Six indicted in production scandal

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The federal government's long-running investigation into conspiracy and price-rigging schemes in the print-production industry resulted in federal grand-jury indictments last week of two advertising-agency employees, as well as three others connected to graphic-supply companies.

Last week's indictments bring into sharp focus federal investigators' interest in Manhattan-based supplier of graphic services The Color Wheel and its dealings with clients, including ad agencies. The probe was underway in December 2000, when investigators searched Color Wheel's offices. Eventually investigators were led to Mitchell E. Mosallem, former exec VP-director of graphic services for Grey Global Group's Grey Worldwide, New York, who was arrested March 21 on charges of mail fraud and invoice padding.

price-rigging charges

On May 16, Mr. Mosallem was indicted in U.S. District Court, Southern District of New York, along with Color Wheel; its founder and owner Haluk Ergulec; Birj Deckmejian, a salesman employed by Color Wheel; and John Ghianni of Fort Lee, New Jersey, a salesman of an unindicted graphic-supply company. The defendants are charged with conspiring to rig bids and allocate contracts for the supply of retouching and separation services purchased by Grey on behalf of one of its clients. They are also charged with conspiring to defraud certain Grey clients in a phony-billing scheme, according to documents issued by the Justice Department.

Lawrence Scaglione, a former purchasing agent at WPP Group's Brouillard Communications, was indicted May 14 on 17 counts of "conspiracy, commercial bribery, mail fraud and witness tampering as part of his receipt of kickbacks from graphics-services vendors." Documents issued by the U.S. attorney, Southern District of New York, say the indictment charges Mr. Scaglione with three conspiracies related to a particular printing-vendor salesman who conspired with Mr. Scaglione. In an arraignment on May 16, Mr. Scaglione pleaded not guilty. He was released on bail after signing a $100,000 personal-recognizance bond.

charges of fraud

At the time of Mr. Mosallem's arrest, he was released on $1.5 million bail. A complaint filed by the U.S. Justice Department's antitrust division charged him and an unidentified executive of an unnamed graphics supplier with conspiring to defraud Grey clients by padding invoices. Mr. Mosallem's attorney said then his client intended to defend himself against the charges. Calls to Mr. Mosallem's attorney were not returned by press time.

Ken Kaplan, the attorney representing Haluk Ergulec and Color Wheel, said in a prepared statement last week: "The charges against Haluk Ergulec and The Color Wheel are without merit, and I fully expect them to be exonerated when the facts of this case are revealed." Messrs. Mosallem, Ergulec, Deckmejian and Ghianni are scheduled to be arraigned today.

A spokesman for Brown & Williamson Tobacco Corp., named in court papers as one of Grey's clients defrauded by the alleged scheme, declined to say whether the company was contacted by authorities. B&W continues to work with Grey, which says it's cooperating with authorities.

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