LEGEND BEFORE THE FALL: THE DESCENT OF ALLY & GARGANO (PART 2/2)

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December '94, said Mr. Luceno "had not been able to build a relationship with any client or anybody at the agency."

Mr. Luceno's style seemed to fracture the agency itself, Mr. Taber and others said, giving it nothing or nobody to hold the pieces together. There were clients and account teams, but no organization with cohesion, vision and direction.

Account teams operated almost more like units of their clients than of the agency, in large part because Mr. Luceno didn't have good relationships with the clients, said Mr. Tannenbaum, who was senior VP-creative director on the Bank of New York account until he left in April, when the account went into review.

"The accounts were tightly held by people outside the agency's upper management. One or two creatives and one or two account guys held the relationship together," Mr. Tannenbaum said.

In fact, several of those people are with the same clients at different agencies today. Scott MacLeod, who was management director on Bank of New York for Ally, now works for the bank at DDB Needham Worldwide. Bob Piwinski works on Lorillard at Saatchi & Saatchi unit Compton Partners. Mal MacDougall Jr. works for Compar Inc. at Altschiller & Co., and Mal MacDougall Sr. works on the New York Daily News at Christy MacDougall Mitchell.

Mr. Luceno is not without his defenders. "He made a good try, but he didn't succeed," an ex-worker said, adding that, to be fair, Mr. Luceno had made the financial dealings of the agency his main priority as CEO.

But when Ally President Warren Dechter left the agency in February 1994 and returned to MCA, Mr. Luceno had to take on a much greater role in client service. By then, many of the client relationships were already showing strain.

Mr. Luceno chose not to respond to specific criticisms but said, "You win as a team, you lose as a team. If people want to rip me, they can rip me."

Mr. Dechter couldn't be reached. Nor could Mr. Ally, and Mr. Gargano wouldn't comment on specifics regarding his old agency's problems.

As the end of 1994 approached, Ally was struggling, but it still had big accounts on the roster, including Lorillard, Bank of New York and Dunkin' Donuts. The core agency had about $100 million in billings, with three subsidiaries adding another $150 million.

Then in December, Lorillard announced it would pull its $25 million account from Ally.

The blow was a huge one, said sources close to the agency. "Lorillard paid a lot of bills. It was a profitable account," said one. "When it left, it created a climate of uneasiness for other clients."

Lorillard wouldn't comment on its reasons for firing Ally, but sources close to the client cited creative and financial concerns. The relationship had been less than rosy for a year or longer, said one former Ally staffer. Mr. Luceno cited an ongoing difference of opinion regarding strategy.

The move left Ally with two clients with billings of $20 million or more, Bank of New York and Dunkin' Donuts. Both had been with the agency a long time, Dunkin' Donuts having helped make Ally famous. And as '94 ended, both clients were thinking of dropping Ally, said Messrs. Taber and Tannenbaum.

In anticipation of that, the two executives were looking to life beyond Ally, too.

Ally's "last chance"-as Mr. Luceno characterized it-came when troubled agency met troubled advertiser in the form of Kmart Corp.'s $175 million account review.

Ally made the finals in January. Mr. Luceno had gotten his agency into the review through a friendship with Kenneth Watson, Kmart exec VP-marketing and product development, said two ex-employees.

Some agency executives have suggested Mr. Watson was merely doing Mr. Luceno a favor by including Ally in a competition it would never win, but Mr. Luceno didn't see it that way.

Either way, in March, Kmart picked Campbell Mithun Esty, Minneapolis, a shop with a strong retail reputation, to handle its account. The retail chain threw Ally a bone with a small research project.

Things began to unravel quickly after that. H.J. Heinz Co. (Weight Watchers) put its $4 million account into review in April, as did Bank of New York with its $20 million account. The $40 million Dunkin' Donuts account stayed on until June. With each loss, more employees left or had to be let go.

Some saw their fate coming and got out early, such as Mr. Taber, who left in December 1994, sure that Dunkin' Donuts wouldn't last at Ally through the summer. Mr. Tannenbaum left in April when Bank of New York went into review. Mal MacDougall Sr., who had been relieved of duties as chief creative officer in February 1994 but stayed on in an advisory capacity, left for good in March 1995.

The rapid losses in billings had made it hard for Ally to pay bills. A public records search turned up two liens filed against Ally in June 1993 by New York City for unpaid taxes totaling almost $480,000. While as late as last week, the city showed the liens as still active, Mr. Luceno said they have been settled. He showed Ad Age a letter written by an accounting firm and dated July 13, 1995, demanding that the liens be removed.

In fact, a new lien, for $3,000, was filed against Ally Aug. 1, by the New York State Department of Taxation & Finance.

Last May, Western International Media took over media buying responsibilities for Ally's remaining clients from Ally's media subsidiary, Media Partners, Norwalk, Conn.

Ally fell behind on about $2 million in bills owed on behalf of Dunkin' Donuts, one source said. In early July, Dunkin' Donuts sent letters to media outlets saying it would begin paying for airtime directly.

GNC, Compar and BMW Tristate all have put their accounts into review since July.

"We terminated the relationship because we don't feel they have the resources to service our account," said Ron Napoli, chairman of BMW Tristate.

Other clients contacted, including Bank of New York, GNC and Dunkin' Donuts, declined to comment on reasons for leaving.

Ally may be able to pay some of its bills out of proceeds from the disposition of its three subsidiaries. It sold healthcare agency Dugan/Farley Communications, Upper Saddle River, N.J., to Bozell, Jacobs, Kenyon & Eckhardt, New York, on Aug. 7 and direct marketing agency AdDirect, Norwalk, to North Castle Partners, Stamford, Conn., on Aug. 11, for undisclosed prices. Dugan/Farley had become Ally's largest division, with $62 million in billings and 51 employees.

The third subsidiary, Media Partners, has been absorbed, essentially with no money changing hands, by Western International Media.

Sources say Mr. Luceno and Vestar talked to a number of bigger agencies in the past year or even earlier about acquiring Ally in whole, but no deal could be consummated.

Even if Mr. Luceno succeeds in paying off the agency's debts and moving forward, Ally & Gargano appears to be finished. Mr. Luceno said the retail agency he has plans for would probably operate under a different name.

That leaves some of the many employees who spent time at Ally bitter and others simply sad.

"I would like to see [Mr. Luceno] punished for destroying what was a great place to work," said one.

But others said that while the CEO has to take a certain amount of blame, Ally's problems were too big for one man to fix.

"It was an awesome place," Mr. Tannenbaum said. "You had real luminaries in all of the offices, people like Amil Gargano and Mike Tesch and Barry Greenspon."

"It's a real sad thing," said another. "It didn't have to happen."

But Mr. Anderson said the mourning comes years after the fact. "It really isn't Ally & Gargano that they're talking about. That agency ended [with the LBO in '88]. It's an agency that isn't Ally & Gargano and has some new people and didn't change its name."

Mr. Gargano agreed: "It became something else."

Joe Mandese contributed to this story.

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