Yesterday, the Association of National Advertisers published a new whitepaper on the topic of the U.S. Federal Bureau of Investigation's probe into agency media-buying practices.
The document touches on many of the issues my colleague E.J. Schultz reported on when the ANA's top lawyer Doug Wood discussed the topic during the organization's Masters of Marketing Conference in Orlando earlier this month. "It may turn out to be nothing is wrong," Wood said then, but "it could turn out quite the opposite…we'll know that in the next six months to a year."
The FBI investigation concerns allegations that agencies engaged in non-transparent practices, including collecting cash rebates from media vendors and not passing them along to clients. The probe was sparked in part by a 2016 ANA report conducted by independent firm K2 Intelligence. Earlier this month, the ANA revealed that the FBI had recently contacted Reed Smith about the investigation in attempt to get cooperation from ANA members. The ANA is leaving the decision of whether to cooperate up to individual advertisers, but suggests they do not talk to the FBI without a lawyer.
"If evidence is uncovered proving that the transparency issues outlined in the K2 Intelligence report are fraudulent, criminal charges can be brought against the media buying agencies and those executives and employees who were involved," the whitepaper says.
The paper suggests, as an example, if advertisers are being overcharged or not being given even five percent of what they're entitled, the annual cost to advertisers could be "staggering." It says the primary statutory offenses likely at issue in the FBI investigation are mail and wire fraud. Also discussed in the whitepaper are fraudulent intent (examples including deceptive conduct or deviation from known standards of conduct), conspiracy (the conspiracy statute requires two or more people to agree to do something unlawful, plus taking one or more overt acts to further the scheme) and racketeering.
The FBI told Reed Smith that "merely raising a hand saying you have been defrauded will not benefit its efforts," according to the new whitepaper. It says meaningful cooperation means doing an internal investigation and, if fraud exists with evidence, to let the FBI know.
So, the question for advertisers is this: Cooperate or not? According to the ANA's whitepaper, some ANA members have expressed concern that cooperation will result in being "blackballed" if their cooperation becomes known. The paper says the FBI is sensitive to protecting the advertising community consistent with its legal and investigative obligations.
The potential benefits of cooperating are both monetary and otherwise, the whitepaper says. "If criminal cases are brought, the likely result will be far more transparency going forward and industry-wide reform," it says, but financial benefits may also occur since victims of crimes are entitled to restitution.
"Even if the Department of Justice decides not to indict any agency, intermediate steps may be taken that will benefit the advertising industry," the paper says. "These can include deferred prosecution agreements and non-prosecution agreements where restitution is still mandated. Lastly, unless advertisers engage in an internal investigation, they may never learn whether they have been defrauded. If they have been, apart from any potential financial benefits of pursuing claims or restitution, an increased knowledge of what occurred will improve the advertiser's negotiation powers going forward."
The 4A's, in a statement issued by a spokeswoman, said it has nothing further to add. "As a practice, we don't comment on ongoing investigations," it said.
If you see something, say something
One more thing before we move on to this week's agency news: It feels like a good time to remind you that there are many ways you can get in touch if there's something you think I should know — I don't mean press releases, but tips or things you want me to dig into. You can always email me at [email protected]. If you're concerned with anonymity, I have an encrypted email at [email protected] or you can send me an encrypted message on Wire at @megancgraham. I'm here and I want to listen.
ANewCompanyForMildenhall
Jonathan Mildenhall has a new thing going: The former Airbnb CMO has launched TwentyFirstCenturyBrand, his branding and marketing consultancy, my colleague I-Hsien Sherwood reported this week. He is joined by co-founders Alexandra Dimiziani and Neil Barrie. Previously, Dimiziani was Airbnb's global marketing director and Barrie was chief strategy officer at TBWA\Chiat\Day. The company offers five verticals: Company mission and values; brand blueprint; go-to-market planning; marketing org design; and outsourcing agency management. It is currently working with Arianna Huffington's Thrive Global, Sean Parker's Airtime, Pinterest, GoDaddy and WeWork.
Christmas comes early for this agency
The Richards Group has won the Hobby Lobby account following a review. Earlier this month, the brand began running its holiday campaign, "Christmas Is What You Make It," which will run through Dec. 25. Check out a long-form version of the video, which depicts a young girl (who has some serious sweater style) crafting a quilt for her rural family's recently shorn sheep, below.
One sick campaign
Goodby Silverstein & Partners has created its first campaign for San Francisco-based independent primary-care organization One Medical. The campaign, called "Sick Cities," includes 130 different ads for places where getting sick or injured is easy, like Times Square or the Sunset Strip.
