PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE — ATTORNEY WORK PRODUCT — PREPARED AT THE DIRECTION OF COUNSEL
MEMORANDUM
FROM: Bernard Crawford, Partner, Labor & Employment Calderwood & Harkness LLP 1999 Avenue of the Stars, Suite 2800 Los Angeles, CA 90067
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
CC: Fiona Blackwood, General Counsel, Aurelius Global Media Group PLC
Date: August 19, 2023
Re: Remedial Recommendations Following Independent Workplace Investigation — Marcus Hale, President, Aurelius Pacific Studios Inc.
Matter No.: 1017-00005
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I. Introduction and Purpose
Calderwood & Harkness LLP ("Calderwood & Harkness" or the "Firm") was retained by the Board of Directors (the "Board") of Aurelius Global Media Group PLC ("AGMG" or the "Company") on May 2, 2023, to conduct an independent, privileged workplace investigation into allegations of sexual harassment, retaliation, and creating a hostile work environment against Marcus Hale ("Hale"), President of Aurelius Pacific Studios Inc. ("APS"), a wholly owned subsidiary of AGMG. The engagement was authorized by the People & Culture Committee and the Audit & Risk Committee of the Board, acting jointly, and was conducted under the protection of the attorney-client privilege and the attorney work product doctrine.
The investigation was opened on May 2, 2023 and was formally closed on August 19, 2023. Over the course of the investigation, Calderwood & Harkness conducted twenty-seven (27) witness interviews, including interviews of the three complainants, the respondent, and twenty-three additional witnesses with relevant knowledge. The Firm reviewed a total of approximately 38,600 filtered items collected from relevant custodians and data sources, from which 4,218 documents were identified as relevant and responsive. Of those, 312 documents were designated as "hot" documents bearing directly on the substantive allegations. Forensic data collection and analysis was performed by Linden Forensics Group Inc. ("Linden Forensics"), engaged by Calderwood & Harkness as a litigation support vendor. The investigation methodology is described in full in the Final Privileged Investigation Report.
The Final Privileged Investigation Report (the "Final Report") has been delivered to the Board concurrently with this memorandum on August 19, 2023. The Final Report sets forth the Firm's factual findings in detail. In summary, the investigation substantiated the following categories of misconduct by Hale:
(a) Sexual harassment of Jenna Morales — all four categories of alleged conduct were substantiated, including unwanted invitations to Hale's hotel room, sexually suggestive text messages, inappropriate comments about physical appearance, and unwanted physical contact;
(b) Sexually inappropriate comments directed at Claire Ngo — substantiated that Hale made sexually suggestive comments regarding Ngo's attire and made personal inquiries of an inappropriate nature during a company off-site retreat; and
(c) Retaliation against Darren Whitfield — substantiated that Hale reassigned Whitfield's highest-profile production projects in direct response to Whitfield's having raised concerns about Hale's treatment of female employees.
In addition to the individual findings of misconduct, the investigation identified systemic deficiencies in APS's complaint-handling procedures, documentation practices, and policy frameworks that contributed to the failure to detect or address Hale's conduct at an earlier stage and that, if left unremedied, present ongoing compliance and legal risks.
The purpose of this memorandum is to set forth Calderwood & Harkness's recommended corrective and remedial actions for consideration by the People & Culture Committee and the Audit & Risk Committee. These recommendations are informed by, and designed to ensure compliance with, the following applicable legal standards, policies, and governance frameworks:
• The California Fair Employment and Housing Act, Cal. Gov. Code §§ 12940 et seq. ("FEHA"), including the employer's affirmative duty to take immediate and appropriate corrective action under Section 12940(k);
• The AGMG Global Code of Conduct (Version 4.2, effective January 1, 2022) (the "Code of Conduct");
• The APS Employee Handbook (California Supplement, revised March 15, 2022) (the "APS Handbook"), including Sections 5.3, 5.7, and 8.1;
• The AGMG Board Corporate Governance Guidelines (the "Governance Guidelines"), including Section 12 (Executive Conduct Standards); and
• Applicable California common law and regulatory guidance regarding employer liability for supervisory harassment.
Calderwood & Harkness notes that CEO Elliot Vane was recused from oversight of the investigation due to his direct reporting relationship with Hale, and that Vane did not participate in the formulation of these recommendations. Recommendations regarding executive succession planning and interim leadership for APS are outside the scope of this memorandum but should be considered by the Board as a matter of urgency in light of the personnel actions recommended herein.
This memorandum should be read in conjunction with the Final Report. All factual findings referenced herein are set forth in full in the Final Report, and this memorandum cross-references the relevant sections of that report where appropriate.
II. Summary of Substantiated Findings
The following is a brief recitation of the key findings substantiated during the investigation, provided to establish the factual context for the recommendations set forth in Sections III through X below. The Board is referred to the Final Report for the complete factual record, witness credibility assessments, and evidentiary analysis supporting each finding.
A. Sexual Harassment — Jenna Morales
The investigation substantiated all four categories of sexual harassment alleged by Jenna Morales ("Morales"), Vice President of Development at APS. The substantiated conduct occurred over approximately six months, from September 2022 through March 2023, and is summarized as follows:
(a) Unwanted Invitations — Vancouver Production Trip (October 2022). During the production trip for Project Meridian in Vancouver, British Columbia, in October 2022, Hale made repeated and unwanted invitations to Morales to visit his hotel room after work-related events. On at least two separate occasions — October 12, 2022 and October 14, 2022 — Hale suggested to Morales that they continue discussing production matters "in private" in his suite at the Fairmont Hotel Vancouver. Morales declined on each occasion. The invitations were corroborated by two witnesses who were present during or immediately after the interactions.
