PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT PREPARED AT THE DIRECTION OF COUNSEL
MEMORANDUM
FROM: Devon Archer, Lead Associate, Labor & Employment Practice Group, Calderwood & Harkness LLP
REVIEWED BY: Bernard Crawford, Responsible Partner, Labor & Employment Practice Group, Calderwood & Harkness LLP
TO: Dame Cordelia Ashworth, Chair, People & Culture Committee, Board of Directors, Aurelius Global Media Group PLC; Raymond Okoro, Chair, Audit & Risk Committee, Board of Directors, Aurelius Global Media Group PLC
(via Fiona Blackwood, General Counsel, Aurelius Global Media Group PLC)
DATE: August 2, 2023
RE: Policy Gap Analysis — Complaint-Handling, Documentation, and Escalation Practices at Aurelius Pacific Studios Inc.
MATTER NO.: 1017-00005
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I. Purpose and Scope of This Memorandum
This memorandum is prepared in connection with the independent workplace investigation being conducted by Calderwood & Harkness LLP ("C&H" or the "Firm") at the direction of the Board of Directors of Aurelius Global Media Group PLC ("AGMG" or the "Company"). The investigation was formally opened on May 2, 2023, following authorization by the People & Culture Committee and the Audit & Risk Committee of the AGMG Board. The investigation concerns allegations of sexual harassment and retaliation against Marcus Hale, President of Aurelius Pacific Studios Inc. ("APS"), a wholly owned subsidiary of AGMG with its principal offices in Burbank, California.
The purpose of this memorandum is to identify and analyze deficiencies in APS's existing policies, complaint-handling procedures, and human resources documentation practices that were revealed during the course of the investigation. While the investigation remains ongoing as of the date of this memorandum, the procedural and policy-level deficiencies identified herein are sufficiently well-established from the documentary record and witness interviews conducted to date to warrant immediate attention by the Board.
In preparing this analysis, we have reviewed the following policy instruments:
(1) The AGMG Global Code of Conduct, Version 4.2, effective January 1, 2022 (the "Global Code of Conduct" or "Code");
(2) The APS Employee Handbook, California Supplement, revised March 15, 2022, with particular focus on Section 5.3 (Anti-Harassment & Anti-Discrimination Policy), Section 5.7 (Anti-Retaliation Policy), and Section 8.1 (Complaint & Investigation Procedures) (collectively, the "APS Handbook" or the "Handbook"); and
(3) The AGMG Board Corporate Governance Guidelines, specifically Section 12 (Executive Conduct Standards) (the "Governance Guidelines").
We have benchmarked these policies and the practices observed during the investigation against the requirements of the California Fair Employment and Housing Act, Cal. Gov. Code §§ 12940 et seq. ("FEHA"), and against recognized industry best practices for multinational employer complaint-handling and investigation procedures.
It is important to note at the outset the distinction between this memorandum and the separate Draft Privileged Investigation Report, which is scheduled for delivery on August 11, 2023. The Investigation Report addresses the specific factual findings of the investigation, including witness credibility assessments, evidentiary analysis, and conclusions regarding the substantive allegations against Hale. This memorandum, by contrast, focuses exclusively on the systemic and procedural gaps in APS's and AGMG's policy frameworks that the investigation has brought to light. While there is necessarily some overlap in the factual background described herein — particularly with respect to the handling of the 2021 Serena Whitcomb complaint and the 2023 Jenna Morales complaint — the analytical focus of this memorandum is on the adequacy of the Company's policies and procedures rather than on the merits of the underlying allegations.
II. Executive Summary of Identified Deficiencies
The investigation has revealed six principal categories of deficiency in the policy frameworks, complaint-handling procedures, and documentation practices applicable to APS and, where relevant, to AGMG at the parent level. These deficiencies are systemic in nature and extend beyond the specific facts of the Hale investigation, although they were brought into sharp focus by those facts. Taken together, these deficiencies reflect a compliance infrastructure that was not adequately designed to detect, escalate, and address misconduct by senior executives within the subsidiary organizational structure.
The six principal categories of deficiency are as follows:
1. Failure to Document Disciplinary Actions in Personnel Files. The August 2, 2021 verbal counseling of Hale following the Serena Whitcomb informal complaint was neither reduced to writing nor placed in Hale's personnel file, resulting in a complete absence of institutional memory regarding a prior complaint of inappropriate conduct by the same individual.
2. Gaps in the Anti-Harassment Policy (Section 5.3, APS Handbook). Section 5.3 does not contain heightened standards or separate procedures for complaints against senior executives. It lacks sufficiently specific examples of prohibited conduct and does not explicitly address conduct occurring at off-site events or during business travel.
3. Gaps in the Anti-Retaliation Policy (Section 5.7, APS Handbook). Section 5.7 defines retaliation narrowly, failing to encompass subtle forms of adverse action such as reassignment of high-profile projects and exclusion from meetings. It does not explicitly extend protection to bystander reporters who raise concerns on behalf of others.
4. Deficiencies in Complaint & Investigation Procedures (Section 8.1, APS Handbook). Section 8.1 lacks mandatory escalation protocols for complaints involving senior leadership, does not establish investigation timelines, does not require independence of the investigator, and does not mandate interim protective measures or regular communication with complainants.
