Texas Tragedy

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On Wednesday, October 18th, executives at the Dallas ad agency Berry Brown were preparing for perhaps the most important meeting in the company's 23-year history. A small agency tucked in a third-tier ad market, Berry Brown had always kept a low profile. But its blue-chip client list caught the eye of a suitor, the global marketing powerhouse Publicis. The French holding company was in the late stages of negotiations to acquire Berry Brown, and the meeting that day was crucial to the transaction.

As keeper of Berry Brown's books, Philip Schieber was an integral player in the talks. He was scheduled to attend the meeting in Dallas to relinquish financial documents. But the 38-year-old chief financial officer wasn't in his office; instead, he was 92 miles north at his Oklahoma ranch, steeling himself for a grimmer task.

Schieber calmly toured his sprawling estate that morning before returning to its main house. He poured a glass of Crown Royal, skipping his usual Sprite mixer, then another. After polishing off two-thirds of the bottle, he walked outside, settled under a small tree just yards from the front door and placed a 12-gauge pump Mossberg shotgun under his chin.

Then he pulled the trigger.

After Phil Schieber's body was discovered by a ranch hand the following morning, local police also found a message on his home answering machine, left on the day of the suicide. Verdie Horton, who worked in the accounting department, was trying to determine where Schieber was and why he hadn't shown up at work.

By the time his body was found, agency executives already suspected the answer. A subsequent audit confirmed the CFO had embezzled $6.25 million from company coffers. In a letter to creditors, Berry Brown President Jim Hradecky wrote, "The chief financial officer committed suicide about the time we would have discovered his deplorable actions."

Agency employees were first informed only of the suicide. Later, they learned of the embezzlement. Then came the third blow: On November 15, Berry Brown would shut its doors.

In accounting terms, Schieber's crime is known as defalcation. In human terms, it took a young life, toppled a 23-year-old business and upset the careers and lives of 49 co-workers.

Two months after Schieber's death, the physical assets of the firm were auctioned off to the highest bidders. His personal property--including the ranch in Oklahoma, a luxurious residence in Dallas, flashy cars, cattle and thoroughbred racehorses--was put on the block to remunerate the agency and its creditors. Even the $400 suicide weapon was requested from the Oklahoma police for resale. In the end, Berry Brown will be lucky if it can recoup a third of what Schieber stole.

The 49 employees who found their lives upended when Schieber took his own life were the same people who often turned to him for personal advice about financial planning and retirement. Even after his betrayal, they remained loyal to the agency--many volunteering to work without pay during the final weeks. Those in the Dallas ad community say the staff's dedication was a testament to the nurturing management styles of Hradecky, the president, and Bob Berry, the agency's founder and chairman.

"Jim and Bob are the two men in the world of advertising who represent integrity," said former Berry Brown art director Susan Hanssen. "That's why this whole thing is so painful."

It was no secret that Phil Schieber was financially well off. He spent his vacations on Virgin Island beaches and the slopes of snow-covered Aspen mountains. He navigated morning traffic on a Harley-Davidson motorcycle or in a vintage Jaguar. During after-work happy hours, he treated friends and colleagues to $95 glasses of Remy Martin Louis XIII cognac. While he could be stern in the office, he was sociable after hours, often joining co-workers for cocktails. He also had an active social life away from his colleagues. Single and gay, he frequented Dallas hot spots and upscale strip clubs such as the trendy La Bare.

Although he was a fixture on the Dallas nightlife circuit, Schieber maintained a low profile in the dusty town of Love County, Okla., where he kept his 528-acre ranch. Locals said they rarely saw him around their rural community and didn't know much about his lifestyle. He spent little time in the local town of Marietta--which lacked big-city amenities such as movie theaters or nightclubs. Instead, according to those who knew him, Schieber would often charter planes to fly in male companions from out of town for the weekend. He and his dates would spend days four-wheeling over the ranch's rugged terrain and quiet nights at his red-brick ranch home, which was equipped with a satellite dish, large-screen TV, surround-sound audio system and high-powered telescope. In a nod to his more extravagant side, photos of Schieber and friends on chartered ocean excursions adorned the ranch's walls.