(b) Sexually Suggestive Text Messages (November–December 2022). Hale sent Morales three sexually suggestive text messages on November 14, 2022, November 29, 2022, and December 8, 2022. The messages were recovered from Morales's personal mobile device and independently verified through forensic extraction performed by Linden Forensics. The content of the messages is set forth in the Final Report at Section IV.B.2. The messages were consistent with Morales's account and contained language that was sexual in nature and not reasonably related to any legitimate business purpose.
(c) Inappropriate Comment Regarding Physical Appearance (January 11, 2023). During a one-on-one meeting in Hale's office on January 11, 2023, Hale made a comment about Morales's physical appearance that was sexual in nature. Morales reported the comment to a colleague within hours of the meeting, and the colleague's contemporaneous account was consistent with Morales's testimony.
(d) Unwanted Physical Contact — Company Dinner (February 3, 2023). At a company dinner at Nobu Malibu on February 3, 2023, Hale placed his hand on Morales's lower back and subsequently on her thigh while seated beside her. Morales described the contact as unwanted and inappropriate. The physical contact was directly observed by four witnesses, and three additional witnesses observed Morales's visible discomfort and her immediate departure from the table.
In total, seven corroborating witnesses provided testimony consistent with Morales's account across the four categories of conduct. The recovered text messages constituted direct documentary evidence of sexually suggestive communications by Hale. Calderwood & Harkness found Morales's testimony to be credible, consistent, and well-corroborated. Hale's denials were not credible in light of the documentary evidence and corroborating witness testimony, as discussed in detail in the Final Report.
B. Sexually Inappropriate Comments — Claire Ngo
The investigation substantiated that Hale made sexually suggestive comments about Claire Ngo's ("Ngo") attire and asked Ngo whether she was "seeing anyone" during the company off-site retreat at the Monarch Valley Resort in Ojai, California, on February 17–18, 2023. Ngo is a Senior Director of Talent Relations at APS. Two corroborating witnesses were present during portions of the interactions and provided testimony consistent with Ngo's account.
The investigation further substantiated that, following the off-site retreat, Hale excluded Ngo from three key talent-relations strategy meetings in March and April 2023. Although Ngo's role and responsibilities would ordinarily have required her participation in those meetings, Hale did not provide any documented business justification for her exclusion. The exclusion was consistent with a pattern of retaliatory or avoidant behavior following Ngo's failure to respond positively to Hale's personal attention. While the exclusion from meetings was not separately alleged as retaliation by Ngo, it is noted here as contextually relevant conduct.
C. Retaliation — Darren Whitfield
The investigation substantiated that Hale retaliated against Darren Whitfield ("Whitfield"), Senior Vice President of Physical Production at APS, after Whitfield raised concerns about Hale's treatment of female employees at a leadership team meeting on January 23, 2023. Specifically, on February 6, 2023 — just fourteen days after Whitfield's complaint — Hale reassigned two of Whitfield's highest-profile production projects, Project Meridian and Project Halcyon, with combined budgets of approximately $187 million, to SVP of Production Cameron Briggs.
Email evidence recovered during the investigation demonstrated that Hale directed the reassignment on February 5, 2023, the day after a follow-up conversation with Whitfield in which Whitfield reiterated his concerns. The emails contained no reference to any performance-related justification for the reassignment, and no performance deficiencies were documented in Whitfield's file for the relevant period. The temporal proximity between Whitfield's protected activity and the adverse employment action, combined with the absence of any legitimate business justification, supports a finding of retaliatory motive.
D. Systemic Deficiencies
The investigation identified several systemic deficiencies in APS's policies, procedures, and practices that are relevant to the recommendations set forth herein:
Prior Informal Complaint — Serena Whitcomb (2021). In July 2021, Serena Whitcomb ("Whitcomb"), who served as Hale's executive assistant from April 2019 to September 2021, made an informal complaint to Victor Gallegos ("Gallegos"), Vice President of Human Resources at APS, regarding inappropriate comments and behavior by Hale. Gallegos handled the complaint informally, without conducting a formal investigation, and issued verbal counseling to Hale on August 2, 2021. Critically, the verbal counseling was not documented in writing and was not placed in Hale's personnel file. The General Counsel's office was not notified. Whitcomb resigned from APS in September 2021. The failure to document and escalate the 2021 complaint represents a significant gap in APS's complaint-handling practices.
Escalation Procedures — Ethics & Compliance Hotline. The investigation identified gaps in the escalation procedures governing the relationship between the Ethics & Compliance Hotline, operated by Meridian Compliance Solutions LLC ("Meridian"), and APS's internal HR function. While the April 2023 complaint by Morales was ultimately escalated appropriately, there is no formalized protocol requiring automatic escalation to the General Counsel and/or Board committees when a complaint involves a senior executive at or above the SVP level.
APS Employee Handbook Deficiencies. Sections 5.3 (Anti-Harassment & Anti-Discrimination Policy), 5.7 (Anti-Retaliation Policy), and 8.1 (Complaint & Investigation Procedures) of the APS Handbook were found to contain insufficient specificity in several material respects, as detailed in Section V of this memorandum.
III. Recommendation 1: Termination of Marcus Hale for Cause
A. Basis for Termination
Based on the totality of the substantiated findings, Calderwood & Harkness recommends that the Board authorize Aurelius Pacific Studios Inc. to terminate the employment of Marcus Hale for cause, effective immediately upon Board approval.
The substantiated findings of sexual harassment against two female employees and retaliation against a male employee who engaged in protected activity constitute clear and material violations of multiple company policies and applicable law, including:
• The AGMG Global Code of Conduct (Version 4.2, effective January 1, 2022), which provides that all employees, officers, and directors of AGMG and its subsidiaries are expected to maintain the highest standards of professional conduct and expressly prohibits harassment, discrimination, and retaliation in any form;
• Section 5.3 (Anti-Harassment & Anti-Discrimination Policy) and Section 5.7 (Anti-Retaliation Policy) of the APS Employee Handbook (California Supplement, revised March 15, 2022), which prohibit sexual harassment and retaliation against any employee who reports or participates in the investigation of a complaint of harassment or discrimination; and
• Section 12 (Executive Conduct Standards) of the AGMG Board Corporate Governance Guidelines, which imposes heightened standards of conduct on senior executives and provides that violations may result in disciplinary action up to and including termination of employment.