5. Deficiencies in the Ethics & Compliance Hotline Escalation Workflow. The hotline operated by Meridian Compliance Solutions LLC routes all APS complaints to the local VP of Human Resources regardless of the seniority of the subject. No automatic notification to AGMG-level stakeholders or Board committees is triggered by complaints involving senior executives.
6. Inadequate Alignment Between Policy Frameworks. The AGMG Global Code of Conduct, the APS Employee Handbook, and the AGMG Board Corporate Governance Guidelines are not adequately harmonized with respect to executive-level misconduct. There is no integrated escalation chain from subsidiary-level complaint intake through to Board-level oversight, and the three documents do not cross-reference one another.
Each of these deficiencies is discussed in detail in Section IV below, with a summary table of deficiencies and recommendations provided in Section V. An assessment of the legal exposure created by these gaps under FEHA is provided in Section VI.
III. Methodology
III.A. Documents and Records Reviewed
In preparing this memorandum, we reviewed the following documents and records:
• The APS Employee Handbook, California Supplement, revised March 15, 2022, including all sections relevant to complaint-handling, anti-harassment, anti-retaliation, and investigation procedures;
• The AGMG Global Code of Conduct, Version 4.2, effective January 1, 2022;
• The AGMG Board Corporate Governance Guidelines, including Section 12 (Executive Conduct Standards);
• The personnel file maintained by APS for Marcus Hale, reviewed for completeness of documentation, including any records of complaints, disciplinary actions, counselings, or corrective measures;
• Human resources records maintained by APS related to the July 2021 informal complaint by Serena Whitcomb, former Executive Assistant to Marcus Hale (employed at APS from approximately April 2019 through September 2021), including such records as could be located, which proved to be limited;
• Intake records from Meridian Compliance Solutions LLC ("Meridian"), the third-party vendor operating AGMG's Ethics & Compliance Hotline, including case reference MCS-1014-00001, the complaint submitted by Jenna Morales on April 18, 2023;
• Email and other electronic communications between Victor Gallegos, Vice President of Human Resources at APS (Burbank), and Fiona Blackwood, General Counsel of AGMG (London), and Patricia Sung, Chief People Officer of AGMG (London), regarding the escalation of complaints and investigation-related matters;
• Records maintained by Ingrid Holt, Chief Compliance Officer of AGMG, regarding the Meridian hotline vendor relationship, including the current escalation procedures and routing protocols; and
• Interview memoranda from relevant witness interviews conducted during the investigation, with particular reliance on the interview of Victor Gallegos conducted on June 1, 2023, which provided the most detailed account of APS's internal complaint-handling processes and documentation practices.
III.B. Legal and Best-Practice Framework
We have assessed the adequacy of the policies and practices described herein against the following legal requirements and best-practice standards:
California FEHA Requirements. The principal statutory provisions relevant to this analysis are:
• Cal. Gov. Code § 12940(j), which establishes employer liability for harassment by supervisors and imposes a duty on employers to maintain effective anti-harassment policies;
• Cal. Gov. Code § 12940(k), which imposes an affirmative duty on employers to take "all reasonable steps necessary to prevent discrimination and harassment from occurring," including the obligation to conduct fair, timely, and thorough investigations of complaints;
• Cal. Gov. Code § 12940(h), which prohibits retaliation against individuals who oppose practices forbidden by FEHA, file complaints, or participate in investigations; and
• Cal. Gov. Code § 12950.1, which establishes training requirements for employers regarding the prevention of harassment, discrimination, and retaliation.
A more comprehensive analysis of the applicable FEHA legal standards is set forth in the separate California FEHA Legal Standards Memorandum prepared by the Firm and dated May 18, 2023, which was provided to Ms. Blackwood at that time. This memorandum incorporates and relies upon that earlier analysis where relevant.
We have also considered guidance published by the California Department of Fair Employment and Housing (now the California Civil Rights Department, or "CRD") regarding employer investigation obligations, as well as recognized best practices for multinational employer complaint-handling and investigation procedures, including guidelines published by the Equal Employment Opportunity Commission and standards reflected in peer-reviewed compliance and employment law literature.
III.C. Interviews Informing This Analysis
The policy-gap analysis set forth in this memorandum has been informed by the following witness interviews, among others:
• Victor Gallegos (interviewed June 1, 2023): Mr. Gallegos is the Vice President of Human Resources at APS, based in Burbank. His interview provided detailed information about APS's internal complaint-handling processes, the circumstances surrounding the 2021 Whitcomb matter, documentation practices at the HR level, and the escalation of the 2023 Morales complaint.
• Ingrid Holt (interviewed in the course of the investigation): Ms. Holt is the Chief Compliance Officer of AGMG, based in London. She provided information regarding the hotline vendor relationship with Meridian Compliance Solutions LLC (located at 233 South Wacker Drive, Suite 4100, Chicago, Illinois 60606), including the current escalation workflow and routing protocols for hotline complaints.
• Patricia Sung (interviewed in the course of the investigation): Ms. Sung is the Chief People Officer of AGMG, based in London. She provided information regarding the AGMG-level human resources policy architecture, the development and deployment of the Global Code of Conduct, and the interaction between AGMG-level policies and subsidiary-level handbooks and procedures.
