• by February 5, 2002

Advertising agency Ogilvy & Mather North America has agreed to pay the government $1.8 million to settle claims that it overcharged the U.S. Drug Czar's office for work on anti-drug ads, the Justice Department said on Monday.

Ogilvy, the U.S subsidiary of international agency WPP Group Plc (WPP), will pay the government $689,744 in cash and revise its pending charges to the government downward by more than $1.1 million to settle the allegations, the department said.

The government had alleged that the ad agency violated U.S. law by submitting false paperwork for services it provided in 1999 and 2000 under a contract with Drug Czar's office, formally known as the Office of National Drug Control Policy.

"This settlement illustrates the United States' determination to recover funds inappropriately billed on government contracts," Assistant Attorney General Robert McCallum, Jr. said in a statement.

Under the contract, first awarded in 1999, Ogilvy produces ads designed to discourage the use of illegal drug use, like those aired during Sunday's Superbowl broadcast.

Ogilvy admitted no wrongdoing in the settlement. A spokesman for the company said the government had gotten its money's worth from the contract.

"We believe that Ogilvy performed the substance of this contract in an exemplary manner," the spokesman said.

The contract for the anti-drug ads is valued at about $15 million a year and is renewable by the government a year at a time, according to Ogilvy's spokesman.

Last year officials with the agency decided not to renew the contract and instead put the work up for rebid. However, the Ogilvy spokesman said the firm is one of the bidders and still hopes to keep the work. The contract expires in March, according to Ogilvy's spokesman.

"I don't think it helps our chances, but I don't think it precludes it either," the spokesm???a result of the case, he said, "We have created a billing system that ought to be state of the art in the industry. So it ought not be an issue longer."

The Drug Czar's office had alleged that Ogilvy charged too much for the ads because it had submitting "inaccurate" time sheets that overestimated the amount of work its employees had devoted to the campaign.

Ogilvy "did not exercise reasonable control to ensure that billings for labor were accurate," the department said.

But the ad agency admitted only that it had made "technical timekeeping errors."

"Ogilvy was a first-time federal contractor, and although we outperformed the contract and underbilled the (Drug Czar) for our work, we recognized our responsibility for our billing mistakes, and cooperated fully with the government to resolve them," Ogilvy said in its statement.

"We are pleased now to be able to put these issues behind us and move forward," Ogilvy said.