The severity, duration, and repeated nature of Hale's conduct — directed at multiple individuals over a period of approximately six months, encompassing both quid pro quo and hostile work environment elements of sexual harassment, and including a clear act of retaliation against an employee who reported concerns — warrants termination rather than any lesser form of discipline. This conclusion is further reinforced by the existence of the prior 2021 informal complaint by Serena Whitcomb, which, although inadequately documented and handled, demonstrates that Hale had previously been counseled regarding inappropriate workplace behavior and that the conduct identified in the current investigation represents a continuation and escalation of a pattern of misconduct.
Under California FEHA, Cal. Gov. Code § 12940(k), employers have an affirmative duty to "take all reasonable steps necessary to prevent discrimination and harassment from occurring." Where harassment by a supervisory employee has been substantiated, the employer's corrective action must be "immediate and appropriate" and "reasonably calculated to end the harassment." See Dept. of Fair Employment and Housing v. Superior Court (Hartley) (2020) 54 Cal.App.5th 356. Given Hale's position as President of APS — the most senior executive within the subsidiary, reporting directly to CEO Elliot Vane — and the gravity and persistence of the substantiated misconduct, termination is the proportionate and legally appropriate corrective response. Lesser measures, such as suspension, demotion, or a performance improvement plan, would be insufficient given the nature and extent of the violations and would expose the Company to substantial legal risk in any subsequent litigation.
B. Employment Agreement Provisions
Hale's employment with Aurelius Pacific Studios Inc. is governed by an Employment Agreement dated January 7, 2019 (the "Employment Agreement"), as amended by Amendment No. 1 dated March 12, 2021 and Amendment No. 2 dated September 8, 2022.
Section 9.2(b) of the Employment Agreement provides for termination of Hale's employment for "Cause," which is defined to include, among other enumerated grounds:
(i) a material violation of the Company's policies, procedures, or codes of conduct, including but not limited to the AGMG Global Code of Conduct;
(ii) conduct that constitutes harassment, discrimination, or retaliation as defined under applicable federal, state, or local law;
(iii) willful misconduct or gross negligence in the performance of duties; and
(iv) any act or omission that brings the Company or any of its affiliates into material disrepute.
The substantiated findings satisfy multiple grounds for termination for Cause under Section 9.2(b). Specifically, Hale's conduct constitutes a material violation of the Code of Conduct and the APS Handbook (ground (i)), constitutes harassment and retaliation as defined under California FEHA (ground (ii)), and constitutes willful misconduct (ground (iii)). Accordingly, Calderwood & Harkness recommends that the Board authorize Aurelius Pacific Studios Inc. to terminate Hale's employment for Cause pursuant to Section 9.2(b) of the Employment Agreement.
Termination for Cause under Section 9.2(b) would eliminate the Company's obligations to provide the following compensation and benefits that would otherwise be payable upon a termination without Cause or a voluntary resignation for Good Reason:
• Severance Payment: Under Section 10.1, Hale would otherwise be entitled to severance equal to twenty-four (24) months of base salary ($3,700,000), which is forfeited upon termination for Cause.
• Accelerated Vesting of Equity Awards: Under Section 10.3, Hale's unvested restricted stock units and performance share units (estimated current value of approximately $4,200,000 based on the closing price of AGMG ordinary shares on the London Stock Exchange AIM market as of August 18, 2023) would otherwise vest on an accelerated basis upon a qualifying termination; this acceleration is forfeited upon termination for Cause, and all unvested equity awards are cancelled.
• Target Bonus: Under Section 10.2, Hale would otherwise be entitled to a pro-rata target bonus for the year of termination ($1,390,000 annualized target), which is forfeited upon termination for Cause.
Hale's total annual compensation is approximately $4.7 million, consisting of a base salary of $1,850,000, a target annual bonus of $1,390,000, and annual equity awards with a grant-date value of approximately $1,460,000. The financial impact of a for-Cause termination versus a without-Cause termination is substantial and further supports the recommendation that termination be effected on a for-Cause basis.
Calderwood & Harkness recommends that the Board coordinate with Pendleton & Warwick LLP (20 Fenchurch Street, 8th Floor, London EC3M 3BY), the Company's UK corporate counsel, regarding any corporate governance notifications, regulatory filings, or market disclosures that may be required under the AIM Rules for Companies or other applicable UK regulatory requirements in connection with the termination of a senior executive of a London Stock Exchange AIM-listed company. AGMG's current market capitalization is approximately £3.8 billion, and the departure of the President of its largest North American subsidiary may constitute information that requires disclosure under applicable market abuse regulations or AIM Rule 11.
C. Notification to External Auditors
Greystone Advisors LLP ("Greystone"), AGMG's external auditor, was previously notified of the existence and scope of the investigation in connection with Greystone's assessment of potential financial reporting implications, including accrued compensation liabilities, contingent liabilities related to potential employment litigation, and the treatment of Hale's unvested equity awards under applicable accounting standards.
Calderwood & Harkness recommends that the General Counsel provide further notification to Greystone regarding the for-Cause termination determination and its impact on:
• Accrued severance and bonus liabilities (which would be reversed in the event of a for-Cause termination);
• The accounting treatment of Hale's unvested equity awards, including any required adjustments to share-based compensation expense; and
• Any disclosures required in AGMG's financial statements or notes regarding the investigation, the termination, and related contingent liabilities.