In addition to the above, the accounts of other witnesses interviewed during the investigation — twenty-seven individuals in total as of the date of this memorandum — have informed our understanding of the procedural gaps and their practical consequences, although it is not necessary to identify each of those witnesses for purposes of this analysis.
IV. Detailed Findings
IV.A. Deficiency 1: Failure to Document Disciplinary Actions — The Serena Whitcomb / Hale Matter (July–August 2021)
IV.A.1. Factual Background
In July 2021, Serena Whitcomb, who served as Executive Assistant to Marcus Hale from approximately April 2019 through September 2021, made an informal complaint to Victor Gallegos, Vice President of Human Resources at APS. The complaint alleged that Hale had made inappropriate comments to Whitcomb. The precise nature of those comments is addressed in greater detail in the Draft Privileged Investigation Report; for purposes of this memorandum, it is sufficient to note that the complaint raised allegations of conduct that, if substantiated, would constitute sexual harassment under both company policy and FEHA.
Mr. Gallegos handled the complaint internally. He did not initiate a formal investigation under Section 8.1 of the APS Handbook. Instead, by his own account during his June 1, 2023 interview, he spoke with Hale informally and, on August 2, 2021, issued a verbal counseling to Hale regarding the reported conduct. Mr. Gallegos characterized this as a "conversation" in which he reminded Hale of the company's expectations regarding workplace conduct and informed him that the behavior described in the complaint was inappropriate.
Critically, no written documentation of this verbal counseling was created at the time. No memorandum was prepared. No contemporaneous notes of the counseling conversation were retained. No record of Whitcomb's complaint was placed in any file. No notation of any kind was made in Hale's personnel file. Mr. Gallegos confirmed during his interview that the counseling was entirely verbal and that he did not create or retain any written record of it.
Ms. Whitcomb separated from APS in September 2021, approximately two months after her complaint. The circumstances of her departure are addressed in the Investigation Report.
When investigators reviewed Hale's personnel file during the current investigation, there was no record whatsoever of the July 2021 complaint by Whitcomb or the August 2, 2021 verbal counseling. The file contained performance reviews, compensation records, and administrative documents, but was devoid of any complaint-related or disciplinary documentation. The absence of any such record meant that, as an institutional matter, APS and AGMG had no awareness that the current allegations against Hale represented a potential pattern of misconduct by the same individual toward subordinate female employees — a fact of considerable significance both to the investigation and to the Company's legal exposure.
IV.A.2. Policy Requirements
We have examined each of the three applicable policy frameworks to determine what documentation obligations, if any, they impose with respect to verbal counselings and informal complaint resolutions.
APS Employee Handbook (CA Supplement), Section 8.1 (Complaint & Investigation Procedures). Section 8.1 provides that "all complaints will be documented and maintained in accordance with the Company's record-retention policies." This language, on its face, imposes a documentation obligation for complaints. However, the provision is ambiguous in at least two respects. First, it is unclear whether the obligation applies to informal complaints — such as Whitcomb's verbal report to Gallegos — or only to complaints submitted through the formal channels described elsewhere in Section 8.1. Second, and more critically, Section 8.1 is entirely silent on documentation requirements for informal resolutions and verbal counselings that result from complaints. There is no requirement that the outcome of a complaint — particularly a verbal counseling or informal corrective measure — be documented in any form, let alone placed in the subject employee's personnel file.
AGMG Global Code of Conduct, Version 4.2. The Global Code of Conduct states that the Company "will maintain records of all reports of misconduct and actions taken in response." This language is broader than the APS Handbook provision in that it encompasses both the reports themselves and the responsive actions. However, the Code is a high-level, principles-based document and does not set forth specific documentation protocols, file-retention requirements, or standards for what constitutes adequate written documentation of corrective measures. As a practical matter, the generic nature of this language rendered it insufficient to compel the specific documentation practices necessary to create an adequate institutional record.
AGMG Board Corporate Governance Guidelines, Section 12 (Executive Conduct Standards). Section 12 establishes conduct expectations for senior executives but contains no specific requirements regarding the documentation of disciplinary actions taken against such executives. There is no provision requiring that corrective measures directed at senior executives be recorded in any particular manner or communicated to any Board committee.
IV.A.3. Legal Standards
Under Cal. Gov. Code § 12940(k), employers have an affirmative duty to take "all reasonable steps necessary to prevent discrimination and harassment from occurring." California courts and the Civil Rights Department have consistently recognized that contemporaneous documentation of complaints and corrective measures is a critical element of demonstrating compliance with this duty. An employer's ability to show that it responded promptly and effectively to a complaint of harassment depends, in significant part, on its ability to produce documentation of that response. Where no documentation exists, the employer is unable to demonstrate the nature, timing, or adequacy of its corrective measures.
The failure to document also creates a more insidious risk: it permits patterns of misconduct to go unidentified and unaddressed. This is precisely what occurred in the present case. The absence of any written record of the 2021 Whitcomb complaint and the August 2, 2021 verbal counseling meant that, when the 2023 Morales complaint was received, no one within APS or AGMG was aware that Hale had been the subject of a prior complaint of similar conduct. Had a written record existed in Hale's personnel file, it would have alerted any reviewer — whether within HR, the General Counsel's office, or outside investigators — to the potential for a pattern of misconduct and would likely have prompted a more robust response at an earlier stage.
California regulatory guidance published by the CRD (and its predecessor, DFEH) emphasizes the importance of documenting all complaint-related actions, including informal resolutions and verbal counselings, as part of the employer's demonstration of good-faith compliance with its preventive obligations under FEHA. While there is no California statute that prescribes the specific form of such documentation, the absence of documentation is a factor that courts and administrative agencies will consider in evaluating whether an employer took "all reasonable steps" to prevent harassment.
IV.A.4. Gap Identified
The gap identified in this area is threefold:
(a) None of the three policy frameworks — the APS Handbook, the AGMG Global Code of Conduct, or the Board Corporate Governance Guidelines — requires written memorialization of verbal counselings or informal complaint resolutions. The obligation to "document" complaints, as stated in Section 8.1 of the APS Handbook, does not extend with sufficient clarity to the documentation of corrective measures taken in response to those complaints, particularly where the complaint is handled informally.
(b) No policy mandates that disciplinary actions at any level — including verbal counselings — be documented in the subject employee's personnel file. The personnel file is the primary repository of employment-related records for any employee, and the absence of a requirement to place disciplinary records in the file creates a structural gap in the Company's record-keeping.
(c) There is no audit mechanism to verify the completeness of personnel files for senior executives. No periodic review is conducted by the Chief Compliance Officer, Chief People Officer, or any other function to ensure that personnel files for division presidents and other senior officers contain complete records of complaints and corrective measures.
IV.A.5. Recommendation (Summary)
Detailed corrective action recommendations are set forth in the separate Remedial Recommendations Memorandum dated August 19, 2023. In summary, we recommend the following:
• Amend all three policy frameworks to require written documentation of all disciplinary actions, including verbal counselings and informal corrective measures, regardless of the level of the employee involved.
• Mandate that all such documentation be placed in the subject employee's personnel file within five business days of the corrective action.
• Implement a periodic audit of senior executive personnel files — at a minimum annually — conducted by the Chief Compliance Officer or Chief People Officer (or their designee), with results reported to the People & Culture Committee of the Board.
IV.B. Deficiency 2: Gaps in Anti-Harassment Policy (Section 5.3, APS Employee Handbook, CA Supplement)
IV.B.1. Scope of Coverage for Senior Executives
Section 5.3 of the APS Handbook applies, by its terms, to "all employees" of APS. It does not distinguish between employees at different levels of the organizational hierarchy and does not contain heightened standards, additional procedural requirements, or separate complaint-handling pathways for complaints against members of senior leadership — defined for purposes of this analysis as officers at the Vice President level and above.
This uniform-treatment approach fails to account for the unique power dynamics and organizational risks associated with harassment by senior executives. Marcus Hale, as President of APS, oversaw nine direct-report Senior Vice Presidents and, through them, approximately 2,300 employees. His position afforded him significant authority over the careers, assignments, compensation, and working conditions of a large number of individuals. The power differential between an executive at this level and the employees who might be subject to or who might witness his misconduct creates particular challenges for complaint-handling and investigation procedures.
Specifically, Section 5.3 does not address:
• The heightened risk that employees will be deterred from reporting misconduct by a senior executive due to fear of retaliation or career consequences;
• The need for independent investigation procedures when the subject of a complaint occupies a position of authority over the individuals responsible for receiving and investigating complaints at the subsidiary level;
• The need for Board-level oversight and involvement in complaints against division presidents and other senior officers whose conduct may have significant reputational, legal, and financial implications for the parent company; or
• The requirement that complaints against the division President or other C-suite officers be handled by independent outside counsel, rather than by internal HR personnel who report within the same organizational structure as the subject.
The absence of these provisions is a significant gap. Best practices for multinational employers with subsidiary structures uniformly recommend differentiated procedures for complaints against senior executives, including mandatory escalation to the parent company and engagement of independent outside counsel.
IV.B.2. Specificity of Prohibited Conduct
Section 5.3 defines prohibited harassment in general terms, using language that substantially tracks the statutory definitions found in FEHA and Title VII. While this language is legally adequate at a high level, it does not provide sufficiently specific examples of conduct that constitutes sexual harassment in the workplace. In our experience, policies that include concrete, illustrative examples are more effective at informing employees of the Company's expectations and at enabling employees to recognize and report prohibited conduct.
In particular, Section 5.3 does not provide specific examples of the following categories of conduct, all of which are relevant to the allegations in the current investigation:
• Unwanted physical contact, including touching that may be characterized by the actor as casual, friendly, or incidental;
• Sexually suggestive electronic communications, including text messages, direct messages via workplace collaboration platforms (such as Meridian Solutions or Northgate Data Systems), and social media communications;
• Inappropriate comments regarding an individual's appearance, body, clothing, or personal life, including comments made in ostensibly professional settings such as meetings or performance reviews;
• Conduct occurring at off-site events, including company-sponsored retreats, dinners, and social functions; and
• Inappropriate conduct during business travel, including uninvited visits to hotel rooms, requests to meet in hotel bars or rooms for purportedly professional purposes, and other conduct that exploits the travel environment.
The allegations in the current investigation involved conduct across multiple settings and modalities. Providing employees with concrete examples of prohibited conduct in the written policy would strengthen the Company's preventive posture and reduce ambiguity regarding the boundaries of acceptable behavior.
IV.B.3. Application to Off-Site Events and Business Travel
Related to the issue of specificity, Section 5.3 does not explicitly address the application of the anti-harassment policy to conduct occurring at company-sponsored off-site events and during business travel. The allegations in the current investigation include conduct that allegedly occurred at the following locations and events, among others:
• The APS leadership off-site retreat held February 17–18, 2023, at the Monarch Valley Resort, 905 Country Club Road, Ojai, California 93023, where complainant Diane Ngo alleged that Hale made inappropriate comments during a group dinner;
• Business travel to Vancouver, British Columbia in October 2022 in connection with production activities, where complainant Jenna Morales alleged that Hale made uninvited hotel room invitations; and
• Various company dinners, social events, and production-related gatherings.
While it is well-established under FEHA that an employer's anti-harassment obligations extend to all work-related contexts, including off-site events and travel, the failure of the written policy to explicitly state this coverage may contribute to a perception among employees — and among managers who are responsible for maintaining appropriate workplace conduct — that the Company's expectations are somehow relaxed in these settings. Best practices call for explicit extension of the policy to all company-sponsored events, business travel, and off-site meetings, with clear statements that the same standards of conduct apply in these settings as in the Company's offices and facilities.
IV.B.4. Legal Benchmark
FEHA and California regulatory guidance require that anti-harassment policies be sufficiently comprehensive to inform employees of prohibited conduct and employer expectations. Cal. Gov. Code § 12950.1 requires that employers provide anti-harassment training to supervisory employees that addresses practical examples of harassment; parallel specificity in the Company's written policies ensures consistency between the training content and the policy to which employees are expected to adhere.
The California Civil Rights Department's guidance materials emphasize that effective anti-harassment policies should include, at a minimum: a clear definition of prohibited conduct with illustrative examples; a description of the complaint process; identification of multiple reporting avenues; assurance of confidentiality to the extent possible; and a statement of the consequences for policy violations. While Section 5.3 includes some of these elements, the specificity and scope deficiencies identified above fall short of the standard recommended by CRD guidance and reflected in industry best practices.
IV.B.5. Gap Identified and Recommendation Summary
The gaps identified in Section 5.3 fall into three categories:
(i) The policy does not contain heightened procedures for complaints against senior executives, including mandatory escalation to AGMG-level stakeholders and Board committees, or requirements for independent outside investigation;
(ii) The policy does not provide sufficiently detailed examples of prohibited conduct, including electronic communications and conduct in off-site and travel contexts; and
(iii) The policy does not explicitly extend its coverage to company-sponsored events, business travel, and off-site meetings.
We recommend that Section 5.3 be revised to address each of these gaps. Detailed drafting recommendations are included in the Remedial Recommendations Memorandum dated August 19, 2023.
IV.C. Deficiency 3: Gaps in Anti-Retaliation Policy (Section 5.7, APS Employee Handbook, CA Supplement)
IV.C.1. Definition and Examples of Retaliatory Actions
Section 5.7 of the APS Handbook prohibits "retaliation against any employee who reports a violation of company policy or participates in an investigation." This general prohibition is appropriate and consistent with FEHA requirements. However, the policy defines retaliation in terms that are unduly narrow, limiting the concept to "termination, demotion, reduction in pay." While these are certainly among the most serious forms of retaliation, they represent only a subset of the adverse actions that may constitute retaliation under both FEHA and recognized best practices.
The allegations in the current investigation illustrate the inadequacy of this narrow definition. Complainant James Whitfield, Senior Vice President of Production at APS, alleged that after he raised concerns about Hale's treatment of female employees at a leadership meeting on January 23, 2023, Hale reassigned two high-profile production projects from Whitfield's oversight. These projects — internally designated as "Project Meridian" and "Project Halcyon," with combined budgets of approximately $187 million — were among the most significant assignments in Whitfield's portfolio. Whitfield alleged that the reassignment was retaliatory, intended to diminish his role and standing within the division as a consequence of his having raised concerns about Hale's conduct.
This type of retaliatory action — reassignment of significant responsibilities without any change in title, compensation, or formal employment status — is not covered by the current language of Section 5.7. The policy's limitation of its definition to "termination, demotion, reduction in pay" implicitly signals that other forms of adverse action, however injurious to the affected employee's career or professional standing, are not within the scope of the Company's anti-retaliation protections.
Similarly, complainant Diane Ngo, Vice President of Talent Relations at APS, alleged that she was excluded from three consecutive talent-relations strategy meetings in March and April 2023 — meetings that she would ordinarily have been expected to attend given her role — following her report of Hale's inappropriate comments at the Ojai retreat. Exclusion from meetings is another form of subtle retaliation that falls outside the current policy definition.
Best practices define retaliation broadly to include, in addition to termination, demotion, and pay reduction:
• Changes in job assignments, including removal of significant projects or responsibilities;
• Exclusion from meetings, communications, or decision-making processes that the employee would ordinarily be included in;
• Changes in reporting structure;
• Negative performance evaluations or documentation that is not supported by the employee's actual performance;
• Reassignment to less desirable duties, shifts, or locations;
• Reduction in access to resources, support staff, or budget authority; and
• Any other adverse change to the terms, conditions, or privileges of employment.
