January 7, 2004 - The Washington Post

Prosecutors Say Bills Were Inflated For Anti-Drug Ads

By Brooke A. Masters, Washington Post Staff Writer

NEW YORK, Jan. 6 -- For five years now, the advertising agency Ogilvy & Mather Worldwide has startled the public with in-your-face ads linking illegal drug use to car crashes, teen pregnancy and -- during the 2002 Super Bowl -- international terrorism.

"Tell your brother you forgot to pick him up because you were getting stoned. He'll understand," reads one advertisement. "Parents: The Anti-Drug" says another.

The American taxpayers footed the multimillion-dollar tab for the entire campaign, and now federal prosecutors in Manhattan are alleging that two top executives at the ad agency deliberately padded bills for some of the earliest ads.

On Tuesday, a federal grand jury charged finance director Thomas Early and former senior partner Shona Seifert with conspiracy and filing false claims, saying they submitted inflated bills to the White House's Office of National Drug Control Policy in 1999 and 2000.

The New York-based advertising agency already has repaid $1.8 million to the government to settle a civil suit based on the same billing issues and continues to produce anti-drug spots for the government.

According to the grand jury filing, the problems started when Ogilvy & Mather won a five-year contract in 1998 to do the spots, and executives projected that they would receive $684 million based on anticipated labor and overhead costs.

In mid-1999, Ogilvy executives found that their employees were logging fewer hours than expected on the anti-drug campaign, the 14-page indictment said.

Seifert allegedly ordered 16 subordinates to change past timecards to increase the hours that could be billed to the federal government, and she and Early told employees that, in the future, they should report that they had worked a specific percentage of their time on the ad campaign, whether or not they had, the indictment said.

A lawyer for Early, 48, of Rockville Centre, N.Y., said he intends to fight the charges. "Sometimes the government gets it wrong. . . . We expect Mr. Early to be fully vindicated," said the attorney, Laurence Urgenson. An Ogilvy spokesman said Early's status at the firm is "under review."

Seifert, 43, of Southport, Conn., issued a statement saying, in part, "I am innocent of any wrongdoing. I will contest these charges. I know I will be exonerated." She is now president of TBWA\Chiat\Day, another prominent New York agency.

The 11-count indictment did not put a dollar value on the scheme, but sources familiar with the case said the allegedly false bills added up to "hundreds of thousands of dollars."

Complaints about billing problems in the ad campaign have been around since mid-2000, and the allegations gathered steam in 2001 when the General Accounting Office questioned more than $7 million of the Ogilvy charges. In 2002, Ogilvy agreed to repay the federal government $1.8 million.

"We were unprepared for the complex and unique federal record-keeping requirements of that type of contract," the firm said in a statement yesterday.

The statement also said that Ogilvy redesigned its billing system and cooperated extensively with government investigators. After making the changes, the ad giant also won another $150 million annual contract to continue working on the anti-drug campaign.

The firm also said, "If [the charges against Seifert and Early are] true, their behavior was inconsistent with the high standards the company promotes and maintains."

The White House anti-drug office announced last fall that it would put the advertising contract out for bid again later this year, and some legislators are seeking to bar Ogilvy from the competition.

"It really bothers me that money that was supposed to be used to prevent drug use among our young people appears to have been misused by an ad agency, and yet this agency gets a slap on the wrist and a pat on the back, 'here's another contract,' " said Sen. Byron L. Dorgan (D-N.D.).

Tom Riley, a spokesman for John P. Walters, the White House's drug policy director, noted that all of the allegations date back to the Clinton administration. "The types of abuses alleged here wouldn't be possible today. Since that time, stronger accounting procedures and greater oversight have been applied," Riley said.

The indictments come at a time when the often-controversial anti-drug media campaign had been enjoying some good news. After years of criticism that the expensive and high-profile ads had little effect, a comprehensive University of Michigan survey released last month found sharp reductions in teen drug use over the past two years. The report's authors credited the campaign's ads discouraging use of ecstasy and marijuana with helping fuel especially large reductions in the use of those two drugs.

Early and Seifert are scheduled to appear in court Wednesday.