D. Insurance Implications
Notice of the investigation and potential claims was previously provided to the Company's employment practices liability insurance ("EPLI") and directors and officers ("D&O") insurance carriers:
• EPLI Coverage: Northbridge Mutual Insurance Co., Policy No. NM-EPLI-2023-00417, with a per-claim limit of $10,000,000 and an aggregate limit of $25,000,000, subject to a self-insured retention ("SIR") of $500,000. The policy period is January 1, 2023 through December 31, 2023.
• D&O Coverage: Castlemaine Underwriters Ltd., Policy No. CU-DO-2023-11283, with a tower limit of $50,000,000. The D&O program provides coverage for directors and officers in connection with claims arising from their service in such capacities.
Calderwood & Harkness recommends that supplemental notice be provided to both Northbridge and Castlemaine, through Kessler & Dunn Insurance Brokers Ltd. (the Company's insurance broker of record), regarding the for-Cause termination of Hale and the potential for claims by the complainants, including the existing demand from Nakamura Reeves LLP on behalf of Morales. The supplemental notice should provide an updated description of the claims exposure, the substantiated findings, and the Company's remedial actions.
Total investigation costs incurred to date are $1,437,250, consisting of Calderwood & Harkness legal fees of $1,247,850 and Linden Forensics Group Inc. forensic data collection, processing, and analysis fees of $189,400. These costs should be submitted to Northbridge under the EPLI policy for reimbursement to the extent they exceed the $500,000 SIR. Calderwood & Harkness recommends that the General Counsel coordinate with Kessler & Dunn to prepare and submit the coverage claim in a timely manner.
E. Interim Measures Pending Board Action
Hale has been on paid administrative leave since May 3, 2023, the day after the investigation was formally opened. Upon the commencement of the leave, Hale's access to Company email, Meridian Solutions, and all internal information systems was suspended. Hale was notified of the leave by Fiona Blackwood, General Counsel, and was directed not to contact any APS employees regarding the investigation or any work-related matters during the pendency of the leave.
Calderwood & Harkness recommends that Hale's paid administrative leave and system access suspension be maintained until the formal termination is authorized and executed by the Board. Upon Board authorization, the termination process should be coordinated between APS's Vice President of Human Resources, Victor Gallegos, and Calderwood & Harkness, and should include:
• Preparation and delivery of a termination letter setting forth the grounds for termination under Section 9.2(b) of the Employment Agreement;
• Collection and return of all Company property in Hale's possession, including any laptops, mobile devices, access badges, and confidential documents;
• Confirmation of Hale's post-termination obligations, including confidentiality, non-disparagement, and, to the extent applicable, any restrictive covenant obligations under the Employment Agreement; and
• Coordination with IT security to ensure permanent revocation of all system access credentials and remote access capabilities.
IV. Recommendation 2: Mandatory Enhanced Anti-Harassment Training for Senior Leaders
A. Scope and Audience
Calderwood & Harkness recommends that AGMG implement a mandatory enhanced anti-harassment and anti-retaliation training program for all senior leaders at Aurelius Pacific Studios Inc., commencing immediately following the Board's authorization of the remedial measures set forth in this memorandum.
The initial phase of training should encompass all senior leaders at the SVP level and above, which includes the nine (9) individuals who serve as direct reports to the APS President, as well as all Vice President-level employees within APS. This group should complete the enhanced training within thirty (30) days of Board authorization. In the second phase, the enhanced training should be extended to all approximately 2,300 APS employees within ninety (90) days.
In addition, Calderwood & Harkness recommends that the Board consider extending the enhanced training program to all approximately 4,600 United States-based employees of AGMG and its subsidiaries, recognizing that the systemic deficiencies identified in this investigation may not be unique to APS and that a company-wide training initiative would reinforce the Board's commitment to a compliant and respectful workplace culture across all divisions.
B. Content Requirements
The enhanced training program must satisfy, and should meaningfully exceed, California's mandatory sexual harassment prevention training requirements under Cal. Gov. Code § 12950.1 and the implementing regulations at 2 Cal. Code Regs. § 11024. Under these requirements, supervisory employees must receive at least two (2) hours of training, and non-supervisory employees must receive at least one (1) hour of training, within six months of hire and every two years thereafter. Calderwood & Harkness recommends that the enhanced training for senior leaders extend to a minimum of three (3) hours and include the following substantive content areas:
• Definitions and examples of quid pro quo harassment and hostile work environment harassment, including harassment based on sex, gender, gender identity, gender expression, and sexual orientation;
• The legal and company-policy prohibitions against retaliation, including a clear explanation of what constitutes protected activity and what actions may constitute unlawful or policy-violating retaliation;
• Bystander intervention strategies, including practical guidance on how to intervene when witnessing inappropriate conduct, how to support colleagues who report misconduct, and how to create an environment in which reporting is encouraged rather than discouraged;
• The mandatory reporting obligations of supervisory employees under California law and Company policy, including the obligation to report complaints to HR or the Ethics & Compliance Hotline even when the complainant requests confidentiality;
• The consequences of policy violations, including that substantiated harassment or retaliation may result in discipline up to and including termination of employment, regardless of the offending employee's seniority or tenure;
• A detailed overview of the Company's complaint and investigation procedures, including the Ethics & Compliance Hotline, the role of internal HR, the escalation process to the General Counsel, and the availability of external reporting mechanisms (e.g., the California Civil Rights Department); and
• Anonymized case-study scenarios drawn from the substantiated findings in this investigation, designed to illustrate the types of conduct that constitute violations of law and Company policy. These scenarios should be developed in a manner that does not identify any individual complainant, witness, or respondent.
C. Trainer Selection
Calderwood & Harkness recommends the engagement of an independent, qualified third-party training provider with demonstrated expertise in California employment law and, ideally, familiarity with the unique workplace dynamics of the entertainment industry, including the production environment, talent-facing roles, and the power dynamics inherent in studio hierarchies. Reliance solely on internal HR resources for the delivery of enhanced training is not advisable, given the systemic deficiencies identified in APS's HR function and the need to ensure that the training is perceived by employees as credible, independent, and substantive.
