• Canadian Ad Agencies Under Fire for Misusing $76 Million
  • February 27, 2004
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • The Canadian auditor general has charged five Canadian advertising agencies with receiving approximately $76 million in commissions for doing "little to no work" over the past four years in connection with a government-initiated campaign aimed at boosting public support in Quebec for a unified Canada. The government had allotted a total of $190 million for the campaign. The five ad agencies cited are: Groupaction, Lafleaur Communications, Gosselin, Groupe Everest, and Media/I.D.A Vision.

    The report filed by the auditor general also found that the Canadian government failed to comply with the rules governing the selection of and payment to ad agencies, and failed to maintain adequate documentation for the activities in which it had reportedly engaged. In response, Prime Minister Paul Martin has fired the cabinet minister in charge of the campaign, who now serves as Canada's ambassador to Denmark. A committee from Canada's House of Commons is conducting further inquiries.

    Significance: Reports such as this may well prompt an increase in client audits of ad agency spending. Accordingly, advertising agencies should keep careful books and records documenting each account's activities.