign levy agreement between SAG and the AMPTP is an illegal agreement as SAG does not have the authority to bargain away performers’ rights under foreign law.”

The letter also disputes SAG’s assertion that an audit of the program will be conducted, noting that the word “audit” was used in the SAG news release about the proposed settlement but isn’t included in the settlement or the class-action notice. Instead, those documents mandate that a “review” will take place.

“As you are aware, there is a legal definition of audit, which is a formal examination of an organization’s or an individual’s financial records often for the purpose of uncovering fraud,” the letter said.

The letter asserts that the intent of SAG and Osmond’s attorneys appears to be for members of the class and collecting societies to believe that an audit will take place and — once the settlement is final — that SAG’s been exonerated of mishandling the funds.

The letter to White also disputes SAG’s assertion that it’s paid out more than $7 million in the foreign funds, alleging that the guild’s LM-2 statements filed with the Dept. of Labor show that the payouts are less than $1 million.

SAG, the WGA and the DGA began collecting the foreign funds in the early 1990s on behalf of members and nonmembers. SAG general counsel Duncan Crabtree-Ireland said in a declaration in September that SAG has distributed the foreign levies to more than 70,000 individuals and held $7.9 million as of Sept. 13. Similar suits on foreign levies were filed by William Richert against the WGA West, and by William Webb against the DGA in 2006; the former was settled earlier this year, the latter in 2008.

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