The selection of a training provider should be coordinated between the Chief People Officer, Patricia Sung, and the General Counsel's office, with input from Calderwood & Harkness as appropriate.
D. Ongoing Requirements
To ensure sustained compliance and cultural reinforcement, Calderwood & Harkness recommends the following ongoing training requirements:
• Annual Refresher Training: All APS employees should receive annual refresher training on anti-harassment, anti-discrimination, and anti-retaliation topics. The content of the refresher training should be updated annually to reflect any changes in applicable law, company policy, or emerging best practices.
• New Hire Training: All new employees should receive the enhanced anti-harassment training within thirty (30) days of their start date, as part of the onboarding process.
• Documentation and Tracking: Completion of all training — initial, refresher, and new hire — should be documented and tracked in centralized HR records. The Chief People Officer should provide quarterly reports to the People & Culture Committee on training completion rates, broken down by division, level, and location.
V. Recommendation 3: Revision of APS Employee Handbook (California Supplement)
The investigation identified several areas in which the APS Employee Handbook (California Supplement, revised March 15, 2022) requires revision to ensure adequate specificity, legal compliance, and operational effectiveness. Calderwood & Harkness recommends the following revisions to Sections 5.3, 5.7, and 8.1 of the APS Handbook.
A. Section 5.3 — Anti-Harassment & Anti-Discrimination Policy
The current Anti-Harassment & Anti-Discrimination Policy (Section 5.3, revised March 15, 2022) provides a general statement of the Company's prohibition against harassment and discrimination but lacks sufficient specificity in several material respects. Calderwood & Harkness recommends the following revisions:
• Expanded Definitions of Covered Conduct. The revised policy should include a significantly expanded set of examples illustrating the types of conduct that may constitute harassment, including: verbal harassment (such as sexually suggestive comments, epithets, jokes, and propositions); physical harassment (such as unwanted touching, physical intimidation, and blocking movement); visual harassment (such as displaying sexually suggestive images, cartoons, or drawings); and electronic harassment (such as sexually suggestive text messages, emails, direct messages, and social media communications). The current policy's examples are insufficient to convey the breadth of conduct that may give rise to liability under California FEHA.
• Explicit Zero-Tolerance Statement. The revised policy should contain an unambiguous statement that AGMG and APS maintain a zero-tolerance approach to harassment and discrimination, and that substantiated violations will result in disciplinary action up to and including immediate termination of employment, regardless of the offending employee's seniority, tenure, or perceived value to the organization.
• Applicability to Off-Site Events, Business Travel, and Company-Sponsored Social Functions. The revised policy should make clear that the anti-harassment policy applies to all work-related contexts, including but not limited to off-site production locations, business travel (domestic and international), company-sponsored retreats and social events, and any other setting in which employees are interacting in connection with Company business. This clarification is directly responsive to the substantiated findings, which involved conduct occurring during the Vancouver production trip and the Monarch Valley Resort off-site retreat, and at a company dinner at Nobu Malibu.
• Supervisor Liability and Heightened Obligations. The revised policy should explicitly address the heightened obligations of supervisory employees and individuals in positions of authority. The policy should make clear that supervisors who engage in harassment or discrimination are subject to personal liability under California law, and that the Company may be held strictly liable for the harassing conduct of its supervisors. The policy should also emphasize that individuals in positions of authority have a particular responsibility to model appropriate conduct and to promptly report any harassment or discrimination they observe or become aware of.
• Available Complaint Channels. The revised policy should include a clear and prominently displayed description of all available complaint channels, including: (i) direct report to the employee's supervisor or another member of management; (ii) report to the VP of Human Resources or any member of the HR team; (iii) report via the Ethics & Compliance Hotline (operated by Meridian Compliance Solutions LLC), including the hotline telephone number and web portal address; and (iv) direct report to the General Counsel. Employees should be advised that they may use any of these channels and are not required to report through their direct chain of command.
B. Section 5.7 — Anti-Retaliation Policy
The current Anti-Retaliation Policy (Section 5.7) should be revised to address the following deficiencies identified during the investigation:
• Expanded Definition of Protected Activity. The revised policy should provide a more expansive and explicit definition of protected activity to include not only filing a complaint of harassment or discrimination, but also: raising concerns on behalf of others (as Whitfield did); participating in or cooperating with an investigation of a complaint; providing testimony or evidence in connection with an investigation; and opposing conduct that the employee reasonably believes to be unlawful, even if the employee is not the direct target of such conduct.
• Enumeration of Retaliatory Conduct. The revised policy should include specific examples of conduct that may constitute prohibited retaliation, including but not limited to: termination or demotion; reassignment of duties, projects, or responsibilities; exclusion from meetings, communications, or opportunities; changes in reporting structure; negative performance evaluations that are not supported by documented performance issues; reduction in compensation or benefits; isolation, ostracism, or other forms of social exclusion in the workplace; and any other adverse action that would dissuade a reasonable employee from engaging in protected activity.
• Standalone Violation. The revised policy should state explicitly that retaliation is a standalone violation of Company policy and applicable law, separate and independent from the underlying complaint of harassment or discrimination. The policy should make clear that an employee may be found to have engaged in prohibited retaliation even if the underlying complaint is not substantiated, and that substantiated retaliation will be treated as a serious violation warranting discipline up to and including immediate termination of employment.
C. Section 8.1 — Complaint & Investigation Procedures
The current Complaint & Investigation Procedures (Section 8.1) are inadequate in several respects that were directly implicated by the investigation findings. Calderwood & Harkness recommends the following revisions:
• Timelines for Intake and Escalation. The revised procedures should establish clear timelines for the intake, acknowledgment, and escalation of complaints. At a minimum, complaints should be acknowledged within two (2) business days of receipt, and an initial assessment regarding the appropriate level of investigation should be completed within five (5) business days.
