Advertising Agency Sued for Overcharging

How advertising agencies can deviate their clients' money for their own benefit.

Friday, February 25, 2011

IBM sued Ogilvy & Mather for overcharging its services for millions of dollars.

The recent lawsuit against Ogilvy & Mather by IBM for overbilling highlights the need to maintain a tight control over contracted advertising agencies. John Siefert, chairman of Ogilvy, acknowledged that the agency had overbilled IBM in the purchase of digital media. It is the third time that Ogilvy is sued by customers accused of overbilling.

How the scheme works:

When an advertising agency is hired for an ad, any discount for volume, discount or price advantage should benefit the customer, not the agency. In return for their services, the agency receives a flat fee or a percentage to place the ads.

But some agencies find ways for discounts or price advantages to stay within their wallets and not the customers. Generally, contracts signed with customers prohibit this practice but customers are historically bad at auditing agencies, allowing them to keep their money. That is basically the accusation Ogilvy is facing now, company owned by WPP (WPPGY).

More on this topic

Guatemala: Former Directors of Bancafé Prosecuted

March 2013

The Banking Unit of the Prosecution Office Against Organized Crime has accused them of a special case of fraud, comprising continuous money laundering and financial intermediation.

Eduardo Manuel González Rivera, his sons Manuel Eduardo and Jorge Alfredo Gonzalez Castillo, Ariel Estuardo Camargo Fernández, Moisés Cupersmith, Óscar Salazar Perdomo, Gloria Marina Barrios Pineda, Eduardo Antonio Palomo Escobar and his son Eduardo Alberto Palomo Marh, Patricio Andrade Falla, Álvaro Maldonado Vásquez, Celeste Aída Desirée Soto de Vetorazzi, Francis Frederick Fisher Theriot and Juan Eladio Campos Moraga, are accused "of having defrauded the company and led to its bankruptcy."

Ponzi Scheme with Costa Rican Investments?

August 2010

A lawsuit filed in the U.S. accuses a company of luring investments from retirees using a ponzi-like scheme.

The text of the lawsuit establishes that during the past six years, Paragon Properties of Costa Rica, a Hollywood-based company, received money from over 900 U.S. retirees, promising to build residences in various Costa Rican communities, insisting that unhappy investors would receive 100% of their money back.

Real Estate Fraud in Costa Rica

August 2009

It is reported that up to 30% of Costa Rica's real estate offers may hide some sort of fraud.

Before considering investing or purchasing a property in Costa Rica, two key issues must be taken into consideration:

-Costa Rica's complex legal system is based in the old Napoleonic Code, and its general motto is "If there's no blood, there's no damage". Taking a civil issue to the courts costs a lot of time and money.

Rica Foods pays fine and leaves AMEX

January 2009

The Costa Rican company has agreed for the Stock Exchange Commission to revoke its registration, resolving an accusation of financial fraud.

In the elNuevoHerald.com it is reported that "Rica Foods, a poultry processor and feed producer based in Miami, and its former executive director resolved the case of financial fraud presented by the Stock Exchange Commission (SEC).

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