IV.C.2. Protection for Bystander Reporters
James Whitfield's situation also highlights a second gap in Section 5.7. Whitfield was not a direct victim of sexual harassment. Rather, he raised concerns about Hale's treatment of female employees at a leadership meeting — functioning, in effect, as a bystander reporter who brought potential misconduct to the Company's attention on behalf of others.
Section 5.7 protects employees who "report a violation of company policy or participate in an investigation." While this language could be interpreted broadly enough to encompass bystander reporters, it does not explicitly do so. Employees who consider raising concerns on behalf of colleagues may be uncertain whether the Company's anti-retaliation protections extend to them, and this uncertainty may deter them from coming forward.
Under FEHA, the anti-retaliation protections of Cal. Gov. Code § 12940(h) extend to any person who "has opposed any practices forbidden under this part or . . . has filed a complaint, testified, or assisted in any proceeding under this part." California courts have interpreted "opposed" broadly to encompass informal complaints, expressions of concern, and interventions on behalf of others. The Company's policy should mirror this breadth to ensure that employees understand the full scope of the protections available to them.
IV.C.3. Gap Identified and Recommendation Summary
The gaps identified in Section 5.7 are:
(i) The definition of retaliation is impermissibly narrow, limited to termination, demotion, and reduction in pay, and does not encompass the full range of adverse actions — including project reassignment, exclusion from meetings, and changes in responsibilities — that may constitute retaliation under FEHA and best-practice standards;
(ii) The policy does not explicitly extend anti-retaliation protection to bystander reporters and individuals who raise concerns on behalf of others; and
(iii) The policy language is not aligned with the breadth of FEHA's anti-retaliation protections under Cal. Gov. Code § 12940(h).
We recommend that Section 5.7 be revised to expand the definition of retaliation, to explicitly protect bystander reporters, and to align the policy language with FEHA's broad protections. Detailed drafting recommendations are included in the Remedial Recommendations Memorandum dated August 19, 2023.
IV.D. Deficiency 4: Complaint & Investigation Procedures (Section 8.1, APS Employee Handbook, CA Supplement)
IV.D.1. Escalation Protocols for Complaints Against Senior Leadership
Section 8.1 of the APS Handbook designates the Vice President of Human Resources — currently Victor Gallegos — as the primary intake officer for all employee complaints at APS. The section provides that employees may submit complaints to their direct supervisor, to the VP of Human Resources, or through the Ethics & Compliance Hotline. It does not establish any differentiated procedure based on the seniority or organizational position of the subject of the complaint.
The absence of a mandatory escalation protocol for complaints against members of senior leadership is a significant procedural gap. Under the current framework, when a complaint is received about a member of the APS executive team — up to and including the President of the division — the VP of Human Resources is vested with full discretion to determine whether, when, and to whom the complaint should be escalated. No escalation is mandated by policy.
The consequences of this discretionary approach are illustrated by the contrasting handling of the two complaints at issue in the current investigation:
The Whitcomb Matter (July 2021). When Whitcomb made her informal complaint to Gallegos in July 2021, Gallegos handled the matter entirely internally. He did not escalate the complaint to AGMG's General Counsel (Fiona Blackwood), the AGMG Chief People Officer (Patricia Sung), or any Board committee. He did not engage independent outside counsel. He resolved the matter through a verbal counseling of Hale, which, as discussed in Section IV.A above, was not documented. The complaint was effectively contained at the APS HR level, with no visibility to any stakeholder outside the division.
The Morales Matter (April 2023). When Gallegos received the Morales complaint on April 19, 2023 — the day after Morales's hotline submission and the day on which Morales self-identified — he escalated the complaint to Blackwood and Sung on the same day. However, this escalation was a product of Gallegos's individual judgment and experience, not a procedurally mandated step. Gallegos indicated during his interview that he recognized the seriousness of the allegations and the seniority of the subject and determined that escalation was appropriate. Had a less experienced or less assertive HR professional been in his position, there is no assurance that the same escalation would have occurred.
Even in the Morales matter, where escalation did occur, there was a meaningful delay before the Board committees with oversight responsibility were informed. The People & Culture Committee (chaired by Dame Cordelia Ashworth) and the Audit & Risk Committee (chaired by Raymond Okoro) were not informed of the complaint until April 28, 2023 — ten calendar days after the initial hotline submission and nine days after Gallegos escalated to Blackwood and Sung. The Board committees did not authorize the retention of outside counsel to conduct an independent investigation until that date. The investigation commenced formally on May 2, 2023.
While the ten-day delay between the initial complaint and Board notification may be understandable in the absence of a mandatory escalation protocol — Blackwood and Sung needed time to assess the complaint, consult with one another, and determine the appropriate next steps — a mandatory, policy-driven escalation framework would have compressed this timeline significantly and ensured that the Board committees received prompt notification as a matter of course rather than as a matter of individual judgment.
IV.D.2. Timeline and Investigation Standards
Section 8.1 states that the Company will "promptly investigate" all complaints. This commitment to prompt investigation is appropriate but lacks the specificity necessary to ensure consistent, adequate performance. The policy does not establish:
• A specific timeline for commencing an investigation following receipt of a complaint (e.g., within five business days);
• Target milestones for the completion of key investigative steps, such as initial interviews with the complainant, the subject, and key witnesses;
• A target timeframe for the completion of the investigation (recognizing that complex investigations may require flexibility);
• Requirements for communicating the outcome of the investigation to the complainant and the subject; or
• Standards for the thoroughness and quality of investigations, including requirements for witness interviews, document review, and written findings.
