Official And Confirmed (Indirectly): Feds Are Probing Media-Buying Practices

Today we got the first (if indirect) confirmation that the FBI and the U.S. Attorney General’s Office for the Southern District of New York have launched a formal investigation into media-buying practices.

The confirmation didn’t come from the feds — they rarely comment on ongoing probes. In fact, a spokesperson for the NY Southern District AG’s office confirmed Tuesday there would be no confirmation forthcoming from that office on the investigation.

And that’s about all the spokesperson had to say on the matter.

An FBI spokesperson returned a phone call and suggested I put my query in an email. I am still waiting to hear back on the written request for comment.

The confirmation came from the Association of National Advertisers, which disseminated a letter from CEO Bob Liodice to the group’s members (about 2,000) confirming the FBI had reached out to the organization’s legal counsel Reed Smith seeking cooperation with the probe.



The bottom line, it seems, is that the feds want help in identifying potential victims of media-buying fraud, which I guess they believe primarily fall within the advertiser sector.  

Liodice urged ANA members that believe they might be victims of fraud to get a lawyer, do an audit and figure out options. Liodice stressed the group itself is playing no part in coordinating member actions — what individual members do is entirely up to them.

So far, the agency community is being pretty quiet. Both WPP and IPG reps responded with a "no comment" when asked whether they or their agencies had been contacted by the FBI regarding the investigation. Omnicom and MDC Partners spokespersons replied the companies had not been contacted. Publicis Groupe and the 4As have not yet responded to requests for comment.

The point people at Reed Smith are Douglas Wood and Steven A. Miller. Wood serves as the ANA’s general counsel. Miller, a former federal prosecutor in Chicago, now specializes in complex financial investigations at the firm and partners with Wood on numerous cases.

In a brief phone interview, Miller declined to go into detail about the discussions he and Wood have had so far with the FBI regarding the investigation, other than to confirm that a request was submitted “for cooperation from ANA members.”

Miller added that he wasn’t sure how far along the probe was, but said “we expect it to be a long-term federal investigation about potential mail and wire fraud.”

Those are very broad statutes the government uses to investigate fraud. Could that include rebates provided to agencies by media companies — and not disclosed to clients —  in return for doing business? It could be, although Miller would not be drawn into a conversation about specific behavior the probe could cover.

What about a case in which a media company provides a rebate to an agency for doing business where the clients are clued in? What’s the difference between an illegal kickback — a bribe, basically — paid by a vendor to an agency or client for doing business and a legal rebate? Or a volume discount? Or a President’s Day special sale?

It all gets a bit murky, doesn’t it? That’s what the feds are trying to sort out.

My guess is that all the potential probe targets — agency holding companies, media firms, perhaps even some clients — are lining up legal talent as we speak.

4 comments about "Official And Confirmed (Indirectly): Feds Are Probing Media-Buying Practices".
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  1. Henry Blaufox from Dragon360, October 11, 2018 at 8:10 a.m.

    Does this meet the standard of fraud that calls for intervention by federal law enforcement? Or should the advertisers sue for civil fraud? After all, they should be able to watch out for their own interests.Who has suffered the harm?

  2. Maarten Albarda from Flock Associates (USA) replied, October 11, 2018 at 8:58 a.m.

    Henry: I suspect the interest to explore a potential case stems from the fact that the government is a large advertiser in its own right. So it might be that help is sought from experts to understand practices and nuances in advertising deals and dealings. If the probe concludes that the government in its relationships with their agencies has suffered financially, a case might be brought forward but I am going to guess that it would be settled out of court pretty quickly. If such a case was to come forward, I assume other advertisers might also start a negotiation process for themselves, if they have solid reason to believe that their circumstances are similar to that of the government's case. Note: this is all specualtion of course, and I have no legal background to back up any of these assumptions.

  3. Ed Papazian from Media Dynamics Inc, October 11, 2018 at 11:46 a.m.

    Maarten, I suspect that you are right.

  4. Tarry Shebesta from ACS, Corp, October 11, 2018 at 12:18 p.m.

    Would the practice of Google providing hidden kickbacks to agencies who spend PPC $$$ on behalf of their clients fall under this probe?

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