• Ad Age, Wednesday, January 7, 2009 11:15 AM

While denying any wrongdoing, Leo Burnett has agreed to pay $15.5 million to settle allegations that it overbilled the U.S. Army for work on its "Army of One" campaign, Jeremy Mullman reports. In doing so, Burnett avoids the risk of being barred from future government contracts.

Two whistleblowers from inside Leo Burnett claimed the agency treated the work of its own Internet unit as if it was performed by a third-party contractor, and that it inflated the costs of subcontractors it worked with, in order to increase its profits. They will receive a $2.79 million share of the settlement.

"Leo Burnett strongly denies the claims in this civil proceeding and believes the government's claims have no merit," Burnett CEO Tom Bernardin wrote in a memo to his staff. And while it considered taking the case to court, it decided "litigation can be a long, expensive and uncertain process," he says.

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