Advocacy advertising and PR firm GMMB's contractual fraud lawsuit against subcontractor Durazo Communications has been partially dismissed, according to documents filed Monday in Los Angeles County state Superior Court.
The suit, originally filed by the Omnicom-owned agency last Thursday, alleged that Los Angeles-based Durazo Communications – subcontracted by GMMB to assist in placing Spanish-language commercials on behalf of the First 5 California Children and Families Commission on TV stations throughout the state – misappropriated $2.8 million of the $4 million it was paid for its most recent round of media buying. The suit quotes Durazo Communications EVP Dan Durazo as acknowledging this budgeting oversight, explaining that his firm's accounting practices were insufficient.
While the suit sought to recoup the unaccounted-for funds – and contended that firm principals Dan and Jane Durazo at times treated their agency as a "personal financial entity" – newly appointed First 5 Commission Chairman Hector Ramirez has said that the state tax-funded spots did air.
Papers filed Monday by GMMB attorney Mara E. Rosales call for a partial dismissal of the suit; the decision to drop charges was based upon a payment schedule and other unspecified agreements made between GMMB and Durazo Communications.
In the wake of this, sources said financial and management issues have made Durazo Communications decide to quietly shutter up – at least temporarily – this Friday, leaving staff members without jobs, and clients without service.
While Dan Durazo said that the firm was "negotiating with our landlord to leave our space," there would be "no certainty" in the matter and "no definite plans to go forward" – either in terms of office venue or agency work – until at least early next week. "I'm not sure what the future holds," he said.
As of Tuesday, however, firm operations were "status quo," Durazo said, adding that the agency is "consistently serving other clients."
Durazo Communications founder (and Dan's father) Ray Durazo – not named in the GMMB lawsuit--launched his own firm, Durazo Marketing, earlier this month after transferring ownership of the agency to Dan in 1999, and parting ways entirely in December 2005. In an email sent to colleagues and business associates when the First 5-Durazo Communications news initially broke, Durazo the Elder noted that "I have not been involved in the First 5 California campaign in any significant capacity ... When I saw the [LA Times] article, it was my first exposure to the issues raised by GMMB and the First 5 California commission."