Ex-SAG Benefit Plan Official Pleads Guilty to $700K+ Tax Evasion

SAG logoWhen Bruce Dow resigned under pressure as longtime head of the Screen Actors Guild’s pension and health plans in April 2012 amid allegations of extensive self-dealing, a good deal of unfinished business remained. Now the workload has gotten smaller. On November 12, former plan chief information officer Nader Karimi pleaded guilty in Los Angeles federal court to omitting more than $700,000 in income on his tax returns for the years 2005 through 2008. Karimi had changed his “not guilty” plea to “guilty” before U.S. District Judge Fernando Olguin. Sentencing, originally set for March 11, has been reset for April 14. He faces up to three years in prison. The plea follows a probe by the FBI, the IRS, and the Labor Department’s Office of Inspector General and Employee Benefits Security Administration.

The case against Nader Karimi sprung from a complaint filed with the Department of Labor (DOL) four and a half years ago by Craig Simmons, a former official of the Screen Actors Guild’s Producers Pension and Health Plans (SAG-PPHP), which is separate from SAG itself. Union Corruption Update at the time reported on this case (here and here). Originally hired in 2008, Simmons was promoted to human resources executive director in January 2011. His tenure would be brief. That March, SAG benefit plan management fired him, claiming he lacked competence and integrity. Simmons countered that the real reason for his termination was his refusal to conceal anywhere from $5 million to $10 million of embezzlement. After twice contacting the SAG-PPHP board of trustees, getting no response each time, he filed a complaint with the Labor Department that September requesting separate civil and criminal probes. Simmons followed this up in March 2012 by filing a wrongful termination suit in California state court. Then, when plan trustees rejected his allegations, he filed a defamation suit against them.

For someone who lasted all of two months on the job, Simmons was getting a lot of legal mileage out of the experience. Was Craig Simmons a heroic whistleblower or a vindictive loser out for revenge and money? Even assuming Simmons was less than reliable, there were, in fact, financial irregularities at SAG-PPHP, with roughly $3 billion in assets now under management. In the latter months of 2011, he testified on separate occasions to FBI, IRS, SEC, Justice Department, and Labor Department investigators. His complaint to the DOL had alleged that Dow: 1) conspired with SAG-PPHP Executive Director Michael Estrada to use plan assets to buy stock through insider information and divert profits to themselves; 2) provided his brother-in-law with a lucrative no-show job; 3) diverted a portion of PPHP insurance premiums to his wife; 4) underreported the amount of money allegedly embezzled by Nader Karimi; and 5) ordered Simmons to block any and all outside investigations related to these issues. SAG-PPHP officials and their attorneys asserted that Simmons’ suit had no merit. But the investigation progressed anyway, and with a boost from feared Hollywood industry blogger Nikki Finke.

For Bruce Dow, who had managed benefit plans for nearly 30 years, the story didn’t have a happy ending. Having taken a leave of absence in January 2012, he was supposed to be back on the job in mid-March. He wasn’t. Support from the SAG-PPHP board of trustees was fading fast. And that wasn’t just because of the evidence. It was also because of the timing. SAG and the American Federation of Television and Radio Artists (AFTRA) were in the process of finalizing a long-planned merger. Neither union wanted a cloud of scandal hanging over them. Several board members called upon Dow to step down and remain a consultant. Sensing he was being told “Don’t call us, we’ll call you,” Dow announced his retirement that April, effective at the end of the month. SAG and AFTRA, meanwhile, had merged in late March.

