NEW YORK: Two former executives with WPP ad firm Ogilvy & Mather (O&M) were found guilty of fraudulent billing practices last week, causing concerns of a ripple effect through the advertising and PR industries.
Thomas Early and Shona Seifert, two of the advertising agency's former top executives, were convicted of falsifying time sheets to meet budget forecasts on work done for the Office of National Drug Control Policy. The two are now facing a maximum sentence of five years in prison.
The conviction lead to speculation among lawyers and PR pros about increased attention among clients to billing practices - including the possibility of more accounting audits.
"I think a very sober message will go out to the advertising and PR agencies," said Doug Wood, who leads the advertising and marketing group at law firm Reed Smith, which represents PR agencies and is not involved in the case.
But he cautioned that a guilty verdict in this case does not necessarily signal that there will be a greater crackdown on overbilling.
"Fraud is not an easy thing to prove," Wood explained. "Each case will be judged on its own facts."
Fleishman-Hillard, which has been accused of overbilling the Los Angeles Department of Water and Power by $4.2 million, declined to comment on the verdict. One former Fleishman executive, John Stodder Jr., was indicted in January and more indictments are expected.
Other legal and financial experts agree that the O&M case is isolated.
But Tom Rosenwald, MD at executive search firm Ray & Berndtson, which has PR agencies as clients, noted that the focus on billing is part of a larger trend toward viewing agencies as suppliers, rather than strategic partners.
"You increasingly see clients using their purchasing departments to negotiate fees, and that's a symptom of client dissatisfaction," he said. "This has been evolving for some time, but [the guilty verdict] will dramatize or accelerate" the shift.
O&M emphasized in a statement that it has set up the "most rigorous accounting compliance program in the industry," as well as ethics training, an ethics officer, and an ethics hotline.
Sister WPP agency Robinson Lerer & Montgomery is handling media relations around
the verdict. The statement constitutes the only comment issued so far.
But calls to fellow WPP agencies and others suggest that the guilty verdict has not yet spurred procedural changes.
Billing practices are set by each agency, not the holding companies.