• Escalation Criteria. The revised procedures should specify the criteria for when complaints must be escalated from local HR (i.e., the VP of Human Resources level) to the General Counsel and/or relevant Board committees. At a minimum, the following categories of complaints should require mandatory escalation: (i) any complaint involving an officer or executive at the VP level or above; (ii) any complaint alleging sexual harassment, sexual assault, or other conduct of a sexual nature; (iii) any complaint alleging retaliation; (iv) any complaint involving a pattern of conduct or multiple complainants; and (v) any complaint that may give rise to litigation or regulatory action. Such complaints must be escalated to the General Counsel within forty-eight (48) hours of receipt.
• Documentation Requirements. The revised procedures should mandate written documentation at each stage of the complaint and investigation process, including: the initial complaint (whether received orally or in writing); the intake assessment; the investigation plan; all witness interviews (with written summaries or transcripts); all documents reviewed; the investigative findings; the determination regarding substantiation; any corrective or remedial actions imposed; and any follow-up monitoring. Documentation should be retained in a secure, centralized system accessible to the General Counsel's office.
• Role and Independence of Outside Counsel. The revised procedures should address the circumstances under which outside counsel should be engaged to conduct or oversee an investigation, including, at a minimum, any investigation involving a senior executive at the SVP level or above, any investigation in which internal HR or legal personnel have a conflict of interest, and any investigation that the General Counsel determines, in her discretion, would benefit from independent outside review.
D. Implementation Timeline
Calderwood & Harkness recommends the following timeline for the implementation of handbook revisions:
• Draft revisions to Sections 5.3, 5.7, and 8.1 of the APS Handbook to be completed by the Chief People Officer, Patricia Sung, in coordination with the General Counsel, within sixty (60) days of Board approval of the recommendations set forth in this memorandum.
• Draft revisions to be reviewed by Calderwood & Harkness (or successor outside employment counsel) for compliance with California FEHA and other applicable law prior to finalization.
• The revised APS Handbook (California Supplement) to be distributed to all APS employees, with a mandatory acknowledgment of receipt and review to be signed by each employee and retained in the employee's personnel file.
• Consideration should be given to whether corresponding revisions are warranted to employee handbooks and policies applicable to AGMG's other U.S. and international subsidiaries.
VI. Recommendation 4: Revision of Hotline Escalation Procedures with Meridian Compliance Solutions LLC
A. Identified Deficiency
The initial complaint by Jenna Morales regarding Hale's conduct was filed on April 18, 2023 via the Ethics & Compliance Hotline operated by Meridian Compliance Solutions LLC ("Meridian"), located at 233 South Wacker Drive, Suite 4100, Chicago, IL 60606. The complaint was assigned Meridian case reference number MCS-1014-00001. Upon receipt of the complaint, Meridian routed it to Victor Gallegos, VP of Human Resources at APS, in accordance with the standard routing protocols then in effect. Gallegos escalated the complaint to Fiona Blackwood, General Counsel, and Patricia Sung, Chief People Officer, on April 19, 2023. The escalation by Gallegos was appropriate and timely.
However, the investigation identified that Gallegos's escalation of the Morales complaint was a product of his individual judgment rather than any formalized protocol or mandatory escalation requirement. The existing service agreement between AGMG and Meridian, and the internal procedures governing the interface between the hotline and APS's HR function, do not contain formalized escalation triggers requiring automatic notification of the General Counsel and/or Board committees when a complaint involves a senior executive. This gap is a significant structural deficiency: in a scenario in which a complaint involving a senior executive was received by a less experienced or less diligent HR professional, the complaint could remain at the local HR level without escalation to the appropriate oversight bodies.
Additionally, the lack of documented escalation triggers means that there is no audit trail demonstrating compliance with any particular escalation standard, which undermines the Company's ability to demonstrate the adequacy of its complaint-handling procedures in the event of regulatory inquiry or litigation.
B. Recommended Revisions
Calderwood & Harkness recommends the implementation of formalized, tiered escalation protocols within the Meridian service agreement and in APS's internal complaint-handling procedures. The recommended escalation tiers are as follows:
Tier 1 — Standard Complaints. Complaints that do not involve the categories described in Tier 2 or Tier 3 should be routed to the local VP of Human Resources (currently Victor Gallegos at APS) for intake, assessment, and, where appropriate, investigation in accordance with the revised Section 8.1 procedures described in Section V above.
Tier 2 — Complaints Involving Managers and Directors. Complaints involving respondents at the Manager or Director level should be routed to the local VP of Human Resources with mandatory notification to the Chief People Officer (Patricia Sung) within twenty-four (24) hours of receipt. The Chief People Officer should assess whether additional escalation or the engagement of outside counsel is warranted.
Tier 3 — Complaints Involving VP-Level and Above, or Any Complaint Alleging Sexual Harassment or Assault. Complaints involving respondents at the VP level or above, and any complaint alleging sexual harassment, sexual assault, or physical conduct of a sexual nature (regardless of the respondent's level), should be routed simultaneously to the General Counsel (Fiona Blackwood) and the Chief Compliance Officer (Ingrid Holt), with mandatory notification to the Chair of the People & Culture Committee (Dame Cordelia Ashworth) within forty-eight (48) hours of receipt. Tier 3 complaints should not be investigated at the local HR level without the express authorization of the General Counsel.
In addition to the tiered escalation structure, Calderwood & Harkness recommends the following enhancements to the Meridian platform and reporting processes:
• Automated Flagging and Routing. The Meridian platform should be configured to enable automated flagging and routing of complaints based on the named respondent or the respondent's role designation. When a complaint names or describes an individual at the VP level or above, or when the complainant selects a complaint category indicating sexual harassment, sexual assault, or physical misconduct, the platform should automatically route the complaint to Tier 3 recipients without requiring manual intervention by local HR.
