PROSECUTORS SAY BILLS WERE INFLATED FOR ANTI-DRUG ADS

NEW YORK, Jan. 6 -- For five years now, the advertising agency Ogilvy &
Mather Worldwide has startled the public with in-your-face ads linking
illegal drug use to car crashes, teen pregnancy and -- during the 2002 Super
Bowl -- international terrorism.

"Tell your brother you forgot to pick him up because you were getting
stoned. He'll understand," reads one advertisement. "Parents: The Anti-Drug"
says another.

The American taxpayers footed the multimillion-dollar tab for the entire
campaign, and now federal prosecutors in Manhattan are alleging that two top
executives at the ad agency deliberately padded bills for some of the
earliest ads.

On Tuesday, a federal grand jury charged finance director Thomas Early and
former senior partner Shona Seifert with conspiracy and filing false claims,
saying they submitted inflated bills to the White House's Office of National
Drug Control Policy in 1999 and 2000.

The New York-based advertising agency already has repaid $1.8 million to the
government to settle a civil suit based on the same billing issues and
continues to produce anti-drug spots for the government.

According to the grand jury filing, the problems started when Ogilvy &
Mather won a five-year contract in 1998 to do the spots, and executives
projected that they would receive $684 million based on anticipated labor
and overhead costs.

In mid-1999, Ogilvy executives found that their employees were logging fewer
hours than expected on the anti-drug campaign, the 14-page indictment said.

Seifert allegedly ordered 16 subordinates to change past timecards to
increase the hours that could be billed to the federal government, and she
and Early told employees that, in the future, they should report that they
had worked a specific percentage of their time on the ad campaign, whether
or not they had, the indictment said.

A lawyer for Early, 48, of Rockville Centre, N.Y., said he intends to fight
the charges. "Sometimes the government gets it wrong. . . . We expect Mr.
Early to be fully vindicated," said the attorney, Laurence Urgenson. An
Ogilvy spokesman said Early's status at the firm is "under review."

Seifert, 43, of Southport, Conn., issued a statement saying, in part, "I am
innocent of any wrongdoing. I will contest these charges. I know I will be
exonerated." She is now president of TBWA\Chiat\Day, another prominent New
York agency.

The 11-count indictment did not put a dollar value on the scheme, but
sources familiar with the case said the allegedly false bills added up to
"hundreds of thousands of dollars."

Complaints about billing problems in the ad campaign have been around since
mid-2000, and the allegations gathered steam in 2001 when the General
Accounting Office questioned more than $7 million of the Ogilvy charges. In
2002, Ogilvy agreed to repay the federal government $1.8 million.

"We were unprepared for the complex and unique federal record-keeping
requirements of that type of contract," the firm said in a statement
yesterday.

The statement also said that Ogilvy redesigned its billing system and
cooperated extensively with government investigators. After making the
changes, the ad giant also won another $150 million annual contract to
continue working on the anti-drug campaign.

The firm also said, "If [the charges against Seifert and Early are] true,
their behavior was inconsistent with the high standards the company promotes
and maintains."

The White House anti-drug office announced last fall that it would put the
advertising contract out for bid again later this year, and some legislators
are seeking to bar Ogilvy from the competition.

"It really bothers me that money that was supposed to be used to prevent
drug use among our young people appears to have been misused by an ad
agency, and yet this agency gets a slap on the wrist and a pat on the back,
'here's another contract,' " said Sen. Byron L. Dorgan (D-N.D.).

Tom Riley, a spokesman for John P. Walters, the White House's drug policy
director, noted that all of the allegations date back to the Clinton
administration. "The types of abuses alleged here wouldn't be possible
today. Since that time, stronger accounting procedures and greater oversight
have been applied," Riley said.

The indictments come at a time when the often-controversial anti-drug media
campaign had been enjoying some good news. After years of criticism that the
expensive and high-profile ads had little effect, a comprehensive University
of Michigan survey released last month found sharp reductions in teen drug
use over the past two years. The report's authors credited the campaign's
ads discouraging use of ecstasy and marijuana with helping fuel especially
large reductions in the use of those two drugs.

Early and Seifert are scheduled to appear in court Wednesday.