- Ogilvy Execs Found Guilty of Conspiracy to Defraud Government
- March 9, 2005
- Law Firm: Reed Smith LLP - Pittsburgh Office
Two senior executives from Ogilvy & Mather were found guilty of charges that they conspired to defraud the government and make false claims for work performed on an account for the federal Office of National Drug Control Policy (ONDCP).
A federal jury in Manhattan convicted Shona Seifert, the former senior partner and executive group director who led the effort to win the ONDCP account, and Thomas Early, a former finance director at Ogilvy's New York office, on all 10 counts -- one for conspiracy to defraud the government, nine for filing false claims.
Both had pleaded not guilty to charges that they led an effort to falsify timesheets to make up for a projected $3 million billing shortfall in 1999 on the $700 million media buying account from ONDCP, won the year before.
At trial, prosecutors conceded that Seifert and Early did not actually tell employees to falsify timesheets. Instead, the government claimed, employees were instructed to bill to target percentages regardless of how much time they actually spent on the account. Several former employees -- including two who pleaded guilty to charges that they falsified time on the ONDCP account -- testified against Seifert and Early. In addition, the government produced timesheet notations and email.
In response, the defendants introduced testimony from ONDCP officials who were pleased with Ogilvy's performance on the account. The defendants argued they were inexperienced with government contracting rules, and had sought to correct deficient timekeeping practices. They challenged the veracity of the government's witnesses.
The two, scheduled to be sentenced on May 16, face fines and as long as five years in prison. Both have decided to appeal the verdict, according to their attorneys.
The case against Seifert and Early was brought to light by an ONDCP employee, who tried to file a whistleblower case against Ogilvy under the False Claims Act. That act allows individuals to profit from winnings the government obtains in actions against companies found to defraud the government. While the whistleblower case was dismissed, prosecutors brought criminal charges against Seifert, Early and others.
Ogilvy, which earlier settled civil charges in the matter, released a statement following the trial that said, "the events described ¿ are completely inconsistent with Ogilvy's core values." The company has taken the matter seriously, has upgraded its accounting system to create more rigorous accounting compliance, and has increased its employee training, according to the statement.
Why This Matters: The high-stakes case has major ramifications for Madison Avenue. In addition to underscoring the complex process involved with accepting and complying with government contracts, industry observers have speculated that the convictions also may encourage commercial advertisers to increasingly demand audit rights to their accounts. At a time when procurement departments have taken control of the advertising agency/advertiser relationship, and Sarbanes Oxley fears are pushing companies to widen audits of suppliers, this case is a major blow to the entire advertising agency business.