Conspiracy?Some people are obsessed with the grassy knoll. Others are sure that 9/11 was the first time fire ever melted steel (except for every single day in every steel mill in Pennsylvania, but hey, Rosie O’Donnell knows best).

In the WGA, there’s only one conspiracy theory worth talking up, and lo and behold, it’s the strange case of Foreign Levies.

This is gonna be a long one, folks, so bear with me.

Last week, no less than three articles were published about this topic. The Los Angeles Times, Fade In Magazine and the L.A. Weekly all weighed in, and with varying degrees of accuracy and sensationalism. Prior to this, I guess the only person really interested in this topic (who isn’t a conspiracy theorist) was me. I wrote an article about foreign levies, and if you want the rest of this piece to make sense, you should probably go read that first.

Before I go into my analysis of the current brouhaha and the players involved, I should note for full disclosure that I spoke with Richard Verrier (the author of the L.A. Times article) on background, and I went on record with Stefan Avalos, who wrote the Fade In article.

Here are some facts.

In 2005, a class-action suit was filed against the WGAw, with William Richert as a named plaintiff, alleging that the WGAw had no legal standing by which they could collect foreign levies, and furthermore, they weren’t distributing them.

Also, a former staff employee at the WGAw named Terry Mial was recently fired. Mial, who had been working in the department that distributed foreign levies, is suing the WGAw for wrongful termination.

One last fact. There are some people who believe that the entire foreign levies program is a massive scam designed to steal money from writers and divert those funds into the pockets of highly placed Guild employees and political muckety-mucks.

I think Verrier wrote a very balanced piece, which you can read here. Avalos also did a very thorough job, and I also found him to be extremely balanced and fair-minded. You can read his piece here (the layout is odd…his article starts on the right side, but once you get past the first bit and hit “continue”, the formatting improves).

And then there’s Dennis McDougal at the L.A. Weekly. His article was awful. I understand that the L.A. Weekly doesn’t exactly “do” journalism the way everyone else does…his piece is a hybrid of reportage and opinion…but it’s such a nightmare of misinformation, it belongs happily nestled between ads for prostitutes and pitches for laser vaginal rejuvenation.

Hey, the L.A. Weekly’s gotta make money somehow…

Anyway, I think all of this publicity was precipitated by a recent court ruling in the Richert case. The Guild, represented by General Counsel Tony Segall, argued that the case should be heard in federal court (nb: Tony is really the WGAw’s outside counsel, but ever since the in-house general counsel was summarily fired by Patric Verrone and David Young, Tony has served as outside and inside counsel, an arrangement that makes me a bit squeamish, although I continue to hold Tony in high regard).

The guild wanted the case in federal court, because it apparently believed it would prevail on the basis that they had not violated the Labor Management Relations Act. See, part of the plaintiff’s anger is at the fact that the WGA and DGA share the foreign levies with the MPAA companies. The WGA wanted the case to be heard on those grounds in federal court (which governs the LMRA), because they were pretty sure they hadn’t violated that law.

And they probably haven’t. However, the judge turned down their request, and remanded the case back to the California courts, because:

Plaintiffs here do not allege that defendants breached their duty to collect or disburse foreign levies under the agreement. Rather, they allege that defendants have illegally converted funds that rightfully belong to plaintiffs by holding themselves out as having the right to collect foreign levies on behalf of non-members without having obtained the non-members’ authorization to do so.

Got that? The judge is saying, “The guys aren’t saying you screwed up by making a bad contract under labor law, they’re saying you screwed up by collecting this money in the first place without asking permission from the people on whose behalf you’re doing this.”

As to whether some limitation of rights occured (which is central to the question of whether or not the plaintiff’s case has merit), the judge said:

By providing that the Guilds would receive less than 100% of the author’s share, the agreement clearly limited plaintiff’s right to receive their full share of the foreign levies. The court therefore concludes that the agreement contains ‘clear and unmistakable language’ circumscribing plaintiffs’ rights.

This is certainly true. If you live in Europe and write a movie there, you retain copyright, and you get 100% of the foreign levies due the author of that movie (which would be 50%, actually, since the director gets half…I think…this may vary from country to country). Through their efforts to get that money out of Europe and into our hands here in the U.S., the DGA and the WGA had to deal with the fact that the talent are authors there but not authors here. Hence, the compromise to avoid litigation that led to the 50-50 split with the companies.

It’s important to note that while the Judge believes the agreement circumscribes the plaintiff’s rights, I don’t think her ruling implies that it does so illegally. That’s still up to the state courts to decide…although I must remind everyone that I’m a layperson. I’m playing the home game along with the rest of you.

As an aside, the plaintiffs sought legal fees from the WGA, but the judge didn’t grant those, because she felt the WGA’s position wasn’t frivolous.

As for Terry Mial, here’s what we know. We know that she claims to have complained a lot about the way foreign levies were being disbursed. We know that she alleges that she was cooperating with a Department of Labor investigation (although there’s no other evidence to date that such an investigation exists, formally or otherwise). Lastly, we know that she told a coworker to keep quiet about the alleged investigation or “I’ll have to kill you.”

Joke? Threat? I have no idea. It got her fired, though, and she’s charging that her termination was retribution for whistle-blowing, rather than murder-threatening. I do know that under Patric Verrone and David Young, the WGAw has become a fire-happy termination festival, with heads steadily rolling since they took power. Some of the costs of that sort of management style are resentment and lawsuits.

Reap/sow, etc.

Personally, I think you probably do have to fire anyone who makes a serious death threat. Let’s see how that case winds up.

Before I get into what the L.A. Weekly article got wrong, let me first talk about what I think the critics of the foreign levies program get right.

The star of McDougal’s article is Eric Hughes, former Guild candidate for President and general WGAw gadfly. I think Eric is a bit unhinged about all of this, and I know he’s certainly wrong about some things, but all in all, I don’t blame Eric for any of his more…shall we say…exciting theories about foreign levies.

It’s the L.A. Weekly’s fault for publishing them without checking facts.

Still, there are some things about foreign levies that trouble me.

First, while I’m basically on board with the concept that without the WGA stepping into the breach, none of this money would find its way to us, I’m growing increasingly impatient with the guild’s inability to do the job competently. It’s not the baloney accusations about “hiding money from easily-found widows” that bothers me (most of that stuff isn’t true, e.g. I hear that Preston Sturges died intestate, his heirs are apparently battling for his money, so the guild doesn’t know to whom his levies should go).

I’m more concerned about the bureaucratic inefficiency. Granted, the Guild was swamped by more money than it knew how to distribute, and granted, the paperwork it often gets from the foreign countries is insufficient or nonexistent. Still, you shouldn’t take on a job if you can’t do it right. While things are getting better, they’re not what I’d call “good.” If the Guild can’t manage to clear out all of the funds it’s holding within two years, it should wave a white flag and give someone else a try.

Second, according to the guild’s own internal investigation of the foreign levies money, $17,000 is missing. Unaccounted for. They’ve turned the results of their investigation over to the police, but how could this have happened at all? Where are the safeguards and procedures to prevent what sounds like outright embezzlement? While $17,000 is a pretty small amount in the grand scheme of the many millions that foreign levies bring in, it’s still seventeen thousand dollars.

I think the membership of the Guild deserves to know who, if anyone, is being investigated, and who, if anyone, has been put on leave or suspension over this incident. It’s incredibly embarrassing and disconcerting, particularly in light of the fact that the conspiracy theorists insist that people are stealing money hand over fist from foreign levies. I keep saying “No, there’s no proof!”, and now, apparently, someone has stolen some money. Arghh. If you can’t keep the cash safe, then stop collecting it.

Third, and why Hughes and Co. don’t spend more time complaining about this I don’t know…is the foreign levies deal with the MPAA a collective bargaining agreement or not? If it is, then why didn’t the membership ratify it through a vote? Our constitution clearly sets out the circumstances under which collective bargaining agreements should be ratified, and I think the language is incredibly clear: all CBA’s must be ratified, in one way or another, no matter what type they are or function they serve.

If the deal isn’t a CBA, then was the WGAw, as a labor union, legally entitled to make it?

Fourth: When I spoke with Patric Verrone to learn about foreign levies, he told me (accurately) that if the Guild doesn’t shift undisbursed levies into the union’s general fund after seven years, those funds would escheat…or default…to the state.

Here’s Avalos on that.

Keeping undistributed money from escheating to the state seemed a reasonable attempt to keep it safe for the writers not yet found, especially if “escheat” were synonymous with “forfeit.” Unfortunately, that was not the case.

Folks, I certainly thought escheat was synonymous with “forfeit.” I was wrong.

According to the California state controller website, “The Unclaimed Property law was enacted to prevent holders of Unclaimed Property from using your money and taking it into their business income. This law gives the State an opportunity to return your money and provides California citizens with a single source, the State Controller’s Office, to check for Unclaimed Property that may be reported by holders from around the nation.”

Hmmm. Okay, but all things being equal, why let it escheat?

And unlike the WGA’s five percent administrative fee, the state charges nothing to a claimant. Its service is free.

Oh. Right. Hmmm, not good.

Wouldn’t it therefore have made more sense for the WGA to let the unclaimed money escheat instead of holding on to it?

Well, from the perspective of a recipient of those funds, I think yes, yes it would make more sense to let the funds escheat.

Eric Hughes questions the legality of the guilds’ policy of keeping the money: “Unions do not have to allow money to escheat if it’s ‘dues-able’ … Once the member dies, the member no longer pays dues, so that money must escheat. Money for nonguild [members] has to escheat immediately.”

I’m not sure if his legal analysis is correct or not, but I think he’s on to something. It’s not necessarily good for the union, but it’s probably the right thing to do. Frankly, why shouldn’t members’ money escheat if the WGAw can’t find them or doesn’t know to whom it should actually go?

Contradicting the 2003 WGA newsletter, Segall denies that any principal amount of undisbursed money has ever moved from the levies fund into the general fund. “The only money that has ever flowed into the general account is interest on the money held in trust and, in the last couple of years, the five percent administrative fee.” Segall wouldn’t elaborate on how money, undelivered for more than seven years, had avoided escheatment, but felt the guild was handling it properly.

Ouch. I hate reading stuff like this. I don’t like it that our union put out a statement in 2003 that our general counsel is now saying is false. I also don’t like it that Tony is claiming that money that should be escheating isn’t escheating and not because it’s in the general fund, but he’s not gonna say how the WGAw is doing it, but it’s “proper.”

I generally give Tony and the union the benefit of the doubt, but I think after misplacing $17K, losing a fight in federal court, getting slapped with a wrongful termination lawsuit and contradicting union publications, I’m owed a better explanation as a member. I think we all are. We should know exactly why the WGAw isn’t letting the money escheat, and we should know exactly how the WGAw isn’t letting the money escheat.

This is why, in a way, I’m happy that guys like Eric are around. Does he seem to have an irrational vendetta against the WGAw? Yes, he does. Is he right about everything he says? No. Is he occasionally right? Yes. Is anyone else as publicly assiduous in their attack? No.

Eric is like a car accident. You don’t deserve to get hit by another car, but it’s one of the only ways you’ll find out if your airbag is working, ya know?

Still, like a car accident, conspiracy theories don’t care whom they hurt. Nor do the proponents of conspiracy theories care for truth. They begin with assured, preconceived notions, and then build cases.

That’s why they say silly things a lot.

(Ed. Note - 5/10/07 - I’ve now had a lengthy discussion with someone close to Eric, and as a result of that discussion, I wish to offer this limited apology to Eric Hughes.

Eric…if you’re reading this…I’ve unfairly associated you with some people who purport to speak on your behalf. I understand now that they do not, and will no longer tar you with that brush. My apologies.)

Here are some excerpts from the L.A. Weekly article that I find objectionable.

Since 1990, these critics contend, the guild has quietly been paying a king’s ransom in writers’ foreign earnings—far beyond the $20 million in withheld checks already acknowledged by Gor—to powerful Hollywood entities without the writers’ agreement or knowledge.

