WASHINGTON -- The Rev. Al Sharpton's Madison Avenue Initiative is considering a class-action lawsuit charging that government and advertising agencies have not paid minority contractors fair rates on federal accounts, according to sources and a letter written by Sharpton.
The group is citing noncompliance with an executive order requiring federal agencies to pay market rates. The main focus is on the tense relationship between Chicago-based Leo Burnett and its minority subcontractors on the U.S. Army's $95 million-a-year account. Sharpton is also scrutinizing other government advertising contracts.
The possibility of a lawsuit is the topic of a panel discussion to be held today in New York at the first convention of Sharpton's National Action Network. Lawyer Johnnie Cochran will discuss what the legal basis for a suit could be, such as excluding minority media from government contracts and noncompliance with federal regulation. Other scheduled attendees are Harvard University professor Charles Ogletree and Rep. Carolyn Kilpatrick, D-Mich.
"The focus of the panel will include the next steps and actions that will be taken to make sure minority-owned vendors get their fair share of the advertising funds placed by government agencies," Sharpton said in a letter to participants. "A potential lawsuit that will be filed against all noncomplying government departments and advertising agencies will also be discussed."
The Cartel Group in San Antonio has the Hispanic portion of the Army account, while Images USA in Atlanta handles advertising and media buys aimed at African Americans. The Army slated about $15-20 million for Hispanic audiences and about
$5-$6 million for African Americans. Burnett won the Army account in July 2000, but did not sign a contract with Cartel until Feb. 6. Images does not yet have a signed contract.
A sticking point is subcontractors' fees for their labor, sources said. The Army stipulated that Cartel receive nearly $4 million for labor and Images nearly $3 million. Sources said Sharpton is investigating whether there is a discrepancy between what Burnett is supposed to be paying and what the subcontractors are receiving.
Some sources said the difference could be as high as 40 percent. Burnett denies any discrepancy.
Some congressional staffers are also angered by Burnett's handling of its subcontractors. "Leo Burnett models their management style watching late-night reruns of Gone With the Wind and tries to reinstitute the sharecropper system in their (Continued from page 7) relations with subcontractors," charged a senior staffer familiar with the situation.
Burnett representative Cheri Carpenter said the shop is upholding its contractual obligations. "In honoring our U.S. Army advertising contract, Leo Burnett has operated at all times with total transparency, and we have honored the letter of that contract," she said. "As it relates to our subcontractors, we have adhered to the signed agreements we have with each vendor, paying rates they proposed and which were agreed upon at the onset of each project."
Army representative Paul Boyce said the government does not discuss relationships between contractors and subcontractors, but would address any concerns with individuals. He noted that the Army met its recruiting goals last year and is on track for this year.
Victoria Varela, Cartel's CEO, said her shop attributed the delay in signing a contract to the fact that it had not worked with Burnett before. "We had to develop the relationship before we could finalize the contract," she said.
Images president Robert McNeil was traveling and could not be reached for comment.
Burnett wanted to pitch the Army account using its Hispanic unit, Lapiz, and Vigilante, which specializes in African-American and urban marketing, but sources said Burnett was told the Army wanted Cartel and Images because they are minority-owned.
Some sources attributed the tension to growing pains that are a natural result of large agencies working with smaller, less experienced shops on complicated government accounts.