See Full Background:
BACKGROUND: THE WHITE HOUSE DRUG OFFICE ADVERTISING CASE
The Stories From 2001 to the Present
Calls to several officials at Ogilvy & Mather were not immediately returned today.
$145 million contract
The drug office, formally known as the White House Office of National Drug Control Policy, or ONDCP, has been spending about $145 million annually on advertising designed to discourage drug abuse by the country's children. The incumbent ad agency provides extensive research and negotiates with media companies who must give a free ad for each paid ad, but most of the creative advertising materials come from the Partnership for a Drug-Free America.
In a change from previous practices, the new request for proposals, or RFP, allows only ad agencies listed on the General Services Administration's bid schedule to submit bids on the contract.
The RFP solicitation, which comes after months of delay, offers a one-year contract that can be extended for up to four more years. Proposals are submitted to the U.S. Treasury Department, which administrates the contact.
Another innovation announced for the new contract is performance-based compensation. But even as the ONDCP requires payment to be linked to an assessment of how well the agency performs, it admitted that it has not established standards or procedures for such assessments. The RFP asks responding agencies to submit their own suggestions about how agency performance should be measured.
Ogilvy's handling of the ONDCP contract has been mired in controversy. While drug officials strongly praised the ad agency's advertising efforts, the agency's billing practices have drawn law enforcement scrutiny and congressional criticism. The agency first won the account in 1999.
In 2002 Ogilvy agreed to settle for $1.8 million civil allegations that it billed the drug office for charges that it couldn't support. While some of the charges related to Ogilvy's initial failure to maintain an accounting system compliant with federal standards, Ogilvy was also accused of billing the government for unallowed charges and altering filled out time cards to add additional billing hours.
In January, federal indictments were handed down against three former Ogilvy executives -- Tom Early, finance director for Ogilvy's New York office; Shona Seifert, who managed the White House drug office advertising account; and Peter Chrisanthopulos, president of broadcasting and programming at Ogilvy and later MindShare.
The three were accused of directing staffers to falsify their time sheets and then trying to cover up the scheme.
Mr. Chrisanthopulos, who left the agency to join the Pappas Telecasting Group and resigned from there in the wake of the indictment, pleaded guilty to the charges.
Ms. Seifert, who left Ogilvy two years ago to become president of the New York office of Omnicom Group's TBWA/Chiat/Day, has called the charges "fallacious" and pleaded not guilty. She is expected to call former drug office officials in her defense. Mr. Early, who left Ogilvy after the charges were filed, has also pleaded not guilty. Their trial is set for Nov. 8, but could be delayed.
The drug office for years has been under pressure to drop Ogilvy from the account. Once before, under congressional pressure, the ONDCP rebid the contract, only to award it again to Ogilvy. That move, however, infuriated a number of congressmen and last November Sens. Orrin Hatch, R-Utah; Charles Grassley, R-Iowa; and Joseph Biden, D-Del., introduced legislation that would have forced another rebidding of the contract and banned Ogilvy from bidding.
The legislation hasn't been acted on.
Last December, the ONDCP announced that it wouldn't renew the second contract awarded Ogilvy because of its desire for a "performance-based" agreement. The ONDCP denied its decision not to renew Ogilvy's contact was the result of Congressional pressure.