I think what “these critics” are contending is that the writers share in foreign levies money with directors and the MPAA companies. This is a matter of public record. Hell, I’ve written about it here on my blog. It’s possible that writers don’t know about it, the way that many citizens haven’t read the 9-11 Commission report, but that doesn’t mean that fact is being hidden, nor does it justify the use of the word “quietly” in the above paragraph.

The L.A. Weekly has learned that the Department of Labor has been quietly gathering evidence and testimony about the guild’s payment practices for over a year—though it refuses to confirm or deny that it is investigating.

Uhhh…..huh? If the DOL refuses to confirm or deny it, then how does the L.A. Weekly know this? If they have some evidence, why not share it with the rest of us? Why should Eric Hughes and some guy at the L.A. Weekly enjoy the privilege of that knowledge while the rest of us dues-paying schmoes get left out in the cold? If the DOL is investigating the Guild and there’s evidence of it…PUBLISH IT!

If not…why allege it without evidence?

Moreover, on April 12, a 27-page ruling by Los Angeles federal District Judge Margaret Morrow appears to have granted the writers some legitimacy, by rejecting the WGA claim that, as a labor union, it could collect and hold their money—and charge them hefty fees to boot.

I’m not sure that’s what the ruling said. There’s some tricky wording there…re: “as a labor union.” The WGA may still prove a right to collect and distribute (and hold, I suppose) that money, but outside of the federal statutes specifying management-labor relations. That’s the reason there’s still a trial yet to come. This seems unnecessarily misleading to me.

The controversial but, to many, compelling argument made by Hughes, Richert and other critics is that foreign levies are being withheld by all of Hollywood’s talent guilds in a long-standing practice they see as a bizarre twisting of U.S. copyright law.

That virtually unnoticed 1990 decision, by the guild’s board of directors, to funnel more than 90 percent of American writers’ foreign earnings to big studios and other fat cats, mirrors an old practice struck between screenwriters, actors, directors and the studios in the 1940s shortly after the WGA, Directors Guild of America and Screen Actors Guild were born—and conceded authorship of the movies they created to the studios.

Boy, where to begin on that doozy? I’m glad that an alleged “many” find Eric’s argument compelling. First off, Eric’s premise is incorrect. He believes that writers and only writers are due the foreign levies from movies and television. My understanding is that many countries (if not most) recognize that directors and writers share in the authorship of film and television.

Next, who needs pointless language like “fat cats” in there? “Fat cats?” Really? That’s how journalism goes these days? Anyway, the numbers are off. The early levies deals were bad, but they’ve grown increasingly better. Currently, writers are due 25% of foreign levies. The directors get the other 25%, and the AMPTP gets 50%. I’d like to think that when this deal expires, the breakdown will be even more favorable.

The truly big whopper in the above excerpt, though, is this nonsense about the guilds ceding authorship to the studios in the 40’s. Work-for-hire, the uniquely American quirk of copyright that allows a corporation to commission a work and retain copyright, has been applying to motion pictures since 1912, not the 40’s. Decades before the Guilds ever came into existence, Congress ruled that motion pictures (yes, they specified them) fell under work-for-hire. They don’t have to be created under work-for-hire, but they can be.

Because work-for-hire existed, screenwriters and directors couldn’t exercise copyright claims, nor could they license their work. They were, by dint of work-for-hire, employees. And guess what employees can form?

Unions.

The unions didn’t give away copyright to the studios. They unions were only possible because work-for-hire had already been introduced thirty years prior.

A furious Mial started smuggling out of the gleaming glass WGA headquarters records of “undeliverable” foreign levies—essentially, piles and piles of payment records and mysteriously uncashed checks reviewed by the Weekly, which she claims she rescued from the guild’s shredder.

“Gleaming glass?” Jesus, McDougal…have you seen the place? Gleaming? I guess gleaming sounds more evil or something.

I like the quotes around “undeliverable.” Beats having to write out “allegedly undeliverable,” which is accurate and responsible, but not as much fun.