The absence of these standards means that investigation timelines and quality are left to the discretion of the individual investigator or HR professional assigned to the matter. This creates inconsistency and, in cases involving senior executives, creates a risk that investigations may be delayed, abbreviated, or otherwise compromised.
Additionally, Section 8.1 does not require that investigations involving senior executives be conducted by independent outside counsel. In the current matter, the Board committees made the decision to retain C&H as independent outside investigators — a decision that we believe was appropriate given the circumstances. However, this was a case-specific judgment, not a policy-mandated step. A policy requirement for independent outside counsel in investigations involving officers at the SVP level and above would remove the discretionary element and ensure consistent practice.
Section 8.1 also does not require that the subject of a complaint be placed on leave or have access to company systems restricted during the pendency of an investigation. In the current matter, Hale was placed on paid administrative leave on May 3, 2023, and his access to company email, Meridian Solutions, and internal systems was suspended at that time. This action was taken on the recommendation of counsel and with the concurrence of the Board committees. However, this too was a case-by-case decision, not a policy-mandated step. The absence of a policy requirement for interim protective measures creates a risk that, in future cases, the subject of a complaint may remain in a position of authority over complainants and witnesses during the investigation, with attendant risks of interference, intimidation, and continued misconduct.
IV.D.3. Independence of the Investigator
Section 8.1 does not address potential conflicts of interest in investigations. This is a significant omission. The inherent conflict when the VP of Human Resources — who reports within the same organizational structure as the subject — is tasked with investigating the division's President is self-evident. In the Whitcomb matter, Gallegos was placed in the position of investigating (or, as it turned out, not investigating) the most senior executive in his division — the individual who, ultimately, had authority over Gallegos's own career. While there is no suggestion that Gallegos's handling of the Whitcomb matter was motivated by self-interest or an intent to protect Hale, the structural conflict is undeniable, and a well-designed policy framework should not place HR professionals in this position.
Best practices require that, when the subject of a complaint is a member of senior leadership, the investigation be conducted by a person or entity that is independent of the subject's chain of authority. This typically means engagement of independent outside counsel or, at a minimum, assignment of the investigation to an HR or compliance professional at the parent-company level who does not report to the subject.
IV.D.4. Communication with Complainants
Section 8.1 does not mandate regular status updates to complainants during the pendency of investigations. The importance of proactive communication with complainants is well recognized in employment law and compliance practice. Complainants who are not informed about the progress and expected timeline of an investigation may experience anxiety, frustration, and a loss of confidence in the employer's commitment to addressing their concerns. This, in turn, may lead complainants to seek external remedies — such as filing charges with the CRD or retaining private counsel — before the employer has had the opportunity to complete its internal process.
The need for a structured communication protocol is underscored by events in the current investigation. On July 7, 2023, Sandra Reeves of Nakamura Reeves LLP, counsel for Jenna Morales, sent a follow-up letter to the Company expressing concerns about the pace of the investigation and requesting the implementation of interim protective measures for her client. While the investigation was, in fact, proceeding in a thorough and reasonably expeditious manner, the absence of regular proactive communication with Morales (or her counsel) contributed to the perception that the process was delayed or insufficiently attentive to the complainant's concerns.
Best practices call for periodic updates to complainants at defined intervals — typically every two to three weeks — providing general information about the status of the investigation without compromising the confidentiality or integrity of the process. A policy requirement for such communication would help manage complainant expectations and demonstrate the Company's good-faith commitment to a thorough and fair process.
IV.D.5. Gap Identified and Recommendation Summary
The gaps identified in Section 8.1 are as follows:
(i) There is no mandatory escalation protocol for complaints against officers at the SVP level or above. Escalation decisions are left entirely to the judgment of the VP of Human Resources.
(ii) There is no requirement that investigations involving senior executives be conducted by independent outside counsel or by an investigator who is structurally independent of the subject's chain of authority.
(iii) The policy does not establish specific timelines for investigation milestones or a target timeframe for completion.
(iv) The policy does not require interim protective measures — such as administrative leave, access suspension, or separation of the subject from complainants and witnesses — during the pendency of an investigation involving serious allegations against a senior executive.
(v) The policy does not mandate periodic communication with complainants regarding the status of the investigation.
We recommend a comprehensive overhaul of Section 8.1 to address each of these gaps. Detailed drafting recommendations are included in the Remedial Recommendations Memorandum dated August 19, 2023.
IV.E. Deficiency 5: Ethics & Compliance Hotline Escalation Workflow (Meridian Compliance Solutions LLC)
IV.E.1. Current Workflow
AGMG's Ethics & Compliance Hotline is operated by Meridian Compliance Solutions LLC ("Meridian"), a third-party compliance services vendor located at 233 South Wacker Drive, Suite 4100, Chicago, Illinois 60606. The hotline vendor relationship is managed by Ingrid Holt, Chief Compliance Officer of AGMG. The hotline is available to all employees of AGMG and its subsidiaries worldwide, including APS, and provides a mechanism for employees to submit complaints and reports of misconduct either anonymously or with self-identification.
