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Feb. 26, 2001

By Laura Petrecca

On Wednesday, Oct. 18, executives at Dallas ad agency Berry Brown were preparing for perhaps the most important meeting in the company's 23-year history. A small agency tucked in a third-tier ad market, Berry Brown had always kept a low profile. But its blue-chip client list caught the eye of a suitor, the global marketing powerhouse Publicis. The French holding company was in

Rather than turn over financial records, a Dallas ad executive killed himself on a ranch maintained with embezzled agency funds.
the late stages of negotiations to acquire Berry Brown, and the meeting that day was crucial to the transaction.

As keeper of Berry Brown's books, Philip Schieber was an integral player in the talks. He was scheduled to attend the meeting in Dallas to relinquish financial documents. But the 38-year-old chief financial officer wasn't in his office that morning. Instead, he was 92 miles north at his Oklahoma ranch, steeling himself for a grimmer task.

Schieber calmly toured his sprawling estate that morning before returning to its main house. He poured a glass of Crown Royal, skipping his usual Sprite mixer, then another. After polishing off two-thirds of the bottle, he walked outside, settled under

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a small tree just yards from the front door and placed a 12-gauge pump Mossberg shotgun under his chin. Then he pulled the trigger.

After Schieber's body was discovered by a ranch hand the following morning, local police also found a message on his home answering machine, left on the day of the suicide. Verdie Horton, who worked in the accounting department, was trying to determine where Schieber was and why he hadn't shown up at work.

Embezzled $6.25 million
By the time Schieber's body was found, agency executives already suspected the answer. A subsequent audit confirmed the CFO had embezzled $6.25 million from company coffers. In a letter to creditors, Berry Brown President Jim Hradecky wrote, "The chief financial officer committed suicide about the time we would have discovered his deplorable actions."

Agency employees were first informed only of the suicide. Later, they learned of the embezzlement. Then came the third blow: On Nov. 15, Berry Brown shut its doors.

In accounting terms, Schieber's crime is known as defalcation. In human terms, it took a young life, toppled a 23-year-old business and upset the careers and lives of 49 co-workers.

Philip Schieber stole $6.25 million from the agency.

Two months after Schieber's death, the physical assets of the firm were auctioned off to the highest bidders. His personal property -- including the ranch in Oklahoma, a luxurious residence in Dallas, flashy cars, cattle and thoroughbred racehorses -- was put on the block to remunerate the agency and its creditors. Even the $400 suicide weapon was requested from the Oklahoma police for resale. In the end, Berry Brown will be lucky if it can recoup a third of what Schieber stole.

49 co-workers lost jobs
The 49 employees who found their lives upended when Schieber took his own life were the same people who often turned to him for personal advice about financial planning and retirement. Even after his betrayal, they remained loyal to the agency -- many volunteering to work without pay during the final weeks. Those in the Dallas ad community say the staff's dedication was a testament to the nurturing management styles of Hradecky and Bob Berry, the agency's founder and chairman.

"Jim and Bob are the two men in the world of advertising who represent integrity," said former Berry Brown art director Susan Hanssen. "That's why this whole thing is so painful."

Berry Brown's work for Quaker Oats, Aunt Jemima and Jimmy Dean brands drew Publicis' attention.

By manipulating client payments to media outlets, the CFO was able to siphon off millions from the ad agency. Payment from clients such as Quaker Oats Co. would be forwarded to Berry Brown so the agency could pay the marketers' media bills. But Schieber didn't always pay those bills; instead, he would funnel funds through a money market account he had secretly set up in Berry Brown's name. He would then write checks from that account to phony corporations he controlled, such as MAP Investments. The clients didn't have contact with the media outlets; as per the custom in advertising, the agency acted as a middleman.

Juggling creditors
"The way he juggled things around kept creditors at bay," said William Siegel, one of Berry Brown's attorneys.

Schieber, a computer whiz, kept two sets of records. The set he would show Hradecky and other agency executives had Berry Brown making its media payments on time. In a second, private set, a portion of the money was going to Schieber's self-created entities. According to court documents, in the 45-day period leading up to his suicide, Schieber wrote five checks to MAP on the money market account totaling $150,000.

While it seems remarkable that one individual could take $6.25 million from a company that did about $6.5 million in annual gross revenues, financial experts say agencies are particularly vulnerable to embezzlement schemes.

"So much money passes through agency hands because of media bills," said Abe Jones, an investment banker specializing in advertising. "There are all different ways a scheming financial executive can take some money out. We've been involved in some agency bankruptcies where the amounts of money owed to media is extraordinary."

