The White House Office of National Drug Control Policy is accusing a Florida congressman of conducting a politically motivated hearing into its ad spending even as antidrug office admits that it has held off paying about $13.5 million to Ogilvy & Mather for months, questioning the ad agency's fees and documentation.
In the latest controversy at the antidrug office, officials of the White House office said a sudden unannounced visit to Ogilvy in New York by government investigators from the General Accounting office, a threat against a retired ex-Ogilvy executive, and investigators' visit to the White House office were all motivated by U.S. Rep. John Mica (R., Fla.), and are "strong-arm tactics'' based on "biased'' motives.
Rep. Mica has scheduled a hearing of his House Government Reform Committee subcommittee on criminal justice for Oct. 4 to delve into allegations of mismanagement and fraud in the antidrug push.
The Office of Special Investigations of the GAO, Congress' investigative arm, denied the accusations and said it's pursuing an allegation of government fraud that, if proved true, could lead to criminal charges against Ogilvy.
"Our investigation was conducted totally professionally. There is absolutely nothing we did that we have to make excuses for,'' said Robert Hast, the GAO office's director, suggesting officials in the antidrug office were trying to intimidate his office from conducting its investigation. "We have not determined any fraud, but there are sufficient questions that we want to look at the books.''
The White House office acknowledged Oct. 2 that for months it held off paying millions of dollars of Ogilvy's bills. At one point, it withheld from paying about $4 million for media, $7.8 million for fees and labor, and $1.2 million for production costs of antidrug ads incurred from the start of Ogilvy's contract Jan. 4, 1999, with a large chunk of the amount being unpaid since April. There were indications Oct. 2 that the antidrug office would announce Oct. 4 that differences over much of the $13.5 million had been resolved. Some of the production costs apparently are those of other ad agencies for work done for the Partnership for a Drug-Free America that were passed along by Ogilvy. While ad agencies volunteer their efforts for Partnership ads, the antidrug office pays production costs. The White House antidrug office said it is "very satisfied'' with Ogilvy's work. It said the $13.5 million was held back for the kinds of questions normal in government contracting. "There is no evidence of overbilling. What is happening is part of the standard financial oversight,'' said Alan Levitt, who directs the campaign for the antidrug office. He and another official of the office said most of the money was withheld because supporting documents had not been properly attached to bills. "We are questioning bills, not denying bills,'' Mr. Levitt said.
Mr. Levitt said that aside from missing documentation, some of the differences represent the government questioning expenses that, while normal in private industry, the government doesn't pay. He cited as an example lunch for the crew during a shoot. He acknowledged there were other differences over how much the government should be paying the agency for actual expenses. Ogilvy's contract with the government pays the agency about $30 million in actual buying and planning costs plus a $1.6 million annual fee.
In April, a contractor for the White House antidrug office questioned whether Ogilvy was being overcompensated under its contract. Jane Twyone, of Worldwide Consulting, in her study citing Advertising Age's reports of average salaries and media fees at agencies, said savings of from $8.5 million to $14.5 million a year would be "reasonable to expect'' by letting less senior account people buy at Ogilvy. The report claimed the antidrug agency was paying especially highly for media planning and buying staff used to buy print media, compensation 238% over industry average, but that costs of planning and buying staff for buying network TV were 121% above average.
The antidrug office has contended that Ms. Twyone wrongly compared Ogilvy's costs to those of a normal private-industry media buy. The antidrug office requires media companies provide a free ad or programming of equal value for each ad bought, and Ogilvy also negotiates and monitors media companies' compliance with that part of the ad program.
The Twyone study led to questions from contracting officials, and the subsequent probe by the GAO's Office of Special Investigations cited the Twyone study and also reported problems, but the antidrug office has contended that the investigation wasn't conducted impartially.
"They used strong-arm tactics,'' said Pancho Kinney, director of strategy for the antidrug office. "They showed up at the home of a former O&M executive who had taken medical retirement and had a foot amputated because of diabetes, and threatened that he might have a heart attack in front of a grand jury if he didn't talk.'' Mr. Kinney said they also showed up unannounced in the New York office of Ogilvy Executive Group Director Shona Seifert, demanding answers.
Barry McCaffrey, director of the White House antidrug office, in a letter to Rep. Mica, said investigators showed "apparent misperceptions and lack of objectivity'' and "the manner of inquiry seems to imply motives that may be biased rather than analytical.''
Mr. Kinney accused the congressman of playing politics, noting that four years ago, shortly before the presidential election, Rep. Mica scheduled a hearing directed at embarrassing Mr. McCaffrey.
An aide to Rep. Mica said the congressman had been concerned about oversight of the antidrug ad program for more than a year and was holding the Oct. 4 hearing to respond to allegations of mismanagement and fraud.
"The congressman feels the subcommittee has a responsibility to taxpayers to see that oversight functions are performed and taxpayer money is spent wisely,'' the aide said.
Copyright October 2000, Crain Communications Inc.