EXCLUSIVE: Recently concluded investigations by the U.S. Department of Labor into the SAG Pension and Health Plans have concluded that the plans’ trustees “appeared” to have breached their fiduciary obligations by charging $756,027 in “unreasonable” fees and expenses to the Plans in violation of the Employee Retirement Income Security Act, the federal law that governs private sector pension and health plans.

“Based on the facts gathered during those investigations, it appeared that the Plan’s fiduciaries breached their fiduciary obligations to the Plans and violated several provisions of ERISA,” wrote Ty Fukumoto, the DOL’s deputy regional director, in a December 15, 2016, letter obtained by Deadline (read it here).

But the trustees, in a recent letter to the plans’ participants, insisted they had done nothing wrong; that the plans are “fiscally sound,” and that “not one dollar of participant funds was lost.” They also took issue with a Deadline story in January that characterized the $756,027 in excessive fees and expenses as a “misappropriation” of plan monies.

Michael Estrada, the current CEO of the SAG Pension Plan and the now-merged SAG-AFTRA Health Plan, did not return a call for comment.

In Fukumoto’s letter, addressed to the plans’ trustees and to Bruce Dow, the plans’ former CEO, he noted that $56,027 had to be reimbursed to the plans in 2010, 2012 and 2015 “for unreasonable expenses related to automobile use, moving costs, and personal meals,” and that “an additional $700,000 was reimbursed to the Plans relating to unreasonable fees and expenses.” The $700,000 involved “excessive” fees paid to investment advisors over a six-year period.

Fukumoto noted that while the fiduciaries “confirmed many of the facts” uncovered by DOL investigators, they “denied those facts constituted violations of ERISA.” He went on to write that despite their “failure to take all of the corrective action that we deemed necessary, it is my understanding that the Plans’ fiduciaries have taken substantial corrective action with respect to the violations detailed in our letters dated January 13, 2015, and October 28, 2015.”

Those corrective actions, he noted, include an “updated expense policy” that “requires that any employee acknowledgements, service award ceremonies, and retirement recognition events be held only through regular staff meetings, and prohibits monetary or other gifts at such meetings.”

“Because you have taken the corrective action described above, the Department will take no further action with respect to these matters,” he wrote. “You are cautioned, however, that by agreeing to take no further action with regard to these issues, the Department commits only itself and cannot in any way restrain any other individual or governmental agency from taking any further action it may deem appropriate with respect to either these or other matters.”

Noting there could be tax implications as a result of the “unreasonable” expenses and fees, Fukumoto also advised the trustees that under ERISA, the Secretary of Labor “is required to transmit to the Secretary of the Treasury information indicating that a prohibited transaction occurred. Accordingly, this matter will be referred to the Internal Revenue Service.”

The trustees responded in a Feb. 21, 2017, letter to the Plans’ participants. “The Department of Labor recently concluded an exhaustive, 10-year audit of the Pension and Health Plans’ finances. There are several things you should know: the Plans are fiscally sound. The DOL did not find any issues the trustees were not aware of or had not already proactively corrected. The DOL did make determinations about certain expenditures with which the trustees strongly disagreed, but we chose not to contest them. By not contesting disputed claims we avoided unnecessary expenditures. The trustees and our legal counsel do not agree with certain conclusions drawn by the DOL staff. However, by deciding not to contest those DOL findings with which we disagreed, the Plans avoided unnecessary expenditures of additional time and resources to fight those claims. Ultimately, the Plans received a payment from our insurance carrier, bringing the matter to a close. As a result, Plan assets were not adversely affected. Not one dollar of participant funds was lost.

“Media reports about this issue have been misleading and inaccurate. There was absolutely no ‘misappropriation’ of Plan resources. The audit reflected disagreements between the DOL and the Plans regarding certain expenditures but there was never a DOL finding or assertion of misappropriation.

“The biggest disagreement between the DOL and the Plans concerned fees paid between 2004 and 2010 to City National Bank to serve as an ERISA fiduciary investment advisor. The DOL’s position was that the fees paid to this advisor were excessive. The trustees adamantly disagreed and were confident no court would uphold those findings.

“However, challenging the DOL’s findings would have resulted in further expenditures of Plan resources. Instead, the Plans were reimbursed $700,000 by insurance for those investment fees – fees which the trustees maintain were completely appropriate. An additional $56,000, paid by former Plan staff, had previously been reimbursed to the Plans as a result of independent trustee reviews. In short, the Plans’ assets are whole.

“As Trustees, we take issue with mischaracterizations of Plan activities and attempts to portray the Plans as being mismanaged in any way. We take our fiduciary responsibilities very seriously, and are committed to protecting the sustainability of Plan benefits in order to continue meeting your health and retirement needs for decades to come.”

The $756,027 in “unreasonable” fees and expenses cited by the DOL is in addition to millions of dollars embezzled by Nader Karimi, the Plans’ former chief information officer, who was sentenced a year ago to five years of probation after having pleaded guilty to filing a false income tax return in which he failed to report more than $700,000 in kickbacks he received from contractors he hired to upgrade the Plans’ computer systems.

Dow, the Plans’ former chief administrator who lost his job because of the scandal that occurred on his watch, testified that Karimi may have embezzled as much as $3 million, and that the Plans received more than $2.5 million from its insurers to recoup those loses. During a deposition, Dow said it was difficult to determine exactly how much Karimi had stolen.

In January, the former co-head of information technology at AFTRA’s Health and Retirement Fund was arrested for allegedly stealing $3.4 million from the benefit plans in a nearly identical fake invoice kickback scheme over a six-year period beginning in 2009 and ending in 2015.

The SAG Health Plan and the AFTRA Health Fund merged on January 1, 2017, but the SAG Pension Plan and the AFTRA Retirement Fund remain separate entities.

Peter Antico, who recently announced he’s running for president of SAG-AFTRA in the union’s upcoming elections, said that the DOL letter “demonstrates the breach of fiduciary duty of the Plans’ trustees and executive officers, and their lack of accountability, which is why I have been asking for a forensic audit of the Plans for years. Why hasn’t anyone been fired for this?”

As for the trustees’ response, he said, “They are trying to whitewash their accountability.”