By the time she left last June, she says, the bookkeeping had become so egregious that checks were cut, held for several months, then declared “undeliverable”—after which they were escheated back into WGA bank accounts, allowing the known totals of undelivered payments to swell far beyond $20 million.

Either she’s right, and the Guild is in serious trouble, or she’s really bad at figuring out what’s going where, in which case it’s probably for the best that she got fired.

Until her own death last November, Preston Sturges’ widow, Sandy, had been equally outspoken. At the same time that the guild invited her to unveil its new Preston Sturges Reading Room at the WGA West headquarters at Third and Fairfax in the summer of 2005, her late husband’s name appeared among the long roster of “undeliverables” in the guild’s foreign-levies division. Mial testified in her deposition in the Richert case that she knew of at least one check for $5,000 that Sandy Sturges was never paid—and had documents proving it, which were obtained by the Weekly.

As mentioned above, Preston Sturges died intestate. This is a bad example to keep banging on, because it’s the easiest one to explain away.

But in exchange for a large up-front payday and the promise of future residuals, all of Hollywood’s guilds “assign” copyright to studios, and have done so for more than two generations.

A massive untruth. The Guilds do no such thing. You know who “assigns” copyright to the studios?

We do. The writers. By our own choice. Me, Ted, Eric Hughes, all of us. There’s nothing stopping us from insisting that we retain copyright on our spec scripts, agreeing only to license the movie rights. Completely kosher, and we wouldn’t even have to pay the Guild dues.

Problem is that the studios won’t do business like that. They refuse. The Guild’s MBA is the minimum agreement we follow when we choose to abide by the studio’s terms. It is not some institutional infringement of our rights in any way.

Guild vice president Carl Gottlieb, in a posting to a popular WGA members’ blog called Writer Action, says the foreign-levies diversion scheme was originally hatched in 1990 by two studio lawyers and then-WGA executive director Brian Walton.

Carl isn’t the VP of the Guild. David N. Weiss is. WriterAction ain’t that popular (I’m just being bitchy now, but honestly, it’s the same 30 people talking over there), and the foreign levies program really isn’t a “diversion scheme.” That’s laughable. I guess the L.A. Weekly is a “print ‘journalism’ scheme hatched to lure men to so-called ‘massage’ girls who advertise in the smeary-inked pages.” Sigh.

“Under labor law, ratification is not required,” the WGA’s Segall tells the Weekly. “We don’t read it as requiring ratification.”

Hughes maintains otherwise, saying, “No union has the right to go in and negotiate without the consent of the membership”—not to mention nonmembers or the heirs of dead members.

See, this is what’s frustrating about Eric. He should follow this line of inquiry. Not the baloney moustache-twirling “save the widows from the Gleaming Glass Fortress” stuff. I think Eric has a real case on this point. And it’s not labor law that’s relevant. It’s the WGAw constitution, which is a binding contract between the union and its own members. The constitution demands ratification, regardless of whether or not the law says you don’t have to do it.

But in the end, after all this hullabaloo, here’s the messy truth, far from the world of accusations of theft and evil and so-forth.

The messy truth is that foreign governments collect money for the authors of movies and TV.

Those of us who work in Hollywood are and aren’t the authors of these things. We are in name, we’re not in law.

The foreign countries don’t recognize that corporations can hold copyright.

On the other hand, once the money crosses our border, our laws apply.

Big mess.

One day, maybe they’ll work this all out in The Hague. Given the nature of the international wheel of justice, I figure it will all be settled by 2040, after a few hundred million in legal fees.

What the WGA, DGA and MPAA did was a smart compromise.

Unfortunately, it might not hold up in court.

If it all collapses, we will lose. Of that much, I’m sure. Hughes and Co. believe that the money will finally flow directly to us, and they’re wrong about that. It will be a massive legal battle, and God only knows what we’ll get.

In that sense, I hope they fail.

On the other hand, institutions can’t expect to to build a house of cards in service of a good ideal, because those things never last. Bad structures inevitably fail. It may be that the Guilds’ foreign levies structure is fundamentally flawed.

In a year or two…or fifty…we may find out.