California Lottery: Exec at McCann cries collusion

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The long-running saga of California Lottery's five-year, $125 million advertising account took another serious twist last week as an executive at Interpublic Group of Cos.' McCann-Erickson Worldwide accused another agency contender of collusion.

At the same time, documents filed with the state have raised questions about whether McCann, the latest apparent winner in the bid, failed to meet lottery rules covering disclosure of ownership and must be disqualified.

Ian McGregor, general manager, McCann, Los Angeles, said in a declaration submitted to the lottery and obtained by Advertising Age that he received a telephone call from John Crosson, president of Grey Global Group's Grey Worldwide, Los Angeles, the incumbent on the account. In the declaration, he said Mr. Crosson asked him to withhold McCann's revised media bid in the hopes that the lottery would be forced to call a new, third pitch process from scratch.

In his declaration, dated March 24, Mr. McGregor said, "Mr. Crosson proposed that McCann join Grey and DDB Worldwide in refusing to submit revised cost sheets as called for" by the lottery. "Mr. Crosson suggested that McCann not submit a cost bid so that there would be no participating bidders other than FCB in order to present a stronger case that the Lottery must recommence the bid process completely anew," the document reads. In the declaration, Mr. McGregor said he "unequivocally rejected Mr. Crosson's extraordinary proposal."

A second document was sent to the lottery earlier this month from Ian Beavis, who last week left his post as president-CEO of the San Francisco office of Interpublic's Foote, Cone & Belding Worldwide. The document alleged Mr. Crosson and Rick Carpenter, president, Omnicom Group's DDB Worldwide, Los Angeles, discussed a suggestion by independent agency pitch consultant, Mike Marsak, president-CEO, Effective Marketing Strategies, Surprise, Ariz., to act as arbitrator between the lottery and the agencies and ensure the bidders would be compensated.

crosson denies claims

When called for comment, Mr. Crosson said, "I categorically deny the claims made by these two agencies." Mr. McGregor's attorney, J. Michael Stusiak, said "we would not have made the submission if not true." Mr. Carpenter did not return calls. Mr. Beavis said he had no comment.

DDB's attorney, Richard Pachter, said "Any allegation or statement that DDB colluded with anybody is false, is defamatory, and is made with an attempt to divert attention away from the real issues." Mr. Pachter said he is demanding a retraction from Mr. McGregor.

Lottery executives declined to comment.

Mr. Marsak, in an interview, said he initiated on his own an attempt to get the four shops and the lottery into a binding arbitration agreement. "I couldn't get any of them [the four agencies] to agree," he said. He never called the lottery with his plan, and then gave up, he said.

latest round

The statements are part of the latest round of bitter protests surrounding a review that began in fall 2001. Originally, DDB was declared the apparent winner. Incumbent Grey Worldwide protested, charging that DDB failed to properly disclose ownership of its media arm, OMD.

The lottery responded by calling a new review in fall 2002. This time, FCB was declared the winner. DDB, however, filed a protest regarding the media costs submitted by FCB and partner Initiative Media, also part of Interpublic. Instead of calling for a third pitch, the lottery decided to rebid only the media portion of the contract.

Grey and DDB declined to submit media bids. FCB submitted a bid via fax and was disqualified when the lottery ruled hard copies were required. As a result, McCann was declared the successful bidder and the formal naming of the agency was set for the lottery's April agenda.

There are other controversies surrounding the review. DDB, in a formal protest to the lottery, claimed FCB and its media partner, Initiative, submitted a lowball media bid in order to win a round of the pitch. In a March 4 letter to Lottery Director Joan Wilson, DDB attorney Mr. Pachter said the state's "fair and reasonable pricing requirement should preclude bidders from submitting below-cost proposals."

DDB has demanded an audit of the FCB and Initiative media proposal.

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