Several large agencies have been contacted by the Department of Justice in connection with the investigation, which is centred on allegations of billing fraud.
Well, well, so it apparently was not bad enough that the industry is labouring to emerge from its worst recession in decades while at the same time struggling to figure out how to communicate to consumers distracted by terrorism, war and economic setbacks. Now along comes the spectre of scams against clients that may have cost them uncounted millions and undermined the faith in their agency relationships. What next, locusts?
So far, two agencies, both in New York, have acknowledged being contacted in the investigation - Grey Worldwide and Bates Worldwide - and both have declared they intend to co-operate. The inquiries have already resulted in the arrest of one man, Mitchell E Mosallem, who quit his post last December as the head of print production at Grey.
The attorney for Mosallem, who held the title of executive vice-president and director of graphic services at Grey (and was the chairman of the print production committee of the American Association of Advertising Agencies), says he will fight the charges of conspiracy to commit mail fraud. In the meantime, Mosallem is free on bail of $1.5 million.
No-one is speculating, at least out loud, anyway, how much money may have been involved in the alleged scam, which the Department of Justice contends that Mosallem, along with unidentified co-workers at Grey and employees of at least four outside print services vendors to the agency, carried on for a decade. But in the Government's complaint, it's estimated that from February 1998 to July 2000, "false and fraudulent invoices
led Grey's clients, such as Procter & Gamble, to lose $500,000 to the schemers.
For the longest time, gossip has spread from one agency to another - no names, please, at least until the indictments are unsealed - that top executives in print production departments were thisclose with their counterparts at certain preferred production companies. It has been standard operating procedure for vendors to offer enticements to the agencies with whom they work, typically along the lines of tickets to sports events and hit Broadway shows, and then up to the agency's print production employees to determine what is a perk and what is a bribe. The dark cloud hovering above this case is the particulars of the purported billing, which go far beyond a pair of choice seats on the aisle for The Producers: padding bills for graphic services in order to overcharge advertiser clients and line the pockets of the employees at their agencies.
Concrete measures taken include an internal review by Grey of how its print production procedures operate as well as the hiring of Deloitte & Touche to initiate what's been described as "a comprehensive and independent assessment
of Grey's print production department. Maybe the Andersen employees losing their jobs can get work from the agencies that soon will want Good Bookkeeping seals of approval from accountants.