MCI in late August filed with the American Arbitration Association to recover fees it felt were charged in error, based on an audit with LLT that showed discrepancies in ad billings.
A week after MCI filed, LLT filed its own charges with the arbitrator, alleging defamation, discrimination and unfair business practices, in addition to demanding payment of $6.7 million that LLT says it is owed in commissions based on past billings from MCI.
The charges and countercharges are in the initial stages of arbitration and aren't expected to be settled before yearend.
LLT'S CLAIMS `UNFOUNDED'
"We filed for arbitration first because...we discovered there were funds that needed to be recovered from LLT," said Michael Tierney, senior manager-public relations for MCI. "Not until after we filed for arbitration did LLT file its unfounded claims of discrimination and defamation. ...We feel strongly that we'll be vindicated."
MCI ended its relationship with the agency after going into arbitration, and has put into review its estimated $15 million Asian-American account. MCI invited a "half dozen or so" U.S.-based agencies to submit initial proposals that were due back to the telecommunications giant Sept. 20; a decision is expected by mid-October.
MCI currently uses three shops for its Asian-American business. Admerasia, New York, handles marketing to Chinese, Vietnamese and Japanese; InfoPacific, New York, handles the Asian-Indian market; and Park & Foster, Los Angeles, concentrates on Korean marketing.
Admerasia and Park are participating in the review. While Admerasia has been handling MCI's marketing to Vietnamese consumers since 1995, it didn't add Chinese and Japanese consumers until LLT was dismissed.
LLT co-founder Joe Liu joined Admerasia in late 1994 and is currently managing director of the agency. Park has been handling Korean work for MCI on a project basis since 1994.
MORE TROUBLES FOR LLT
Jennie Tong, co-founder and current CEO of LLT, also is embroiled in a lawsuit with InfoPacific President-CEO John Steere, who formerly served as LLT's general manager. The suit claims he violated fiduciary duties and a non-compete clause in his previous contract with the agency. The case is pending trial in Supreme Court, county of New York, state of New York.
Mr. Steere left LLT in 1993 to found InfoPacific.
"There's absolutely no basis for her lawsuit against InfoPacific; it's frivolous. [Ms. Tong] didn't even compete for MCI's Asian-Indian work that" InfoPacific handles, Mr. Steere said.
Since losing the MCI business, LLT has let go of about 20 employees, said Ms. Tong. The agency currently has 40 employees and clients including Charles Schwab & Co., Bell Canada and Hong Kong Bank. Total billings were not disclosed.
"MCI is acting like the 800-pound gorilla," said Howard Squadron, senior partner at the law firm representing LLT. "Claiming audit errors and abruptly ending their relationship can only serve to undermine LLT."
MESSNER VETERE NOT IN REVIEW
MCI agency of record Messner Vetere Berger McNamee Schmetterer/Euro RSCG is not in the Asian-American review.
The agency does handle Russian, Polish and Arabic marketing, as well as marketing to Hispanics through a strategic alliance with Los Angeles-based La Agencia de Orci & Asociados.