Taking the Drug Czar

The U.S. subsidiary of one of the largest advertising agencies in the world has agreed to pay the United States $1.8 million to resolve claims that the company overcharged the Office of National Drug Control Policy (ONDCP).

Ogilvy & Mather North America will pay the government to settle claims under the False Claims Act and administrative claims that the firm overcharged ONDCP, also known as the Drug Czar’s Office, in 1999 and 2000 for labor costs on a contract to provide advertising services.

Ogilvy will pay $689,744 in cash and will submit amended administrative claims for incurred costs on the contract to reflect a reduction in incurred costs claimed of $1,150,256.

Ogilvy & Mather has a cost-plus fixed-fee contract to provide advertising services for ONDCP.

The settlement resolves allegations that Ogilvys’ labor charges in the advertising firm’s invoices for work performed in 1999 and 2000 were based on inaccurate timesheets submitted by employees and that the company’s management did not exercise reasonable control to ensure that billings for labor were accurate.

The Winnie the Pooh Files

Walt Disney Company has systematically destroyed “massive amounts of documents … hundreds of boxes and thousands of pages” that might have shed light on whether the company withheld or underreported royalties to Stephen Slesinger Inc. — the company that holds the majority of North American rights to A.A. Milne’s Winnie the Pooh character.

That’s according to recently unsealed documents in a 10-year old case by Slesinger Inc. against Disney being fought out in state court in Los Angeles.

Slesinger claims that it has been shortchanged hundreds of millions of dollars on royalty payments for videos, computer games, stuffed animals and theme parks.

Last year, Los Angeles Superior Court Judge Ernest Hiroshige issued an injunction against Disney destroying other documents related to the case.

In June 2000, Hiroshige ordered Disney to pay $90,000 in monetary damages for the destruction of documents.

New evidence that emerged in January shows that Disney destroyed 400 to 500 boxes of documents — 10 times the number of documents Judge Hiroshige estimated were destroyed when he sanctioned Disney in 2000.

Disney’s lawyer Daniel Petrocelli told reporters that “Disney itself came forward to advise the court and the plaintiff that old obsolete files that had nothing to do with the case had been discarded years before.”

But Slesinger lawyer Bert Fields asked, “Why would a conservative judge order Disney to pay $90,000 for destruction of documents if they had nothing to do with the case?”

“Are you trying to tell me that a file titled ‘Winnie the Pooh legal problems’ had nothing to do with this case?” