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J&J Kickback Scheme Shows Preventing Ad Fraud Is Easier Said Than Done

It took three years for Johnson & Johnson (JNJ) to figure out that one of its sales managers had defrauded the company of nearly $900,000 in a kickback scheme. That's a reminder that the oldest advertising trick in the book is alive and well and more difficult to spot than you'd think.

George Mandras was sentenced to nine months in prison this month for submitting bogus radio advertising invoices to J&J on behalf of SBA, an ad agency in Malibu, Calif. SBA then mailed checks back to Mandras as a reward, according to the prosecutors' charging document.

Mandras, who worked at J&J in New Brunswick, N.J., must pay J&J $871,637 in restitution.

There are a couple of unanswered questions about the scam that should worry both clients and their agencies when it comes to dealing with dishonest employees.

Why did it take so long to detect the scheme, which ran from 2003 through 2006? It ought to be easy to audit an ad agency account and check that SBA had actually provided radio ads for the drug company.

A Google search didn't turn up any agency with that name, nor could searches in two different online phone directories. Ad agencies generally maintain a higher profile than that -- so it begs the question of why J&J was doing business with a shop so obscure as to be literally invisible on the Web. It shouldn't have been too difficult for even a rank amateur to check whether this was kosher or not.

The feds allege that SBA exists, but it describes another potential defendant in the scheme, "S.B.," who sent checks back to Mandras. One assumes that if prosecutors bring charges against this person, we'll get a more complete picture of what SBA was and how the scam worked.

Think this isn't happening at your company? Think again. The scheme was almost identical to the one that just went down at Dunkin' Donuts. (And just like the Dunkin case, they nailed the perpetrator on unpaid taxes, too.)

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