The current hotline escalation workflow functions as follows: When a complaint is received by Meridian, the complaint is assigned a case reference number and routed to the designated recipient for the relevant subsidiary or business unit. For APS-related matters, the designated recipient is Victor Gallegos, VP of Human Resources at APS in Burbank. The routing is automatic and is based on the subsidiary identified in the complaint.
On April 18, 2023, Jenna Morales submitted her complaint via the hotline. The complaint was assigned case reference number MCS-1014-00001. The complaint was initially submitted anonymously. On April 19, 2023, Morales self-identified. The hotline report was transmitted to Gallegos as the designated recipient for APS-related matters.
IV.E.2. Identified Gaps
The hotline escalation workflow presents several significant gaps:
Uniform Routing Regardless of Subject Seniority. The routing protocol directs all APS-related complaints to Gallegos without differentiation based on the seniority or organizational position of the complaint's subject. A complaint about inappropriate conduct by a line-level supervisor is routed through the same channel as a complaint about the President of the division. There is no separate routing for complaints against senior executives, and no mechanism within the Meridian workflow to identify and flag such complaints for differentiated handling.
No Automatic Notification to AGMG-Level Stakeholders. The current workflow does not include automatic notification to AGMG-level stakeholders — specifically the General Counsel (Fiona Blackwood), the Chief Compliance Officer (Ingrid Holt), or the Chief People Officer (Patricia Sung) — when a complaint involves a division president or other C-suite officer. Notification of these stakeholders depends entirely on the discretionary escalation decisions of the local HR recipient.
No Priority-Flagging Mechanism. Meridian does not have a protocol for identifying and flagging complaints that involve potential senior executive misconduct for priority handling. All complaints are processed through the same intake and routing workflow, with no triage mechanism to ensure that the most organizationally significant complaints receive immediate attention at the appropriate level.
Delay in Board Notification. As noted in Section IV.D.1, the delay between the initial hotline intake (April 18, 2023) and Board committee awareness (April 28, 2023) was ten calendar days. While the delay resulted from multiple factors — including the need for Gallegos to process the complaint, for Blackwood and Sung to assess the situation, and for a decision to be made regarding Board notification — the absence of a structured escalation workflow with defined timelines contributed to the length of this interval. Given the seniority of the subject and the seriousness of the allegations, a ten-day delay in Board notification is unnecessarily long.
IV.E.3. Gap Identified and Recommendation Summary
The gaps identified in the hotline escalation workflow are structural and require changes both to the internal escalation matrix maintained by Meridian and to the policies governing how hotline complaints are handled within the Company. Our recommendations include:
(i) Revise the Meridian hotline escalation matrix to require automatic dual-routing of any complaint identifying, or reasonably believed to involve, an officer at the SVP level or above. Such complaints should be simultaneously routed to the local HR contact (currently Gallegos for APS) and to the AGMG General Counsel (currently Blackwood) and the AGMG Chief Compliance Officer (currently Holt).
(ii) Establish a twenty-four-hour escalation requirement to the chair of the relevant Board committee — the People & Culture Committee or the Audit & Risk Committee, as appropriate — for any complaint involving a division president or equivalent-level officer.
(iii) Develop a priority-flagging protocol within the Meridian workflow to ensure that complaints involving senior executives are identified and triaged immediately upon intake.
(iv) Incorporate these changes into the Meridian vendor services agreement through a formal amendment, with compliance subject to periodic audit by the AGMG Chief Compliance Officer.
Detailed recommendations are set forth in the Remedial Recommendations Memorandum dated August 19, 2023.
IV.F. Deficiency 6: Misalignment Between AGMG Global Code of Conduct, APS Employee Handbook, and Board Corporate Governance Guidelines
IV.F.1. Global Code of Conduct, Version 4.2
The AGMG Global Code of Conduct, effective January 1, 2022, is a company-wide policy document that establishes high-level principles regarding workplace conduct, ethics, and compliance. With respect to harassment and misconduct, the Code provides general statements of commitment to a respectful workplace free from harassment and discrimination, and it requires employees to report violations. However, the Code is designed as a principles-based, globally applicable document, and it defers to local subsidiary policies — such as the APS Handbook — for the specifics of complaint-handling procedures, investigation protocols, and enforcement mechanisms.
This structure is not unusual for multinational employers and is, in many respects, appropriate. However, the Code's deferral to local subsidiary policies creates a gap when those local policies are themselves deficient. More critically, the Global Code of Conduct does not specify investigation procedures or documentation requirements for complaints involving senior executives of subsidiary entities. It does not establish a parent-level role in the investigation of such complaints, and it does not create a reporting pathway from subsidiary-level HR to the AGMG Board.
IV.F.2. Board Corporate Governance Guidelines, Section 12
Section 12 of the AGMG Board Corporate Governance Guidelines, titled "Executive Conduct Standards," establishes conduct expectations for senior executives of AGMG and its subsidiaries. It addresses topics such as conflicts of interest, confidentiality, public statements, and compliance with law. The section includes general language regarding the expectation that senior executives will conduct themselves in accordance with the Company's values and policies.
However, Section 12 presents several deficiencies in the context of executive misconduct investigations: