The pleas covered charges brought in May as well as additional charges announced today by the Justice Department in U.S. District Court for the Southern District. Sentencing is set for March 4, 2003.
Payment to Grey Global
According to the plea agreement struck by the Justice Department and Ken Kaplan, a lawyer for Mr. Ergulec and Color Wheel, Mr. Ergulec will pay restitution totaling $1.5 million, allocated as follows: $1.1 million to advertising company Grey Global Group; $200,000 to Impact Communications; $100,000 to Brouillard Communications; and $100,000 to Viacom. The amount of other fines has not yet been determined.
As part of the plea agreement, a prison sentence of 37 to 46 months for Mr. Ergulec is being recommended by his counsel.
Before U.S. District Judge Thomas Griesa, Mr. Ergulec, 58, pleaded guilty to charges made in May of mail fraud, while Color Wheel pleaded guilty to participating in a bid-rigging and contract allocation
New charges Mr. Ergulec and Color Wheel pleaded guilty to include paying kickbacks of cash, checks and goods and services to employees of Grey. According to court papers, Mr. Ergulec paid a senior executive of Grey Global monthly cash payments in amounts that sometimes exceeded $10,000.
Mr. Ergulec also pleaded guilty to conspiring to defraud the Internal Revenue Service and agreed to file amended tax returns for the years 1999 to 2001, and will also pay back taxes.
Other charges involved conspiracies in which Mr. Ergulec and his company defrauded Grey clients through separate phony billing schemes. In one scheme, Grey employees participated; in another, participants included Ivan Glick, an independent sales agent primarily representing Color Wheel; a purchasing agent at Impact Communication, an advertising agency in Manhattan; and Lawrence Scaglione, a former purchasing agent at WPP Group's Brouillard Communications; and a purchasing agent at TDI Winston Network, a media shop now owned by Viacom.
Mr. Scaglione last month pleaded guilty to 18 charges of conspiracy, commercial bribery, mail fraud, witness tampering and tax evasion charges. Mr. Glick pleaded guilty in March to charges of conspiring to defraud the U.S., tax evasion and antitrust violation.