Carat Challenges Ground Zero

Carat USA is accusing California state of mishandling its five-year, $125 million anti-smoking account by allowing Ground Zero to take sole control of media buying. Carat contends the state’s actions violate the law and may be costing taxpayers “tens of millions” of dollars.

In a Nov. 2 letter to state officials, Carat said that when Ground Zero won the account in August 2000, it agreed to give Carat’s Los Angeles office media buying responsibilities and presented a media plan created by Carat. Because Ground Zero did not meet the state’s minimum media buying requirements, ac cording to Carat, the shop needed a media partner to be eligible for consideration.

After Ground Zero in Los Angeles won the account, following a review that initially included 20 contenders, the shop opted to do its own media buying, and the state agency that oversees the contract failed to intervene, according to Carat. Carat, which buys more than $150 million in local media in California, maintains that it has the negotiating clout to secure better deals than Ground Zero. As such, it claims, the state may be overspending on media.

Jim Smith, president of Ground Zero, said he was unaware of the allegations and declined further comment.

Carat has been making its case to the Department of Health Services, which oversees the anti-smoking effort, for more than a year, said John Barnes, managing director of Carat’s office here.

“We’ve tried to work with the DHS to resolve this situation, but they have been unwilling to address it,” he said. “We should have gotten the business. Our information and credentials helped win [it].”

Carat’s attorney, Sheldon Sloan, sent the five-page letter to Gov. Gray Davis and six other elected officials, including John Burton, the president pro-tem of the state senate, and Robert Hertzberg, speaker of the state assembly. It was also sent to officials at the DHS. A DHS representative confirmed receipt of the letter but de clined further comment.

Carat also sent the letter to James P. Mayer, executive director of the state’s Commission on Government Organization and Economy. Mayer said he would ask the committee to consider its merits at a meeting on Thursday.