ONDCP Trial: Early Denies Fraud

NEW YORK Former Ogilvy & Mather executive Thomas Early in U.S. District Court today admitted to a revenue shortfall on the Office of National Drug Control Policy account and conceded there could have been inaccuracies in the shop’s billings practices on the business.

The former finance director of the WPP Group agency also said he did not instruct any Ogilvy employees to falsely inflate the number of hours they claimed to have worked on the $1 billion ONDCP business.

Early took the stand in his own defense, just as his co-defendant, former executive group director Shona Seifert, had done on Tuesday and earlier today.

Seifert and Early stand accused of plotting to overbill the government to cover a $3 million revenue shortfall on the ONDCP account. The alleged scheme revolved around an effort to check and revise as many as 5,200 agency timesheets. Both have pled not guilty.

Early’s defense lawyer, Laurence Urgenson, took him back through several e-mails—all of which prosecutors have used to make their case—that appeared to indicate that some Ogilvy executives knew that their timesheets were fiction.

One e-mail, sent by Ogilvy exec Linda Siller, instructed staffers thusly: “Yes, even if you aren’t actually working those hours on ONDCP this week you need to allocate you time that way.”

Another e-mail said, “What percentage of their hours do Angela Mikulicic and Meg Papazian bill to ONDCP, respectably? In reality, Angela also works on Cotton and WebMD.”

When asked by Urgenson what he thought those messages meant, Early replied, “In reality none of them work on it. It seems like looking back they haven’t been accurate at all.”

Urgenson introduced a new set of e-mails that indicated loose play with the shop’s billings on other accounts. The e-mails were between Early and Frank Schumacher, who at the time was an executive group director on Kodak.

Schumacher’s problem was that former Ogilvy strategic planning director Bob Zach was working only about 10 percent of his time on Kodak when the client was paying for much more. “Bob and I spoke today re Kodak. Kodak is obviously paying for more of his time,” the e-mail said. Kodak was upset “because they, too, are questioning paying for over 50 percent of Bob’s time.” Zach had been called to a meeting at Kodak headquarters in Rochester, N.Y., to discuss his time.

Early’s reply e-mail said: “Find someone else to fill the 40 percent plus that Bob is supposed to be doing on Kodak.”

The apparent purpose of this was to suggest that Early had no idea that Zach’s hours on ONDCP were incorrect, because if Early did know that he would have advised Schumacher that Zach was in fact free to devote time to Kodak.

The exchange illustrated the at times confusing nature of the defense’s strategy, which has been to simultaneously suggest that the overbilling was the result of innocent chaos within the agency, and also that the alleged criminal scheme had nothing to do with either Early or Seifert, two notions that are difficult to reconcile.

The defense has pointed at former contract manager Al DiOrio (who is now dead) and Zach as being at fault. The latter two both pled guilty to indictments in connection with this case.

Early also gave his account of the genesis of the effort to collect hundreds of missing timesheets, all of which represented lost revenue to Ogilvy. After a conversation with New York co-president Bill Gray, Early said he called former U.S. media director Larry Cole in order to urge him to fill vacant jobs within the media department that could be devoted to working for ONDCP.

“Larry was on a golf outing on the West Coast and I asked him to please get involved directly,” Early said. Cole then spoke to former senior partner Simko and Zach, and told them to take control of the situation, Early said.

That led to a now-infamous stormy meeting in Early’s office with Simko and Peter Chrisanthopoulos, Ogilvy’s former president of national broadcast. In that meeting, Chrisanthopoulos testified previously, Early threatened their bonuses if they didn’t cure the timesheet problem. Simko stormed out, yelling, and calling Early a “jerk” and an “ass,” Chrisanthopoulos said.

Early’s version of events was different, although he allowed “it was not pleasant.” Simko and Chrisanthopoulos had failed to hire staffers Early had authorized, and were thus contributing mightily to the lost revenue. “I told them they needed to do a better job…I also discussed the issue of missing timesheets … I made a reference to the man next door by pointing to the office of [New York co-president] Bill Gray … he had asked me to do it,” Early said.

When asked if he had instructed anyone to bill hours according to a certain percentage, regardless of reality, he replied, “No, I did not.”

The prosecution made little headway with Early in its cross examination. He stuck to his position that the missing $3 million in revenue was not a “shortfall” that he would be ultimately responsible for, but rather a mere difference between revenue “projection” and “actuals.”

“You continue to call this a shortfall,” Early said, upbraiding Assistant U.S. Attorney Kim Berger. “It was not a shortfall that was going to impact the agency’s revenue. It was a revenue projection that was going to a client.”

His testimony was uncomfortable, in that minutes earlier the jury had been shown a chart of an internal Ogilvy finance memo titled “Sources of 1999 Revenue Growth.” That chart showed ONDCP as the largest growing client, at $11.8 million in revenue, larger than General Foods or Miller Lite.

Finally, Berger had him cornered. “If you’re running $3 million under what you project, isn’t that a shortfall?” she said.

“Yes it is,” Early said.

The judge then ended the hearing for the day and indicated the court would soon hear closing arguments from both sides. The jury could potentially get the case tomorrow afternoon or Friday.