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As controversy swirls around Wells Rich Greene BDDP, Advertising Age has learned that the former president and chief financial officer of the agency still have a $500,000 interest in programming syndicator SeaGull Entertainment.

The half-million dollars former WRG President David Sklaver and Chief Financial Officer Tom Fagan returned to the agency came out of their own pockets, according to WRG attorney Russell Berman of Kronish, Lieb, Weiner & Heller as well as sources close to both SeaGull and Mr. Fagan.

WRG Chairman-CEO Ken Olshan earlier stated that "the funds used in the transaction have been returned" (AA, April 17).

Messrs. Sklaver and Fagan parted with WRG two weeks ago after the agency discovered the misappropriation of $500,000 in corporate funds.

Last week, Mr. Olshan said he had no issue with SeaGull and that the agency had only concerned itself with Messrs. Sklaver and Fagan. SeaGull has not been not implicated in any wrongdoing.

WRG attorney Mr. Berman said the agency has no investment in SeaGull. In fact, WRG could not have an equity interest in SeaGull because that company, for tax reasons, is a sub-chapter S corporation while WRG is a full-C corporation. A sub-chapter S corporation categorization prohibits any equity by corporations but allows investments by individuals.

Mr. Sklaver's attorney, Edward Spiro of Morvillo, Abramovitz, Grand, Iason & Silberberg, did not return calls. Mr. Fagan's counsel, Tom Fitzpatrick of Hertzog, Calamari & Gleason, said it has not been decided if his client will assert claims or proceed beyond his original statement that the accusation is outrageous and a violation of his employment contract.

In a statement last week, SeaGull indicated it "has been developing a number of creative projects with members of the agency's staff over the last several months."

WRG categorized these dealings with SeaGull as routine vendor relationships with its media department. A spokeswoman said the agency would continue to look at any proposals from SeaGull just as it would those from any other vendor.

But BDDP Group President-CEO Jean-Claude Boulet expressed surprise there were any relationships with SeaGull.

SeaGull Entertainment Chairman Henry Siegel said SeaGull's transactions with the agency were "undertaken on an arm's length basis and were fully documented in a normal commercial fashion. Nothing in the transactions suggested that SeaGull was not justified in dealing with the president and the chief financial officer of the agency in connection with these transactions."

When later interviewed by Advertising Age, Mr. Siegel would not elaborate. He said the matter is being handled by his attorney and that he has had no contact with Messrs. Sklaver or Fagan and had only been in touch with the agency's spokesperson.

When Mr. Siegel formed SeaGull Entertainment last fall with his brother Paul, after leaving All American Television, he suggested the possibility of taking his new company public and seeking alliances with other TV companies or advertising agencies.

In November, SeaGull formed an alliance with DCL Media in Dallas and named DCL President Ken Lameiras president of SEG Distribution, SeaGull's distribution unit.

The company's initial moves included gaining domestic distribution rights to the weekly animated series "Dragon Ball," which was launched last fall, followed by deals to handle distribution and advertising sales for the syndicated series "Beverly Hills Beach Club" and the animated series "Sailor Moon," which will make its premiere this fall.

Mr. Siegel is a founder of LBS Communications, which he bought with partners from Grey Advertising in 1988. LBS filed for bankruptcy in 1991 before merging with All American Communications where Mr. Siegel became president of All American TV.

Meanwhile, WRG may not seek a new president. Mr. Olshan said, "We have tremendous confidence in our managing partners and I will be discussing with them whether there is a need to find a replacement."

The search for a new chief financial officer, however, is under way full-force. Mr. Olshan predicted it could take a couple of months, but said: "It is our No. 1 personnel priority."

Mr. Boulet denied rumors that the French are furious about the situation and said he is fully supportive of Mr. Olshan. He denied receiving any pressure for change at the agency from investors, including Walter Butler who with a group of other investors holds a 15%-16% stake in BDDP. The remaining interest is held by banks, other institutions and management.

Pat Sloan and Electronic Media's Wayne Walley contributed to this story.

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