Laurie Jinkins, administrator-community and family health in the Department of Health, said the state paid the money to Seattle shop DeLaunay/Phillips Communications, its prime contractor, which in turn handed the money over to Asher & Partners, Los Angeles, subcontractor for media buying, planning and creative. The $1.2 million was to pay 120 TV stations, radio stations and outdoor advertising suppliers for advertising that ran in January and February.
Asher has offered to pay some vendors 50 cents on the dollar, Ms. Jinkins said. DeLaunay/Phillips, meanwhile, on April 13 filed a lawsuit in King County, Wash., Superior Court against Asher and successor agencies alleging fraud and breach of contract over Asher's handling of the three-year, $15 million Washington State Tobacco Awareness Campaign. According to the lawsuit, Asher sent a fax to a radio station-which was owed money-indicating that Asher is in the midst of liquidating. The lawsuit also contends a successor agency has tried to steal the anti-smoking account.
While Asher is offering partial payment, Washington state "paid 100% of the bill, not 50 cents on the dollar," Ms. Jinkins said. She added: "We are concerned and very upset about this. We want the vendors paid."
Ms. Jinkins said the state finds itself in an awkward position because its contract is with DeLaunay/Phillips and an initial investigation indicated DeLaunay/Phillips handed the media money down to Asher. The ads the state wanted to air have, in fact, aired. "What we wanted done is done," she said.
All options are being considered, and the department is in consultation with the state attorney general, she said. "I can't comment about our legal strategy right now," said Ms. Jinkins. "But there are a huge number of options, none I can rule in or out."
Media payments for March and April have been handled satisfactorily, Ms. Jinkins said, with a new subcontractor to DeLaunay/Phillips.
A vendor that accepted Asher's 50 cents on the dollar settlement, who asked to remain anonymous, said he decided to take the reduced payment to "cut our losses."
DeLaunay/Phillips, an agency with social marketing and public relations expertise, said in the lawsuit that it partnered with Asher for creative and media planning and buying in last year's pitch for the state anti-smoking account.
Asher, founded in 1961 as Asher/Gould Advertising, handled the California Department of Health Services' anti-smoking efforts for six years. The agency lost the account last year.
Over the past year, the agency has undergone name changes and management reshuffling. Asher & Partners merged with Los Angeles shop Italia/Gal last July to form Asher/Gal. Asher/Gal reverted to Italia/Gal after Hal Asher stepped down as chairman in April. In mid-May, Italia/Gal was renamed G/F/D/M following the merger with San Francisco shop Zuckerman Fernandes & Partners. The initials stand for the shop's principals: Ken Gal, president-CEO; Al Fernandes, executive creative director, San Francisco; Bruce Dundore, executive creative director, Los Angeles; and Leah Mitchell, director of media services.
Messrs. Asher, Gal and Dundore and Ms. Mitchell were named as defendants in the lawsuit. Defendants in the suit are expected to file their responses as early as this week.
Mr. Gal said he believes he and other principals of G/F/D/M should not have been named in the DeLaunay/Phillips lawsuit. "The lawsuit has no merit in terms of most of the people named," said Mr. Gal. "It is likely to be dismissed shortly. It costs little or no money to name many people, and some people do it because they wish to get a reaction or stir things up."
He said the money involved in the suit "wasn't money that ever touched my company's hands."
Mr. Dundore declined to comment. Ms. Mitchell and Mr. Asher at deadline hadn't returned calls.
DeLaunay/Phillips said in the suit that it paid Asher for the media that had been supplied by numerous media outlets in the state. But on or about April 2, 2001, according to the suit, a Washington radio station sent a fax to DeLaunay/Phillips indicating "Asher & Partners had hired a consultant to help liquidate their agency."
In addition, the suit charges Mr. Dundore and Ms. Mitchell with trying to steal the Washington anti-smoking account.
The suit additionally asks the agency to provide details of an Advertising Agency Liability Policy with a $2 million minimum limit.
Marc DeLaunay, president, said, "We were totally caught off guard by their decision to go out of business. It was a challenge for us and for the client. We would like these guys to honor their commitment and pay their bills."