A federal grand jury in May handed down an indictment that charged Mr. Ergulec, 52, with mail fraud in connection with a scheme to defraud clients of Grey Global Group in New York. The Color Wheel was charged with both mail fraud and conspiracy to rig bids. Attorneys for the Justice Department's antitrust division in New York, which handled the case, would not comment.
In addition to Mr. Ergulec and his company, the May indictment also charged Mitchell Mosallem, the former exec VP-graphic services of Grey Global Group, with various charges, including rigging bids and signing false tax returns. Mr. Mosallem, 58, has pleaded not guilty.
Court papers obtained by Advertising Age show that earlier in his career Mr. Mosallem cooperated with Justice Department officials investigating a similar scandal. As part of his plea bargain struck in 1983, the government agreed to limit charges against Mr. Mosallem to one count of filing false tax returns for the year 1978.
According to court papers, Mr. Mosallem reported income of $43,123, although he received additional income of $28,010. The court papers do not detail where the extra income derived from. Paul Bergman, the attorney representing Mr. Mosallem today as well as 19 years ago, said "The money was described as commissions. Whether or not the commissions related to his employment, I'm not prepared to comment on at this point."
Nineteen years ago, while a senior print production executive at New York City agency AC&R, Mr. Mosallem agreed to inform the government about "any criminal acts in which [he] participated in in [the Eastern District of New York], the District of New Jersey, and the Southern District of New York" that had an impact on his personal tax returns or those of several corporations, according to correspondence between the Justice Department and Mr. Bergman.
Mr. Mosallem pleaded guilty in 1984 to signing false tax returns for the calendar year 1978. As punishment, he was required to pay approximately $45,000 in monies and penalties owed the government and sentenced to two years' probation.
Because Mr. Mosallem's case arose as part of an ongoing government investigation, U.S. District Judge Jacob Mishler agreed that the probation officer in the case would not contact Mr. Mosallem's then-employer, AC&R, of his crime and punishment, according to a copy of the transcript of Mr. Mosallem's 1984 sentencing. Mr. Bergman, Mr. Mosallem's attorney, said of his client, "When he is guilty, he acknowledges his guilt immediately, as he did in 1984. Now, he is not guilty and he is going to fight the charges."
Alvin Chereskin, the former head of AC&R well-known for his creative work on Estee Lauder, declined to comment. Mr. Mosallem and three of the agency's senior creative executives left in 1984 to open their own business, Rockmore, Mosallem, Bloch and DeLeo. Two years later, Mr. Mosallem joined Bloom Agency as director-creative services. In 1990, he jumped to Grey. A Grey spokewoman said the agency, which is cooperating in the Justice Department's current investigation, had no comment for this story.
Mr. Mosallem surrendered to federal authorities on March 21, charged with conspiracy to commit mail fraud. He resigned from Grey Worldwide, where he was exec VP-director of graphic services in December 2001. From 1994 through 2001, he also served as head of the American Association of Advertising Agencies' print-management committee.