In Dunkin Donuts Kickback Case, Arnold Worldwide Had No Idea It Was Also a Victim

Last Updated Jul 9, 2010 6:56 PM EDT

Carolyn Kravetz, the former Dunkin Donuts PR executive who embezzled $400,000 in kickbacks via a print and graphics shop run by her college buddy, may also have ripped off Arnold Worldwide, the Havas (HAV)-owned Boston ad agency that handles Jack Daniels and Mike's Hard Lemonade, according to a document filed in federal court. Kravetz also worked for Landis Communications in San Francisco before she was finally indicted and extradited back to Massachussetts.

The fact that Kravetz was able to move from employer to employer, and may have ripped off up to three victims, tells you something about how hard it can be to detect advertising employees who are on the take.

A spokesperson for Arnold said that when Kravetz left the agency in 2001 it had no reason to suspect any wrongdoing had occurred. The first the agency knew of any controversy was in 2006, when the FBI contacted Arnold seeking information about her employment there. Arnold cooperated with the probe.*

Kravetz pled guilty to six counts of mail fraud and two counts of tax evasion earlier this year. She faces 20 years in prison and restitution of the $396,875 to Dunkin. Prosecutors have recommended 32 months in prison. She is set to be sentenced on July 22. Boris Levitin, the Boston University friend who laundered the kickbacks through his print shop, Luminophore Inc., is set to be sentenced Sept. 8. In their scheme, Levitin billed Dunkin for non-existent print services and Kravetz authorized the payments to him. The pair then split the money.

This is why the agency world is so bad at detecting fraud: Kravetz and Levitin were producing matching paperwork in the event of an audit. Only if the non-existent work product itself was audited against the accounting paper trail would the fraud have come to light.

Federal prosecutors alleged in a sentencing memo that it was not the first scam Kravetz had committed:
... at the time of the offense conduct, the defendant was under the supervision of the Brookline District Court for her admitted theft of her neighbor's credit card, and use of that credit card to purchase thousands of dollars of merchandise (as well as a separate charge of receiving stolen property). In January of 2005, that case was continued without a finding, and Kravetz did not serve any jail time.
This brush with the law -- and the relative leniency exhibited by the Brookline District Court in the face of serious charges -- did not, however, dissuade the defendant from not only engaging in further criminal activity, but actually escalating the level of her wrongdoing. Not even six months had passed from the date of her arrest, and the defendant brazenly and unabashedly engaged in her scheme to embezzle hundreds of thousands of dollars from Dunkin' Brands.
The feds point out an obvious hole in Dunkin's marketing procurement process -- only one person was needed to authorize checks to agencies and vendors:
Most obviously, she manipulated her position and the trust which her employer placed in her -- bestowing her with sole approval authority for invoices of up to $100,000 to effectively use Dunkin' Brands' public relations budget as her personal checking account.
The link to Arnold -- not previously known in the case -- comes in a footnote:
Nor, apparently, was Kravetz's criminal activity limited to the timeframe of 2004-2005; her codefendant, Levitin, has asserted that the two engaged in a similar kickback scheme when Kravetz was employed at Arnold Worldwide from 1996 to 2002.
In that period, Arnold was on fire: It scooped up the Volkswagen account and relaunched the new VW Beetle with a beautiful set of ads showing the car on a traditional white background, just like DDB's classic "think small" prints from the 1960s. Kravetz, in fact, worked on the VW account, as this remnant of a press release on a scraper site shows.

By 2007 she was working at Landis Communications, as this press release shows, but by August of 2008 she was extradited from California to Massachusetts. Landis did not return a call for declined to comment; there is no suggestion -- yet -- that anything went wrong at that shop.

It's not the first time an ad crook has jumped from shop to shop. Just ask Grey Global Group -- they hired Mitch Mosallem, the greatest crook advertising ever saw, to run their $25 million print ad operation in New York despite the fact that he'd previously been convicted in federal court of putting his mother on the payroll at AC&R.

*Correction: Originally, this article suggested incorrectly that Arnold may have been in a position to blow the whistle on Kravetz. Arnold says it did not know there was anything wrong while Kravetz was employed there. Apologies for the error. Related: Image by Flickr user phaeder, CC.

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