• Quarterly Reporting. Meridian should be required to provide quarterly reports to the Chief Compliance Officer (Ingrid Holt) on complaint volumes, categorization, resolution status, and escalation compliance. These reports should be reviewed by the Chief Compliance Officer and summarized for the Audit & Risk Committee on a quarterly basis.
C. Implementation
Calderwood & Harkness recommends the following implementation timeline:
• Revisions to the AGMG–Meridian service agreement to be negotiated and executed within thirty (30) days of Board approval.
• Configuration of automated flagging and routing within the Meridian platform to be completed and tested within sixty (60) days.
• New escalation protocols to be operational within sixty (60) days, with a communication to all APS employees regarding the enhanced hotline procedures.
• Ingrid Holt, Chief Compliance Officer of AGMG, to oversee the implementation process and to certify to the Audit & Risk Committee that the revised protocols are fully operational.
VII. Recommendation 5: Engagement of Independent Workplace Culture Assessment
A. Rationale
The substantiated findings of sexual harassment and retaliation against Hale, combined with the prior 2021 informal complaint by Serena Whitcomb that was inadequately documented and addressed, raise concerns about potential systemic cultural issues at Aurelius Pacific Studios Inc. that may extend beyond the conduct of a single individual. While the investigation was scoped to address the specific allegations against Hale and was not designed as a comprehensive organizational culture review, several witnesses described during their interviews a workplace environment in which employees were reluctant to raise concerns about senior leadership conduct, in which the "open door" reporting culture described in the APS Handbook was not reflected in employees' lived experience, and in which the power dynamics inherent in studio executive hierarchies created barriers to reporting.
A comprehensive, independent workplace culture assessment will serve several important purposes: it will help identify whether additional unreported misconduct exists within the organization; it will provide a data-driven assessment of the effectiveness of existing reporting channels and the degree to which employees trust those channels; it will evaluate overall employee perceptions of workplace safety, psychological security, and the Company's commitment to a harassment-free environment; and it will establish a baseline against which the effectiveness of the remedial measures recommended in this memorandum can be measured over time.
APS employs approximately 2,300 individuals across three locations: Burbank, California (headquarters), Atlanta, Georgia, and New York, New York. The culture assessment should encompass all three locations to ensure a comprehensive and representative picture of the organizational culture.
B. Scope
Calderwood & Harkness recommends the engagement of an independent, qualified third-party organizational consulting firm to conduct the culture assessment. The firm selected should not have been previously retained by AGMG or APS in any capacity, to ensure independence and credibility. The assessment should include the following components:
• Confidential Employee Surveys. A company-wide, confidential survey instrument designed to measure employee perceptions across a range of dimensions, including leadership conduct and tone at the top, awareness of and trust in reporting channels, perceptions of retaliation risk, effectiveness of existing training programs, and overall feelings of workplace safety and inclusion. The survey should be administered electronically and should include measures to protect respondent anonymity.
• Focus Groups. Facilitated focus group discussions with representative cross-sections of APS employees, stratified by level, function, location, and tenure. Focus groups should be designed to elicit qualitative data that supplements the quantitative survey results.
• Targeted Interviews. Confidential, one-on-one interviews with a sample of employees selected by the consulting firm, with a particular focus on employees in functions or at levels that may have elevated exposure to harassment risk (e.g., production assistants, executive assistants, talent-facing roles).
The assessment should specifically address workplace dynamics unique to the entertainment production environment, including the power dynamics inherent in production hierarchies, the informal nature of many workplace interactions in production settings, and the challenges of maintaining professional boundaries in contexts such as location shoots, off-site retreats, and company-sponsored social events.
C. Reporting
The findings of the culture assessment should be reported to the People & Culture Committee through the General Counsel under the protection of the attorney-client privilege. To preserve privilege, the engagement of the consulting firm should be structured as an engagement at the direction of counsel, and Calderwood & Harkness is available to advise on the engagement structure and contractual arrangements necessary to protect the privileged nature of the assessment and its findings.
Calderwood & Harkness recommends a target completion date of 120 days from the date of engagement of the consulting firm. The engagement itself should be initiated within thirty (30) days of Board approval, such that the assessment results are available to the People & Culture Committee no later than approximately 150 days from the date of this memorandum.
VIII. Recommendation 6: Remedial Measures for Affected Complainants
Calderwood & Harkness recommends the following specific remedial measures for each of the three individuals who were the subjects of the substantiated misconduct, as well as certain general protections applicable to all three.
A. Jenna Morales (Vice President of Development)
Morales was the primary complainant in this investigation. Throughout the investigation, Morales has been represented by Sandra Reeves of Nakamura Reeves LLP (515 South Flower Street, Suite 3600, Los Angeles, CA 90071). On July 7, 2023, Ms. Reeves transmitted a letter to Calderwood & Harkness requesting, among other things, that the Company implement interim protective measures to ensure Morales's safety and position were not adversely affected during the pendency of the investigation. Calderwood & Harkness responded on July 12, 2023, confirming Hale's paid administrative leave status and the interim protections that had been put in place.
Calderwood & Harkness recommends the following remedial measures for Morales:
(a) Preservation of Current Role and Compensation. Written confirmation from APS leadership that Morales's current role as Vice President of Development, her title, her compensation (including base salary, bonus eligibility, and equity awards), and her reporting structure will be preserved without adverse change. This confirmation should be communicated in writing by a senior APS executive (other than Hale) or by the General Counsel.
(b) Restoration of Responsibilities and Projects. Restoration of any responsibilities, projects, or developmental opportunities that may have been affected, diminished, or redirected during the period of Hale's substantiated misconduct (approximately September 2022 through March 2023) or during the investigation period.
