"We're cooperating with the authorities in Moscow and attempting to resolve the situation," said Alex Sandberg, a public relations executive employed by London-based Cordiant, parent of the Bates Worldwide and Saatchi & Saatchi Advertising Worldwide networks. Those two shops operate the combined 4-year-old Mos-cow office.
According to local media reports, Bates Saatchi is accused of hiding more than $5.5 million in unpaid taxes and fines. However, Bates Saatchi only reported gross income of $2.4 million from Russian billings of $19.2 million last year, ranking sixth among agencies in Russia, according to Advertising Age figures.
FIRST AGENCY TO BE CITED
A number of multinational companies are believed to be in negotiations with Russia's tax authorities, though Bates Saatchi is the first ad agency to be publicly named. Other shops deny they are under investigation, though a D'Arcy Masius Benton & Bowles executive said its Moscow agency had a request for information from the tax police recently.
"Since opening our Moscow office [in 1992], we've been constantly in touch with the financial authorities, and our books have been examined every year, just a couple months ago for 1996," said Bernd M. Michael, Grey Advertising's CEO in Germany and president for Eastern Europe.
Wolfgang Slupetsky, chairman for Eastern Europe at Ogilvy & Mather Worldwide, the third-largest agency in Russia, said: "We saw to it that all our transactions are scrupulously in perfect order."
News of the Oct. 29 raid only surfaced in local media last week. Western businessmen said it appeared to mark a long-expected push by tax authorities, under pressure from the government to boost abysmal revenue levels, to focus on foreign companies as a source of cash for Russian coffers.
"They may begin targeting [foreign] representative offices because of the perception that they are more likely to pay if confronted" with demands than their Russian counterparts, a tax specialist at a Western consultancy said.
Contributing: Laura Petrecca in New York, Dagmar Mussey in Duesseldorf.