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Ex-SAG pension exec steered fund money to spouse's firm

Records show that whistleblower was involved in directing business to husband.

October 17, 2011|By Richard Verrier, Los Angeles Times

In another black eye for the Screen Actors Guild pension and health plans, a former executive who blew the whistle on his boss for allegedly steering business to family members was himself involved in directing fund money to his spouse's marketing company, fund records show.

Craig Simmons, the former human resources director at SAG-Producers Pension and Health Plans who was fired in March, arranged to have the fund hire his husband's marketing company, Fortress Communications, to help develop a campaign to mark the 50th anniversary of the plans, according to internal invoices and emails from the plans obtained by The Times.

The payments — made October 2010 and January 2011 and totaling about $25,000 — mark the latest instance in which the plans have done business with relatives of executives who work there, including family members of Chief Executive Bruce Dow.

Although trustees say the plans are financially sound, the Fortress payments raise further questions about the level of financial controls inside an organization that governs more than $2 billion in assets on behalf of Screen Actors Guild members.

The payments are likely to draw more scrutiny from federal Labor Department officials, who have been investigating claims that another former senior executive in the plans allegedly embezzled millions of dollars by receiving kickbacks from several companies that did business with the funds.

Following an audit conducted by PricewaterhouseCoopers in early 2009, SAG-PPHP sued two vendors involved in the alleged scheme. In one of the cases, the plans obtained a final judgment from an arbitrator who awarded them damages of nearly $2.5 million, which the court approved. The lawsuit against the second vendor, filed in June, is pending.

The employee who set up the contracts, Nader Karimi, left his job in early 2009 and reached a settlement with the plans for an undisclosed amount. Karimi could not be reached for comment. The plans received a $2-million payment from its insurer to recover a substantial portion of the losses, said a person close to the board who was not authorized to speak about the matter because of the pending investigation.

The alleged embezzlement scheme publicly surfaced in a complaint Simmons filed with the U.S. Department of Labor last month for wrongful termination, among other claims.

In his complaint, Simmons said he helped uncover some of the wrongdoing. He alleged that he was wrongfully terminated in March, in part for refusing to follow Dow's orders to mislead investigators about the size of the losses from the alleged kickbacks, which he told the Labor Department were $5 million to $10 million. A representative for the plans disputed those figures but declined to provide an estimate of the total losses.

Simmons also said in his complaint to the Labor Department that he was blackballed for raising questions about Dow's conduct, including allegations that Dow steered business to his wife's insurance company, USI of Southern California, and arranged for a "phantom" job for his brother-in-law, Michael Bugbee. He served as the plans' manager of communications and wrote the plans' periodic newsletter before retiring with a SAG pension this summer. Bugbee could not be reached for comment.

Simmons maintained in his Labor Department complaint that the arrangements violated federal rules governing fiduciaries of union health and pension plans, which are regulated under the Employee Retirement Income Security Act. A Labor Department spokeswoman declined to comment on the probe.

In an interview, Simmons acknowledged that his department oversaw the hiring of Fortress, which was registered with the state in June 2010, four months before receiving payments from the plans, state records show.

He said his husband, James Buss, an American Airlines pilot listed as the registered agent of Fortess, was "uniquely qualified" for the job, citing his experience working in marketing at various companies, including Warner Bros., and his educational background, which Simmons said included a master's degree in marketing and brand management.

Records reviewed by The Times indicate Simmons personally instructed the SAG-PPHP accounting department to set up Fortress as a vendor and said his department would receive the invoices. Simmons said in an interview that he did not personally write checks to Fortress and that Dow was aware he had hired the company and two other firms to work on a proposed marketing plan.

However, Simmons acknowledged the arrangement may have been inappropriate.

"In retrospect, maybe I should have stood up earlier and said this whole thing was wrong, but it was the culture of the organization," Simmons said in an interview last week. "We were encouraged to hire people we knew well."

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