WRG last week made public allegations that President David R. Sklaver, 43, and Chief Financial Officer Tom Fagan, 46, the other meeting attendees, misappropriated $500,000 in agency funds, leaving behind a trail of checks made out to an outside production company. WRG didn't identify the company, but Advertising Age has learned it was Mr. Siegel's SeaGull Entertainment, a syndicator and programming production company formed last November with his brother Paul.
A routine agency audit by Price Waterhouse & Co. on March 17 turned up a financial discrepancy. WRG said the checks were made out between November and January. Executives close to WRG said at least one of the check request forms contained the forged initials of Mr. Olshan.
Mr. Olshan, who was busy notifying clients and talking to attorneys last week, wouldn't respond to media inquiries. WRG attorney Russell Berman at Kronish, Lieb, Weiner & Heller, which has been handling the corporate investigation, said Mr. Olshan isn't implicated in any way.
Messrs. Sklaver and Fagan were given the option of resigning; Mr. Sklaver did so, and the agency fired Mr. Fagan after he refused to resign. Through his attorney, Mr. Fagan called the accusation outrageous and a violation of his employment contract.
Henry Siegel in 1976 founded Lexington Broadcast Services Co., a subsidiary of Grey Advertising, and bought the service with partners from Grey in 1988.
In the early days, LBS was often mentioned as a candidate to merge with a major studio to create a large-sale barter syndication company, but no deals were ever consummated. LBS filed for bankruptcy in 1991; in February 1993, it was acquired by All American Communications. Mr. Siegel left as president of All American Television last July to form SeaGull.
Electronic Media in 1993 called Mr. Siegel "an integral part of the industry's go-go 1980s" known for his "fiercely independent and sometimes arrogant manner during that time" and one of the barter syndication business' founding fathers.
There was no indication SeaGull knew of any improprieties with the checks. Neither Siegel brother could be reached at SeaGull's Beverly Hills, Calif., or New York offices late last week.
Advertising Age was told the purpose of the summer meeting was to discuss a possible alliance with the then-embryonic SeaGull. The agency then is said to have asked clients for their assessment of any potential involvement and at least one, Procter & Gamble Co., is said to have recommended against it. It was at that point, executives close to WRG say, Mr. Olshan nixed the idea of agency involvement.
The agency's finding that Mr. Sklaver was involved in the scandal was particularly stinging for Mr. Olshan, one insider said. After all, it was Mr. Olshan who brought in Mr. Sklaver as his hand-picked protege from DDB Needham Worldwide in January 1989. Mr. Sklaver was promoted to president in August 1993.
What's more, it could be a demerit on Mr. Olshan's report card with his French partners BDDP, a relationship that hasn't gone smoothly since the 1990 acquisition.
However, the French are said to approve of Mr. Olshan's handling of the current situation.
Mr. Olshan and four of his remaining top executives have set up a search committee to hunt for a new president and have also engaged Hedrick & Struggles to handle the search for a chief financial officer. Mr. Olshan will assume the responsibilities of president until a replacement is found.
While some WRG employees and clients-whose monies weren't involved, according to the agency-privately wondered if the crisis extends further, clients reached by Ad Age voiced their support.
Chase Manhattan Bank, which had conducted its own routine audit, didn't find any misappropriation of client dollars at WRG.
"It is shocking but sometimes these things do happen," said Aubrey Hawes, VP-corporate marketing. "Even though the agency is not a publicly held company, Olshan came out publicly with this and he has been totally open."
A P&G spokeswoman was more cryptic: "It is an unfortunate situation, but we feel it would be inappropriate to comment on the matter. It is an agency matter."
A Dun & Bradstreet Corp. client was more emphatic. "We have a high regard for the agency and its chairman, Ken Olshan," said William Doescher, senior VP-global communications at Dun & Bradstreet Information Services. "We will continue with the agency full force."
The $840 million agency, founded in 1966 by Mary Wells with sole client Braniff Airlines, has such blue-chip clients as Ford Motor Co., ITT and P&G. After losing some significant accounts over the past few years, the agency was seen as having stabilized itself with the addition of Mr. Sklaver and other key executives.
But it still hasn't had any important new business wins and U.S. billings have declined from $882.6 million in 1993 to $840.6 million for 1994, dropping 4.8%. Gross income was also down from $96.8 million in 1993 to $92.8 million in 1994, a drop of 4.1%.
The departure of $55 million in IBM Corp. business last year was a major blow on top of such losses over the last two years as Continental Airlines, Mobil Corp.'s Hefty bags, Miles Inc.'s Alka-Seltzer antacid, Reckitt & Colman and parts of Midas International Corp.'s accounts.
Mr. Olshan has tried to rejuvenate the agency by bringing in a new management team including Creative Director Linda Kaplan from J. Walter Thompson USA, New York, and Exec VP-Managing Partner Paula Forman. Ms. Forman who has strong ties to P&G from her days at Saatchi & Saatchi Advertising and is among those generally credited with saving the Oil of Olay account last year.
WRG also is agency of record for a portion of P&G's media buying, an area in which agency chief financial officers are traditionally involved.
Meanwhile, the agency's 14th-floor boardroom has been in constant use with crisis meetings of both top executives and the entire New York agency staff.
An April 12 memo, widely circulated to agency staff, clients and the media by Mr. Olshan explained that "although it is clear that the matter did not involve our clients' funds and funds used in the transaction have been returned, our agency had been exposed to very serious risk by individuals who took advantage of their positions of trust for personal gain ... I know you will put this unfortunate distraction aside and reach even higher to prove our backbone and resolve."
In an attempt at levity, the agency on Friday distributed to staffers T-shirts sporting a twist on the Shakespeare adage: "All's Wells that ends well." The "All's" was crooked.