In January, Ogilvy reached a settlement agreement with the Justice Department, which included a $1.8 million payment, after it was accused of overbilling the government on the original contract. In order to continue the contract, Ogilvy agreed to several conditions demanded by the Navy, which serves as contract administrator, one of which was the appointment of an "ethics adviser."
But the documents obtained last week show that the WPP Group agency had to take many other steps to avoid being barred from future government business. These included a new ethics code, a complaint hot line, changes in time-sheet procedures, a regular outside audit of its government business and reports on every ethical-violation complaint about government business.
siblings subject to rules
The requirements were also imposed on Ogilvy contractors, including sibling media agency MindShare, which buys ads under Ogilvy's $150 million a year contract with the White House Office of National Drug Control Policy.
The agreement, inked Feb. 27 by Ogilvy, came as the Navy moved to ensure that no further problems developed after the ad agency settled Justice's charges. In August 2001, the Navy told Ogilvy it had "serious concerns" about the contract.
Ogilvy has denied the overbilling accusations but said it settled to put the issue behind it. The agency said the problems resulted from it not having a government accounting system in place when it won the drug-office account. But there is a criminal investigation into allegations the overbilling was a result of Ogilvy's time cards being altered to increase revenue generated from the account.
With the account in review and Ogilvy in competition to retain it, the agency agreed to a number of immediate changes demanded by the Navy. The agency won the review in July.
"All aspects of Ogilvy's corporate and business operations shall be conducted according to an acceptable code of ethics, generally prevailing lawful and honest behavior," reads the agreement.
The ethics advisers were identified by Ogilvy in the documents as Phyllis K. Rosen, director of human resources, and MindShare's Timothy Cecere, director of human resources. "The ethics adviser shall investigate all instances of suspected misconduct related to government contracts and shall report monthly in writing the findings to Ogilvy North America's Executive Committee for management response," according to the agreement. Management is required to respond within 30 days and to quickly provide both reports to the Navy.
The agreement also requires the ethics adviser to prepare quarterly reports "of each instance of suspected and/or confirmed misconduct ... without regard to the degree to which the ethics adviser has been able ... to investigate such misconduct."
The quarterly reports have to contain "all instances of disciplinary actions for violations of the code of ethics; all known ongoing criminal investigations; all known qui tam suits [for recovery of government claims]; all known or suspected defective pricing cases; all ethics help-line calls received ... and any other matter that might affect Ogilvy's responsibility status."
Tro Pilugian, Ogilvy's president-North America, said there have been no incidents or any disciplinary actions reported by Ms. Rosen since the agreement was signed. "We don't have any issues with that," he said. He declined to elaborate further on the agreement.
The agreement helped Ogilvy win a new drug-office contract in July, but it hasn't satisfied some Congressmen and senators. In legislation to fund the anti-drug program, the House banned payments on the contract to Ogilvy after Oct. 1. The Senate has yet to act. A Navy spokesman said the Navy has not yet replied to an Ogilvy letter that requested assurance the government will reimburse money spent to buy TV time this fall.