CHICAGO (AdAge.com) -- Leo Burnett will pay $15.5 million to settle allegations that it overbilled the U.S. Army for work on its "Army of One" campaign, the Justice Department announced today.
The suit was a result of whistle-blowing by two former Burnett employees. Among the allegations in the lawsuit, filed in 2004: Burnett was treating the work of its own internet unit as if it was performed by a third-party contractor, as well as inflating the costs of subcontractors it worked with, in order to increase its profits.
"The American people trust us to ensure their tax dollars are spent appropriately and we will continue to aggressively seek out and investigate those who intend to defraud the Army and the American taxpayer," said Brigadier Gen. Rodney Johnson, commanding general of the U.S. Army Criminal Investigation Command, in a statement.
Burnett in a statement denied any wrongdoing and noted that it did not admit any liability as part of the settlement. "Leo Burnett strongly denies the claims in this civil proceeding and believes the government's claims have no merit," Burnett CEO Tom Bernardin wrote in a memo to the agency's staff that was provided to Ad Age by an agency spokeswoman. "In fact, we seriously considered fully litigating the matter. But litigation can be a long, expensive and uncertain process, and the time devoted to the lawsuit would be better spent serving our clients and managing our own growth."
As a result of agreeing to a settlement, Burnett avoids the risk of being barred from future government contracts.
The agency also noted that the amounts involved had been previously accounted for and therefore would not have any impact on the earnings of its parent, Publicis Groupe.
The whistle-blowers, ex-VP Greg Hamilton and ex-Comptroller Michelle Casey, will receive a $2.79 million share of the settlement.
As part of the settlement, the government is joining the settled civil whistle-blower lawsuit rather than seperately pursuing its own civil or criminal case, effectively ending the matter.
Burnett had the U.S. Army's ad account from 2000 through 2005. Though the suit was filed in 2004, Burnett did try to defend the account in a review that took place in 2006 but ultimately lost the $1 billion account to Interpublic Group of Cos.' McCann Erickson.~ ~ ~
Ira Teinowitz contributed to this report.