OGILVY FENDS OFF COMPETITORS TO KEEP U.S. ANTIDRUG ACCOUNT

The U.S. selected Ogilvy & Mather Worldwide as its private partner in the
prestigious White House advertising campaign to eradicate youth drug abuse.
The decision gives the Madison Avenue powerhouse a new $762.1 million
contract with the government and a significant advantage in its struggle to
remain the key private player in a public-health advertising effort that
lately has suffered some embarrassing blows.

"To the surprise of a lot of people, Ogilvy has retained this very
important contract," says Rich Hamilton, chief executive of Zenith
Optimedia Group in New York, one of the agencies that was a finalist in an
eight-month showdown for the prize advertising assignment. "It is a huge
shock to a lot of us."

The government contract follows a "cost plus fixed fee" formula. Total
media spending is $151.9 million through July 2003, but the contract can be
extended annually for a total value of as much as $762.1 million over five
years. Mr. Hamilton described the campaign as a golden opportunity for an
agency to gain recognition and serve the public good while getting paid.

"It's advertising. It's high profile; it's in the face of consumers," Mr.
Hamilton said. "Congressional people see it. Everybody sees it."

In a statement, Ogilvy said late Wednesday, "We are delighted to continue
to work with the Office of National Drug Control Policy as its strategic,
research and media partner on the very important work being done on behalf
of the antidrug youth campaign."

A spokesman for the antidrug office said it will work with Ogilvy to fix
some of the shortcomings in the program and would no longer target 12- to
13-year-olds with antidrug messages. The target age instead will be
increased to 14- to 16-year-olds. The office also plans to broadcast
harder-hitting messages and thoroughly test all the commercials before they
run.

The government antidrug advertising program is largely funded by taxpayers,
who have spent nearly $930 million on the program thus far. The flashy
advertising program includes more than 212 television commercials intended
to inspire children to stay off drugs, some featuring such performers as
pop group the Dixie Chicks and hip-hop singer Mary J. Blige, and others
using young actors posing as drug users.

The campaign is considered a novel step in public-health advertising
because it is aimed directly at children. The individual ads are donated to
the program by advertising agencies around the country through the
Partnership for a Drug-Free America, a nonprofit group. Ogivly & Mather, a
unit of London's WPP Group, is the government's private contractor in the
effort, known as the National Youth Antidrug Campaign; the agency's main
role is determining where and when to broadcast the ads.

Ogilvy and the program have faced harsh criticism on a number of fronts,
ranging from bookkeeping problems for the agency's work to recent
allegations that the campaign has been ineffective with teens and might
even have spurred some youngsters to try marijuana . In February, Ogilvy
agreed to a $1.8 million settlement to resolve civil charges that it
inflated labor costs for its earlier work on the advertising program. A
separate criminal investigation focusing on whether Ogilvy employees
deliberately altered time sheets is still pending. Ogilvy denies any
wrongdoing.

In May, the nation's top drug official, John P. Walters, who heads the
White House drug-policy office, presented new third-party survey research
to Congress showing the campaign had largely failed to turn U.S. teens and
preteens against drugs. The research didn't focus on Ogilvy but on the
antidrug efforts in general during 2000 and 2001.

The government hired Ogilvy & Mather for the antidrug effort in 1999, when
the Office of National Drug Control Policy was overseen by President
Clinton's drug czar Barry McCaffrey. Ogilvy says that shortly after it was
hired it discovered some billing errors and brought the errors to the
attention of the government. Republicans in Congress called for the General
Accounting Office, the investigative arm of Congress, to look into the matter.

Last year, the GAO released a report stating Ogilvy improperly billed the
government by, among other things, having employees add billable hours to
time sheets. Ogilvy denies any wrongdoing but changed its accounting system
to meet government standards and reached the $1.8 million settlement.

The episode prompted the U.S. to issue an open call to advertising firms to
vie for the prestigious $150 million annual campaign.

The U.S. received five offers for the contract, and government officials
described the selection of Ogilvy as a "best-value acquisition." If the
U.S. decides to make any big changes in its antidrug ad strategy, it may
have to resolicit bids.