MISMANAGEMENT ALLEGED IN NATIONAL ANTI-DRUG AD CAMPAIGN

Washington (CNN) -- Several lawmakers have criticized the Office of National
Drug Control Policy for the way it has responded to allegations of fraud in
its anti-drug media campaign.

"This...whole program of advertising and bringing more awareness to the
youth of America about the perils of using drugs is not working as well as
we would have hoped," said a frustrated Rep. John Mica, R-Florida, in a
congressional hearing on Wednesday.

Mica is chairman of the Government Reform Subcommittee on Criminal Justice,
Drug Policy and Human Resources.

His subcommittee heard testimony from General Accounting Office
investigators who questioned why ONDCP officials did not immediately request
an audit of a contract with the largest contractor working on the
campaign -- advertising firm Ogilvy & Mather -- when allegations of
overbilling and possible fraud first came to light earlier this year.

In addition to the management review of ONDCP, the GAO is currently
conducting its own investigation into the fraud allegations against Ogilvy
and Mather.

Agency slow to request audit

"There is evidence of false billing here, involving taxpayer monies, and
this has been going on for a period of time...you all haven't even ordered
an audit. That's why we are concerned about this," said Rep. Bob Barr,
R-Georgia.

ONDCP Deputy Director Dr. Donald Vereen defended the office's oversight of
the contract. "Is the public being gouged? The answer is no. We are
diligently protecting the public's purse," he said, but acknowledged that no
audit had been requested.

Vereen said this was due to a dispute with the Department of Health and
Human Services, which administers the five-year, $1 billion Ogilvy and
Mather contract. He said the ONDCP has no ability to handle large contracts
on its own.

However, Vereen noted that the ONDCP has withheld $13.5 million in payment
to Ogilvy and Mather over disputed billing claims and had no intention of
paying the total owed until an audit had been performed.

Advertising firm denies intentional overbilling

The allegations against Ogilvy & Mather, which was hired to coordinate
advertising for the campaign eighteen months ago, include inflating its
labor costs and falsifying timesheets.

Ogilvy & Mather denied it had engaged in intentional overbilling or fraud.
In a written statement, Bill Gray, the president of Ogilvy-New York, said,
"we have charged ONDCP within the necessary industry standard and if we
learn of any accounting problems, we will address them and make any
necessary adjustments."

Alan Levitt, the ONDCP official in charge of the National Youth Anti-Drug
Media Campaign, said he was concerned about charges of overbilling or
mismanagement, but said at least some of the billing irregularities could
have resulted from misunderstandings about what charges are allowed and what
are disallowed under government regulations.

"In the ad industry, people fly first class. They can't do that in the
government," he pointed out. He also said some of the overbilling could
have resulted from math errors or other unintentional mistakes.

Allegations surfaced in March

The fraud allegations initially surfaced in March when an ONDCP contracting
officer received a call from a former Ogilvy employee, Dan Merrick, who
accused the ad agency of padding its bills.

Richard Pleffner, the Office of National Drug Control Policy's project
contracting officer, warned the office's director, Barry McCaffrey, in an
April 13 memo that he had questions about the billing from Ogilvy & Mather.

"Excessive billing irregularities under the Ogilvy contract have led to
growing uncertainties with Oglivy's management practices," Pleffner wrote.

Also, the GAO fraud hotline received an anonymous call about the situation
in July.

CNN Producer Beth Lewandowski and the Associated Press contributed to this
report.