The World: Trial that shook advertising and its practices

Industry observers believe Shona Seifert and Thomas Early were indicted merely for being in advertising.

Shona Seifert and Thomas Early are two names destined to go down in the annals of advertising history. Though, unfortunately, not for the reasons they would have liked.

On 22 February 2005, Seifert, a former senior partner and executive group director of WPP's Ogilvy & Mather, and Early, the company's former finance director, were both convicted of instructing their employees to falsify timesheets to cover a $3 million shortfall in revenue.

The pair were found guilty of all ten counts of plotting to overbill the White House's Office of National Drug Control Policy, the body responsible for advertising campaigns designed to persuade teenagers to stay away from drugs. Sentencing is set for 16 May, and they face potential sentences of either five years or a fine of $250,000 for each count. Both intend to appeal.

The case stems from events in July 1999, just before Ogilvy & Mather sent its White House client its first bill. At that time, Ogilvy executives discovered the agency was projected to spend around $3 million more servicing the account than it would make in revenue, even though billings were around $150 million a year.

The prosecution's case was that Seifert and Early instructed 16 Ogilvy staffers to resubmit their timesheets with increased hours billed to ONDCP owing to "careerism and greed". Much was made of an e-mail in which Seifert promised to "wring the money out of" the ONDCP, and 16 former employees testified that they had been told to falsify timesheets.

The defence focused on character and argued that the lax way the advertising industry conducts its business was as much to blame for anything, along with the sheer size and complexity of the ONDCP account; one that, it argued, had confused Ogilvy executives. In the end, almost 600 employees, more than one million documents and more than 300,000 e-mail messages were involved in the case as part of what prosecutors called the "breathtaking" scope of the government's investigation into Ogilvy billing practices.

Never indicted itself, in 2003 Ogilvy paid $1.8 million to settle civil fraud charges.

The judgment is one that has sent shockwaves through the US advertising industry and, it is generally agreed, is likely to ensure agencies and clients alike will demand more transparency in how accounts are billed.

According to the American Association of Advertising Agencies, inappropriate billing is rare. "Everyone is talking about it and wondering, how did that happen at Ogilvy?" one observer from Universal McCann says. "It's a real wake-up call. We checked our own audits, and it's certainly not happening here."

Some US marketers, such as Procter & Gamble, have an incentive system that bypasses any fee disputes by paying agencies a percentage of sales for their brands rather than compensating them based on media or media spending. And many people think this latest case will only increase this trend. But within the industry there is a groundswell of opinion that Seifert and Early were indicted for being in advertising, rather than for committing any particular crime.

"Nothing good will come of this," another commentator at one of New York's biggest agencies warns. "People already have a negative impression of advertising, which is already under scrutiny. This raises the bigger question about procurement, how advertising agencies get paid for an idea and touches on the whole issue of compensation, at which clients are bound to take a closer look.

"We just sent out a reminder about due diligence, about confidentiality, about e-mails and taking time to do timesheets, and that's all we can do."

Seifert, 43, who according to observers apparently captivated the jury - although obviously not enough - with her "soft English accent", grew up in a self-described "boring family" in Surrey. Intrigued by global business, she got a degree in international marketing from London University.

Her first job was at Nestle in Frankfurt, helping to market stock cubes.

She joined Ogilvy & Mather Worldwide and rose through the ranks in positions that spanned five continents and numerous business sectors, working on accounts such as BMW and AT&T.

Seifert moved to Ogilvy New York from Singapore in the early 90s, reporting to Bill Gray and Rick Boyko, the co-presidents of Ogilvy New York. She ran the ONDCP account when it was won in 1998.

In January 2002, she took over as the president of Omnicom's TBWA\Chiat\Day in New York, and was largely responsible for bringing in the Nextel Communications account. TBWA\Chiat\ Day, which declined to comment on the indictment, privately said she would not be coming back. In August of 2004, TBWA brought in Brett Gosper as the president over her head. Early left Ogilvy in 2004.

A statement from the agency merely said: "Many of the events described during the trial are completely inconsistent with Ogilvy's core values ... We have no other comments on the verdict."

Seifert, meanwhile, was once quoted as saying: "What we've really got to get people to think about is thought leadership and really deliver disruption in the marketplace for our clients." At the time she was unaware of how prophetic those words would be.


December 1998: Ogilvy wins $145 million contract to redesign

aspects of the ONDCP national media campaign

Spring 1999: Ogilvy realises it's projected to spend around $3

million more servicing the account than it would make in revenue

June 1999: Ogilvy New York's president, Bill Gray, learns of the

shortfall, orders Seifert and Early to "get a fix on" the revenue

July 1999: O&M sends the first bill on ONDCP to White House

August 2001: Federal probe launched into ONDCP

January 2002: Seifert joins TBWA\Chiat\Day as president of New York


February 2002: Ogilvy pays $1.8 million to settle civil suit

charges related to the matter

August 2004: TBWA brings in Brett Gosper over Seifert's head

September 2004: Interpublic's Foot Cone & Belding wins the ONDCP account

from Ogilvy

January 2005: Seifert goes on paid leave

1 February 2005: Trial begins

22 February 2005: Seifert and Early indicted on all ten counts