(c) Counseling and Support Services. An offer of confidential counseling services or employee assistance program ("EAP") services at Company expense. The offer should be communicated in a manner that is respectful of Morales's privacy and should not be conditioned on any waiver of rights or claims.
(d) Designated HR Contact. Designation of a senior HR contact, other than Victor Gallegos, to serve as Morales's point of contact for any ongoing concerns related to the matters addressed in this investigation or any future workplace concerns. The designation of an alternative HR contact is recommended in light of Gallegos's involvement in the inadequate handling of the 2021 Whitcomb complaint, which may affect Morales's confidence in Gallegos's ability to effectively respond to her concerns. The Chief People Officer, Patricia Sung, or a designee, may be appropriate for this role.
(e) Ongoing Monitoring for Retaliation. Active and ongoing monitoring for any retaliatory conduct directed at Morales by any APS employee, including but not limited to changes in her responsibilities, performance evaluations, compensation, or interpersonal treatment. Such monitoring should be conducted by the Chief People Officer or her designee and should continue for a minimum of twelve (12) months.
Calderwood & Harkness notes that Morales retains the right to pursue external legal claims against Hale and/or the Company under California FEHA and other applicable law. The demand letter transmitted by Nakamura Reeves LLP on April 20, 2023 signals a potential civil action. The remedial measures recommended above are without prejudice to any rights Morales may have under FEHA or other applicable law, and the Company's implementation of these measures should not be characterized as an admission of liability.
B. Claire Ngo (Senior Director of Talent Relations)
Calderwood & Harkness recommends the following remedial measures for Ngo:
(a) Reinstatement to Meetings and Responsibilities. Immediate reinstatement of Ngo to all meetings, responsibilities, and work streams from which she was excluded during March and April 2023, including the three talent-relations strategy meetings from which Hale excluded her. Ngo should be provided with all materials, minutes, and action items from the meetings she missed, and should be given the opportunity to contribute to any decisions or initiatives that were advanced during her exclusion.
(b) Written Confirmation of Career Trajectory. Written confirmation from APS leadership that Ngo's career trajectory, performance evaluations, and advancement opportunities will not be adversely impacted by the events that gave rise to this investigation. This confirmation should be communicated by a senior APS executive or by the General Counsel.
(c) Counseling and Support Services. An offer of confidential counseling services or EAP services at Company expense, communicated in a manner that is respectful of Ngo's privacy.
(d) Ongoing Monitoring for Retaliation. Active and ongoing monitoring for any retaliatory conduct directed at Ngo by any APS employee, to be conducted by the Chief People Officer or her designee for a minimum of twelve (12) months.
C. Darren Whitfield (SVP of Physical Production)
Calderwood & Harkness recommends the following remedial measures for Whitfield:
(a) Reassignment of Projects. Reassignment of Project Meridian and Project Halcyon (combined budgets of approximately $187 million) back to Whitfield's oversight, to the extent that such reassignment is operationally feasible given the current production status of those projects. If reassignment of one or both projects is not operationally feasible — for example, if significant production milestones have been reached under Cameron Briggs's oversight such that a mid-stream transfer would be disruptive — then Whitfield should be assigned equivalent high-profile production projects that are commensurate with his SVP title and responsibilities.
(b) Written Acknowledgment. Written acknowledgment from APS leadership that the reassignment of Project Meridian and Project Halcyon from Whitfield to Cameron Briggs was unwarranted, that there was no performance-related justification for the reassignment, and that Whitfield acted appropriately and commendably in raising concerns about Hale's treatment of female employees at the January 23, 2023 leadership team meeting. This written acknowledgment should be placed in Whitfield's personnel file.
(c) Performance Evaluation Review. A review of Whitfield's performance evaluation for the period affected by the retaliatory reassignment (approximately February 2023 through the present) to ensure that no adverse impact resulted from the reassignment, and to correct any evaluation that may have been influenced by Hale's retaliatory motive. If Whitfield's evaluation for this period reflects any negative assessment attributable to the reassignment, the evaluation should be amended.
(d) Ongoing Monitoring for Retaliation. Active and ongoing monitoring for any retaliatory conduct directed at Whitfield by any APS employee, to be conducted by the Chief People Officer or her designee for a minimum of twelve (12) months.
D. General Protections
The following general protections should apply to all three complainants:
• Written Assurance of Non-Retaliation. Each of the three complainants should receive a written assurance from the Board of Directors, communicated through the General Counsel, that the Board is committed to ensuring that no retaliation of any kind is directed at any individual who participated in or cooperated with the investigation.
• Periodic Check-Ins. The HR function (through the Chief People Officer or a designated senior HR representative other than Victor Gallegos, at least during the initial monitoring period) should conduct periodic check-ins with each complainant on a quarterly basis for a period of twelve (12) months. The purpose of these check-ins is to assess whether the complainant has experienced any adverse treatment, to address any ongoing concerns, and to ensure that the remedial measures described above have been fully and effectively implemented.
• Escalation of Future Complaints. Any future complaints by or regarding any of the three complainants — whether related to the matters addressed in this investigation or otherwise — should be escalated directly to the General Counsel under the Tier 3 escalation protocols described in Section VI above, regardless of the nature or severity of the complaint.
IX. Recommendation 7: Improvement of HR Documentation Practices
A. Identified Deficiency
As discussed in Section II.D above, the investigation revealed a critical failure in APS's HR documentation practices. Specifically, the verbal counseling issued to Marcus Hale by Victor Gallegos on August 2, 2021, following the informal complaint by former executive assistant Serena Whitcomb, was not documented in any written form and was not retained in Hale's personnel file. Whitcomb was employed by APS from April 2019 to September 2021 and made her informal complaint in July 2021. She resigned from APS in September 2021.