Criminal Investigation Continues

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WASHINGTON (AdAge.com) -- WPP Group's Ogilvy & Mather has settled civil charges with the U.S. government stemming from its work for the White House Office of National Drug Control
White House Office of National Drug Control Policy logo
Policy that requires the agency to pay $1.8 million.

The Justice Department said today that Ogilvy will pay $689,744 in cash and then cut its reimbursement by $1,150,256 to cover costs that should not have been billed to the drug office. The accord was reached last week and reported in Monday's edition of Advertising Age, but details of the settlement weren't released until today.

"This settlement illustrates the U.S.' determination to recover funds inappropriately billed on government contracts," said Robert D. McCallum Jr., assistant attorney general for the Civil Division.

The civil investigation was conducted by several federal offices including the U.S. Attorney for the District of Columbia and the investigative arm of the Defense Contract Audit Agency. A separate criminal investigation by the FBI and U.S. Attorney for the Southern District of New York, over whether Ogilvy time sheets were improperly altered by employees, continues.

Shop can recoup billings
While the settlement

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is more than double the $850,000 Ogilvy had previously said it couldn't properly document, the agreement apparently means the agency can finally get most of the disputed $7.8 million in billings that the drug office has been withholding from the agency since 1999.

The settlement requires Ogilvy to pay the $689,744 immediately then compile a new certified accounting of its 1999 and 2000 bills, minus the $1,150,256.

'Knowingly' submitted false claims
Under terms of the settlement, the Justice Department alleged that Ogilvy "knowingly" submitted false claims for labor hours in both 1999 and 2000; Ogilvy neither admitted nor denied the government claims but agreed to settle to "avoid the delay, uncertainty, inconvenience and expense of protracted litigation of these claims."

Ogilvy won

The White House Office of National Drug Control Policy (ONDCP), a component of the Executive Office of the President, was established by the Anti-Drug Abuse Act of 1988. The principal purpose of ONDCP is to reduce illicit drug use, manufacturing and trafficking, drug-related crime and violence, and drug-related health consequences.
the drug office account in 1998 and took over the $152 million account in 1999 without having met government standards regarding its accounting system. While Ogilvy's creative was praised, its billing practices came into question.

A congressional hearing and a General Accounting Office report charged that Ogilvy employees changed time cards to inflate charges.

The accounting problems ranged from Ogilvy not providing proper documentation to the shop billing for costs the government doesn't allow. More than a year ago, the agency acknowledged that it couldn't adequately document $850,000 in bills it had sent the government.

Account in review
Under congressional pressure, the drug office put its account in review. A decision is due early next month. Ogilvy, which created Drug Office ads for the Super Bowl, is participating in the review. A resolution of the case was viewed by many as a necessary precedent to Ogilvy's attempt to keep the account.

Ogilvy last week issued a statement regarding the agreement.

"Ogilvy was a first-time federal contractor, and although we outperformed the contract and underbilled the [drug office] for our work, we recognized our responsibility for our billing mistakes, and cooperated fully with the government to resolve them."

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