The CFO, a horse lover since his youth, kept 24 prized racehorses on the ranch, including the yearling Freedom Faster, for which he paid $27,000, and Chestnut Tree, which he bought for $20,000. He also owned 24 head of cattle, and his ranch was dotted with colorful bird feeders. He belonged to prestigious organizations such as the American Quarter Horse Association and the American Angus Association.

Schieber spread his unearned wealth not only among colleagues and friends, but also ranch employees. He spent $458,500 for his Oklahoma property, then paid out nearly a half-million dollars for renovations. Love County locals say he compensated one worker some $36,000 to paint the estate's four miles of black pipe fence.

"He was a generous man," said Jim Pratt, the ranch hand who discovered Schieber's body. Pratt, also a horse aficionado, recalled a trip he and a friend took with Schieber to an Oklahoma City racetrack. At the restaurant, Pratt half-jokingly remarked he couldn't find the $2 hamburgers on the menu. Schieber responded that he expected the men to order steaks, on him of course.

But while Schieber treated employees to expensive meals, Berry Brown paid the price. By manipulating client payments to media outlets, the CFO was able to siphon off millions from the ad agency. Payment from clients such as Quaker Oats Co. would be forwarded to Berry Brown so the agency could pay the marketers' media bills. But Schieber didn't always pay those bills; instead, he would funnel funds through a money market account he had secretly set up under Berry Brown's name. He would then write checks from that account to phony corporations he controlled, including MAP Investments. The clients didn't have contact with the media outlets; instead, as per the custom in advertising, the agency acted as a middleman.

"The way he juggled things around kept creditors at bay," said one of Berry Brown's attorneys, William Siegel of Seeberger & Siegel, Dallas.

Schieber, a computer whiz, kept two sets of records. The set he would show Hradecky and other agency executives had Berry Brown making its media payments on time. In a second, private set, a portion of the money was going to Schieber's self-created entities. According to court documents, in the 45-day period leading up to his suicide, Schieber wrote five checks to MAP on the money market account totaling $150,000.

While it seems remarkable that one individual could take so much money from a company that made about $6.5 million in annual gross revenues, financial experts say agencies are particularly vulnerable to Ponzi schemes.

"So much money passes through agency hands because of media bills," said Abe Jones, an investment banker specializing in advertising. "There are all different ways a scheming financial executive can take some money out. We've been involved in some agency bankruptcies where the amounts of money owed to media is extraordinary."

Smaller firms, such as Berry Brown, are at the greatest risk. According to research by Richard Hodgetts, a management professor at Florida International University, smaller companies are 35% more likely to be victimized by white-collar crime than larger firms. In an August 2000 memo to members, the American Association of Advertising Agencies warned, "Smaller agencies may be more vulnerable," adding, "It is probable that each year some company you know experiences a defalcation, even if you do not learn of it." Across the U.S., 11,208 arrests were made for embezzlement in 1999, according to the Federal Bureau of Investigation.

"It's a terrifying but cautionary tale about what can happen in a small business," said Jones, the investment banker. "Setting up a dummy company to siphon the money is one of the oldest embezzlement tricks known to man."

Schieber began to take money a little at a time. He kept a tight reign on financial controls, while the agency ran at what management believed was a profitable level. Other members of the firm didn't receive phone calls about late media payments; Schieber had constructed--and vigilantly enforced--a system that funneled all questions regarding payments through him.

Berry Brown's vulnerability can be traced to its management hierarchy, which divided responsibilities among three principals: Schieber, Hradecky and Senior VP-Media Director Sharon Griesing. Hradecky was responsible for creative output. Griesing was responsible for media placement but didn't handle the financial side of the buys. Because of his tenure, as well as his financial and technical savvy, Schieber was given control over Berry Brown's accounting and computer systems.

On its Web site, the U.S. Small Business Administration warns against that deadly combination: "People with access to computerized data have the very pulse of your business at their fingertips. Dishonest employees can, and have, diverted funds and goods for their personal gain."

Financial advisers also stress the importance of bringing in auditors to check the books annually. But Berry Brown used its outside accounting firm for tax purposes, not for internal audits.

"We all tend to want to trust and respect our compatriots," said William Nicholson, exec VP at the American Association of Advertising Agencies. "If [small agencies] don't perceive a problem, they're not going to worry about it. They say, `I can't afford that or I can't implement that,' but you need to have controls in place or you can get in trouble."

That's a lesson Bob Berry learned the hard way. "All of us get so busy with the day to day, working on the business, overseeing accounts, saving accounts, working with personnel. When you feel as though you have someone you can trust, you focus on the advertising end of the business. But even the person you trust most, you can't trust in business. You just can't take anything for granted."

There was no shortage of trust at the top of Berry Brown. The three principals had worked closely for years. Hradecky joined the agency in 1992; Schieber and Griesing had been there since the 1980s. At the end of 1997, the three banded together to buy the majority interest in Berry Brown from Bob Berry. Hradecky became the largest shareholder, with Griesing and Schieber as minority partners. Schieber's stake was 11%.

"I felt like I had people in place that could carry the agency forward," said the 74-year-old Berry, an avuncular ad veteran who's now retired. "Jim, Sharon and Phil were excellent candidates. Phil was an integral part of the planning, especially from the financial end."

Although the agency did work for high-caliber brands such as Quaker Oats, Jimmy Dean and Aunt Jemima, it was run in an informal fashion. To avoid a show of status, corner office space was turned into conference rooms. Executive offices were lined with glass walls to promote accessibility. Flexible hours were common.

"The management set the tone for the agency," said Angela Carrales, former managing partner of Berry Brown's Hispanic division. "A lot of the senior management all got along. It wasn't just about working together--you're involved in people's lives. You're there for them."

Former employees say Schieber, although off-putting at times, was a member of the close-knit Berry Brown family.

"He was a part of the fabric, part of the corporate culture, whether you liked him or not," Carrales said. "What's scary is that he acted normal for the most part."

Schieber would join co-workers for Mexican-themed agency lunches and after-work cocktails. Those he was particularly friendly with were invited for drinks at his Dallas home. One evening, he even swapped cars with Hanssen, the agency art director, so she could surprise her husband by pulling up in a red Jaguar convertible; Schieber drove off in her Ford Taurus station wagon.

Agency employees aware of Schieber's wealth didn't suspect him of criminal actions. His CFO salary, estimated to be in the low six figures, along with his self-promoted investment savvy, seemed to afford him an above-average lifestyle. His Dallas home, although situated on tony Shorecrest Drive (the ranch in Oklahoma was named Shorecrest in its honor), didn't look extravagant from the outside, especially compared with the mansions down the road. But one former colleague described the interior of the three-bedroom, three-bath home as "a page from Better Homes & Gardens." Its 25-feet by 29-feet master bedroom suite boasted a study and fireplace. Its kitchen had marble countertops, its backyard a pool.

While many at the ad agency knew Schieber had a weekend retreat in Oklahoma, only a handful knew its scale. "I thought he just had a small farm," said one former employee.

Schieber wasn't open with everyone about his financial situation, but he did flaunt his investment prowess. He often bragged about his stock market coups. Long, complex phone conversations with his broker boomed across Berry Brown's offices. He touted his investment gains and parceled out stock tips. "He would say things like `I shorted Yahoo!,"' then loudly speak of his returns, said another former employee. His behavior fueled agency gossip he inherited money from an elderly female friend and invested it well. Schieber didn't discourage the speculation.

For all his extravagance outside the office, Schieber was frugal when it came to company spending. He scrutinized department budgets and was hesitant to upgrade or replace office equipment. A former colleague described him as "tyrannical" about expenses. Revealing a rare glimpse into his past and his psychology, he let several co-workers know he paid for college himself, and expressed disdain for those who came from wealthy families. His at-work prudence only furthered the appearance of integrity.

Certainly nothing in his personal background indicated he would commit such a devastating crime. Born in Lima, Ohio, on March 6, 1962, Schieber was the oldest of eight children, with four sisters and three brothers. He grew up on a modest farm, was a member of the 4H club and rode horses. A serious student, he attended Findlay College, Ohio, where he majored in business systems analysis. He also participated in activities such as choir and band, and graduated cum laude in 1984. A number of friends described the brown-haired, hazel-eyed Schieber as "average looking." At 5 feet 9 inches, he often wore boots to appear taller. His physique fluctuated from trim to pudgy.

Schieber was close with his family, and took his mother's 1997 death from diabetes hard. But he also made sure he was there for his siblings during their mourning.

"He was a leader and a decision maker," said his sister Susan Schroeder, who lives in Ohio. "He talked about investing and we thought all along, `He's doing well."' Schroeder said her brother was munificent, offering to pick up the tab for family vacations. "We were shocked" to find out about the embezzlement, she said, "and we're still grieving. It's affected us greatly and I'm sorry he affected all those innocent people. He'll be missed."

Schieber's scheme began to unravel when Publicis came calling, drawn by Berry Brown's Quaker business. Following a year of acquisition discussions, Publicis, which already operates an agency in Dallas, moved forward toward the end of 2000 to buy Berry Brown. Publicis wanted to get on with due diligence, but Schieber, who had been against the merger from its inception, began stalling when asked to turn over the company's financial records. On October 17, the day before he shot himself, Schieber had lunch with Publicis auditors. He turned over some financial documents, promising more the next day.

But Schieber knew he was running out of time. And once it was clear his double-dealing days were over, he climbed into his Suburban and made the two-hour drive north from Dallas to his Oklahoma property.

Ranch hand Pratt was surprised to see Schieber on a weekday morning; the CFO had previously only visited the estate on weekends. His boss, though, acted as if nothing were amiss. Carrying a cup of warm coffee, he greeted Pratt and the pair walked the estate together. Schieber asked Pratt to come back later and drop off feed for the animals. Schieber also said he'd be back at the ranch the upcoming weekend.

When Pratt arrived that evening with the feed, he noticed his boss lying under a tree, but decided not to disturb him. When he returned the next morning, he saw Schieber in the same spot, dressed in the same clothes. That's when he called the police.

While Pratt was still holding Schieber's cordless phone, he received a call. Schieber's uncle was also trying to locate his nephew. Executives at Berry Brown had called him to say Schieber had disappeared. After hanging up with Pratt, the uncle called Hradecky to break the news about his nephew's death.

That week, members of the ad agency were told of their CFO's suicide, although not of the embezzlement. Co-workers cried when they learned of his death. They gathered the following Monday night for a memorial service, joining Schieber's relatives at his Dallas residence.

Earlier that day, Berry Brown lawyers filed an injunction to freeze Schieber's assets. In the next few months, his property would be put up for sale. His Dallas home was placed on the market for $459,000 at the end of December (by late February, it still hadn't sold). His farm equipment, including three John Deere tractors that ranged in price from $39,000 to $50,000, was sold for thousands less than its value. His cattle and racehorses, costly to feed and care for, were sold immediately at a dramatic loss.

Schieber's high living and frivolous spending didn't leave the agency much to recoup. Back-fence talk among Love County residents says that when police searched his house after the suicide they found $30,000 to $40,000 in cash, but only a $7,000 balance recorded in his check book. His current estate is said to be valued at about $1.25 million. Berry Brown should also receive a $500,000 tax refund and $50,000 in insurance money.

"It's very difficult to collect from someone who embezzles from you," said Berry Brown attorney Siegel. "Obviously when you auction stuff off you don't get as much money as you'd like."

On December 16, Hradecky hosted a holiday gathering for former employees at his Dallas home at his own expense. The guests didn't talk much about what happened. Instead they spoke about moving on. By then, most of them had found new jobs, many with the help of Hradecky and Bob Berry. Dallas marketing agency Slingshot hired Carrales and eight others from the agency's Hispanic division. Hradecky, Griesing and another seven employees landed jobs in the Dallas office of ad agency Fogarty Klein Monroe.

"The worst part was we really thought the agency was going to pull through," said Carrales. "We lost a way of life, a way of working that you just can't replicate. It was a horrible thing that happened, and for Jim and Sharon"--who are dealing with the legal aspects""it continues. For my team, and me, we can move on and it won't haunt us for the rest of our careers. We can focus on the happier times and what we've learned."

Hradecky still won't talk openly about anything that happened. Bob Berry is more candid about his pain, saying the suicide and deception still haunt him. "Jim and Sharon will work things out. I will, too," said Berry. "But it is like a period of mourning. This is the second most devastating thing that happened in my life. The first was the death of my wife three years ago.

"The one thing I regret is not being able to sit down and talk to him, and say, `Can you just tell me why? Just tell me why."'

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