Ogilvy admits improper billing in government ad contract

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Two months after a congressional committee questioned Ogilvy & Mather's labor and management fees for buying White House anti-drug ads, the advertising agency is acknowledging that it has gone to Justice Department officials admitting some of the amount sought was improper.

In an indication of the potential seriousness of the charges first publicized by U.S. Rep. John Mica (R, Fla.) at an early October hearing of the House Government Reform Committee subcommittee he heads, Ogilvy said it had hired PricewaterhouseCoopers to review its billing of the government and approached the Department of Justice and other federal authorities Nov. 29 "so that any questions about the integrity of [the] work and billing process could be promptly resolved."

The ad agency said it initiated the review itself after questions were raised and "is cooperating fully with all government inquiries into its performance and billing."

"Ogilvy believes that it performed the contract with the ONDCP well beyond reasonable expectations and provides our client extremely valuable services," said the statement, first reported Dec. 12 by the Boston Globe. "Nonetheless, the company recognizes that as a first time government contractor, its administration of some accounting aspects did not meet the rigorous record-keeping requirements imposed on federal contractors.

"That is not acceptable to us,'' it said adding that at its meeting with government officials it offered "to identify and resolve any mistakes that may have occurred. We will continue to work with the government to make sure we comply with their high standards as well as our own."

At the hearing Rep. Mica noted that nearly a third of Ogilvy fees for buying anti-drug ads for the White House anti-drug office hadn't been paid amid allegations of fraudulent billing practices and he demanded the office turn over Ogilvy time cards to the committee (which happened in early November). In testimony at the hearing there were reports that a former Ogilvy official, acting as a whistle blower, had claimed that hours on the anti-drug account dramatically increased after Ogilvy executives complained internally about the lack of revenue on the contract.

At the hearing, officials of the drug office denied anything fraudulent happened and suggested the attack was politically motivated. They said Ogilvy's inexperience in government contracting led the ad agency to submit inadequate documentation for some expenses and to bill for some others that O&M didn't realize the government doesn't pay.

After the hearing of the House Government Affairs Committee in early October, Ogilvy New York president Bill Gray issued a statement denying wrongdoing. "It is the policy of Ogilvy to ensure that billing for services is both fair and appropriate,'' that statement said. "We have charged ONDCP within the industry standard and if we learn of any accounting problems, we will address them and make and necessary adjustments."

Copyright December 2000, Crain Communications Inc.

Copyright December 2000, Crain Communications Inc.

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