Schieber began to take money a little at a time. He kept a tight reign on financial controls, while the agency ran at what management believed was a

The interior of Schieber's home in Dallas was like 'a page from Better Homes & Gardens.'
profitable level. Other members of the firm didn't receive phone calls about late media payments; Schieber had constructed -- and vigilantly enforced -- a system that funneled all questions regarding payments through him.

Management vulnerability
Berry Brown's vulnerability can be traced to its management hierarchy, which divided responsibilities among three principals: Schieber, Hradecky and Senior Vice President-Media Director Sharon Griesing. Hradecky was responsible for creative output. Griesing was responsible for media placement but didn't handle the financial side of the buys. Because of his tenure, as well as his financial and technical savvy, Schieber was given control over Berry Brown's accounting and computer systems.

And his partners trusted him. The three principals had worked closely for years. Hradecky joined the agency in 1992; Schieber and Griesing had been there since the 1980s. At the end of 1997, the three banded together to buy the majority interest in Berry Brown from Bob Berry. Hradecky became the largest shareholder, with Griesing and Schieber as minority partners. Schieber's stake was 11%.

"I felt like I had people in place that could carry the agency forward," said the 74-year-old Berry, an avuncular ad veteran who's now retired. "Jim, Sharon and Phil were excellent candidates. Phil was an integral part of the planning, especially from the financial end."

Scheme unravels
Schieber's scheme began to unravel when Publicis came calling, drawn by Berry Brown's Quaker Oats business. Following a year of acquisition discussions, Publicis, which already operates an agency in Dallas, moved forward toward the end of 2000 to buy Berry Brown. Publicis wanted to get on with due diligence, but Schieber, who had been against the merger from its inception, began stalling when asked to turn over the company's financial records. On Oct. 17, the day before he shot himself, Schieber had lunch with Publicis auditors. He turned over some financial documents, promising more the next day.

But Schieber knew he was running out of time. And once it was clear his double-dealing days were over, he climbed into his Suburban and made the two-hour drive north from Dallas to his Oklahoma property.

Ranch hand Jim Pratt was surprised to see Schieber on a weekday morning. The CFO had previously only visited the estate on weekends. His boss, though, acted as if nothing were amiss. Carrying a cup of warm coffee, he greeted Pratt and the pair walked the estate together. Schieber asked Pratt to come back later and drop off feed for the animals. Schieber also said he'd be back at the ranch the upcoming weekend.

Dead on lawn
When Pratt arrived that evening with the feed, he noticed his boss lying under a tree, but he decided not to disturb him. When he returned the next morning, he saw Schieber in the same spot, dressed in the same clothes. That's when he called the police.

Later that week, Berry Brown lawyers filed an injunction to freeze Schieber's assets. In the next few months, his property would be put up for sale. His Dallas home was placed on the market for $459,000 at the end of December (by late February, it still hadn't sold). His farm equipment, including three John Deere tractors that ranged in price from $39,000 to $50,000, was sold for thousands less than their value. His cattle and racehorses, costly to feed and care for, were sold immediately at a dramatic loss.

Schieber's high living and frivolous spending didn't leave the agency much to recoup. Back-fence talk among Love County residents says that when police searched his house after the suicide they found $30,000 to $40,000 in cash, but only a $7,000 balance recorded in his check book. His current estate is said to be valued at about $1.25 million. Berry Brown should also receive a $500,000 tax refund and $50,000 in insurance money.

"It's very difficult to collect from someone who embezzles from you," said Berry Brown attorney Siegel. "Obviously when you auction stuff off you don't get as much money as you'd like."

Holiday gathering
On Dec. 16, Hradecky hosted a holiday gathering for former employees at his Dallas home at his own expense. The guests didn't talk much about what happened. Instead they spoke about moving on. By then, most of them had found new jobs, many with the help of Hradecky and Berry. Dallas marketing agency Slingshot hired Angela Carrales and eight others from the Berry Brown's Hispanic division. Hradecky, Griesing and another seven employees landed jobs in the Dallas office of ad agency Fogarty Klein Monroe.

"The worst part was we really thought the agency was going to pull through," said Carrales, the former managing partner of the Hispanic division. "We lost a way of life, a way of working that you just can't replicate. It was a horrible thing that happened, and for Jim and Sharon [who are dealing with the legal aspects], it continues. For my team, and me, we can move on, and it won't haunt us for the rest of our careers. We can focus on the happier times and what we've learned."

Hradecky still won't talk openly about anything that happened. Berry is more candid about his pain, saying the suicide and deception still haunt him.

"Jim and Sharon will work things out. I will, too," he said. "But it is like a period of mourning. This is the second most devastating thing that happened in my life. The first was the death of my wife three years ago.

"The one thing I regret is not being able to sit down and talk to him and say, 'Can you just tell me why? Just tell me why.'"

Copyright February 2001, Crain Communications Inc.

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