Ogilvy Settles Suit Which Alleged a Plan to Fraudulently Bill Avon

Last Updated May 14, 2009 3:14 PM EDT

Ogilvy & Mather has quietly settled a whistleblower lawsuit brought against it by a former employee who alleged that she was asked to fraudulently overbill Avon in order to cover the costs of a lawsuit it had lost. The terms of the settlement were not disclosed; the parties signed an order of dismissal in the case on April 30. Ogilvy denied the accusations.

The plaintiff was Lisa Steiman, an executive producer at Ogilvy until April 2008 who earned $225,000 a year in compensation. She worked on a shoot for an Avon/Christian LaCroix perfume. Javier Vallhonrat was to shoot print and TV images. But Vallhonrat got into a dispute with Ogilvy, claiming the agency used his intellectual property without his permission. Ogilvy settled with Vallhonrat for $25,000.

Steiman alleges that Ogilvy asked Avon to absorb the cost, but the client -- angry that it had already required Ogilvy to reshoot another commercial it did not like -- did not agree.

So, in August 2007, Steiman alleged that broadcast director Lynn Roer asked Steiman to persuade the music composer on the shoot to reduce his fee from $25,000 to $10,000; and to then bill Avon through Eyepatch Studios the original music fee of $25,000. The alleged result was that Ogilvy would recoup $15,000 in costs on the suit that Avon never agreed to cover.

Roer allegedly encouraged Steiman to do this despite being reminded that Ogilvy account director Shona Seifert and CFO Tom Early had been sent to federal prison for fraudulent billing at Ogilvy in 2005. Steiman alleged that Roer told her:
Well, it's not like we're doing anything wrong; I was just putting a mark-up on it.
In its motion to dimiss the case, Ogilvy made an interesting argument: That Ogilvy is not a public company and thus is not subject to the whistleblower section of the Sarbanes-Oxley Act:
... that provision only applies to publicly-traded companies or an agent of such company. The Complaint does not -- and cannot -- allege that Ogilvy is a publicly traded company, because it is not.
Ogilvy is a unit of WPP, which is, of course, traded on NASDAQ in the U.S. Ogilvy previously made this statement on the suit to AgencySpy:
At the time of the allegations, Ogilvy's Chief Ethics Officer and Internal Audit did a thorough investigation of the claim and found no wrongdoing. The complaint was filed with the Department of Labor which dismissed it in its entirety. The case was then filed in Federal Court. Ogilvy has moved to dismiss the case as the allegations are without merit. We do not comment on ongoing litigation.

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