In a different way, the saga of Craig Simmons didn’t have a happy ending either. For months, Simmons talked freely with reporters about SAG producer benefit plan corruption. Yet since then he has become inaccessible. So have his lawyers. It might be that there isn’t much to talk about. According to court records, he agreed to a dismissal of his termination suit in 2012 to make way for arbitration, which ended in a confidential settlement in 2014. And his defamation suit was dismissed in 2013. Simmons’ campaign proved to be more fizzle than sizzle. However, that shouldn’t let SAG-PPHP management and trustees off the hook. Evidence of wrongdoing was there. In fact, in July 2009 – more than two years before Simmons had complained to the Department of Labor – a fellow SAG-PPHP employee, Gary Mathis, made similar allegations to DOL. Mathis, who had worked under Nader Karami, accused Karimi of embezzlement, conflict of interest and cover-ups. The DOL initiated an investigation in September 2010, referring the case to arbitration. Yet the arbitrator, retired Los Angeles Superior Court Judge Eli Chernow, dismissed all allegations. Mathis’ attorney, Nick Alden, said afterward: “If we had gone before a jury, we would have won hands down. But the chances of winning at arbitration are practically nonexistent, especially when you go against a big law firm.”

That brings us to the man of the hour, Nader Karimi. The Labor Department investigation never led to a prosecution. But a separate Internal Revenue Service investigation did. On November 12, Karimi, who served as chief information officer for the SAG benefit plans during 2005-09, pleaded guilty in Los Angeles federal court to failing to report a combined income of $711,316 during calendar years 2005-08. He originally had pleaded not guilty. The plea agreement calls for Karimi to file amended returns for those four tax years, cooperate with the IRS in any future probe, pay the IRS $194,459, and make additional restitution of at least $100,000 to the SAG Pension and Health Plans.

Given the evidence, he should consider himself lucky if he avoids prison. In addition to his duties as CIO for the Screen Actors Guild benefit plans, Karimi during the same period was an officer at Entertainment Technology and Management Solutions (ETMS), where he set up plans with labor agreements. The plea agreement put it this way: “Defendant caused these payments to ETMS to be deposited in the ETMS bank account, after which defendant used the sums to pay for personal expenses.” Gary Mathis’ July 6, 2009 letter of complaint to the Labor Department was likewise specific: “I was terminated for bringing to the attention of SAG’s controllers the misappropriation of funds by the CIO Nader Karimi and CEO Bruce Dow, with extensive supporting documentation.” Karimi, said Mathis, paid $140,000 to a friend’s consulting company and falsified documents related to the transfer of funds. Mathis also alleged that Karimi “hired another company he had a close relationship with…to oversee a project that already had an in-house project manager. (That company) had an approved spending budget between $50,000-$100,000 maximum. The CIO ended up spending $1,562,000 of the Taft-Hartley pension fund money…which no one was aware of but me, due to several of the invoices coming across my desk.”

There was more. Karimi reportedly hired a “close friend” as a project manager even though she “didn’t have an actual company or DBA license to submit to Human Resources for this newly created position.” According to Mathis: “CIO Nader Kamini came to my office one night looking for another consultant business company license or contract to copy for HR and the accounting department, who asked for it before she could start that following Monday. The bogus/fake company created that night by the CIO was called Basix.” Karimi also demanded a cover-up when accountants came around. Mathis attributed to him the following behavior:

During Price Waterhouse and Coopers audits, everything was set up/prepared in advance to only provide limited information in certain areas only. If the young, sometimes very young, auditors try to pry for more information, we will use our vast experience to guide them into different directions with much success. Audits are very easy to pass for any major Taft-Hartley company in SAG’s position because you are aware of what type of information they need and you prepare before they arrive. These audits were not a surprise or unscheduled, and all information, documentation and scripted feedback from employees were prepared from advanced questions.

Nader Karimi now works as chief information officer at the BCBG Max Azria women’s fashion house. Understandably, he’s not talking to the media. But U.S. Attorney for the Central District of California Eileen Decker is. Following the announcement of Karimi’s guilty plea, Decker stated: “Individuals entrusted with the pension and health care funds of others must be held to the highest standard of conduct. The Department of Justice will do everything within its power to bring to justice those who abuse a position of trust for personal gain.” That might be a sign this case isn’t closed.