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Government Probe Hits Ad Biz

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Grey Worldwide has confirmed that it is cooperating in a Department of Justice investigation involving at least one print- production company.

"The government has been conducting an investigation of various companies within the print-production industry," Grey said in a prepared statement. "Grey has fully cooperated with this investigation to the extent we've been asked."

The Grey representative in New York would not identify the com pany or companies involved or discuss the issue further.

But sources said that one of the companies under investigation is the New York print-production house Color Wheel and that the allegations center on financial improprieties.

It is believed that an IRS audit of Color Wheel triggered the long-running investigation in which agencies were allegedly underbilled and their clients overbilled for services.

The antitrust division of the U.S. Attorney's Office in New York is leading the current investigation, sources said. Several calls to the U.S. Attorney's Office were not returned at press time.

A staffer at Color Wheel's midtown office said owner Haluk Ergulec was traveling on Friday and that he could not immediately be reached for comment.

One source said agencies in addition to Grey continue to work with Color Wheel and also may be involved in the ongoing investigation. Color Wheel was the subject of a similar investigation seven years ago [Adweek, May 22, 1995].

In 1995, Color Wheel, which opened in the late 1970s, was mentioned as part of an alleged IRS investigation of Harold Singer, who had been head of production at now-defunct Wells Rich Greene. The case involved allegations that Singer, in collusion with Color Wheel, overbilled clients for print projects.

Stories in the industry about the relationships among print-production executives, their preferred vendors and special deals are widespread.

"Everyone wants to keep it quiet, so as to not let the clients know about it," one source said. "The production department may as well be in Idaho. No one's paying attention to it as long as [the work] gets done. How it gets done could be wizardry for all [the executives] know. They are so many levels removed."

—with David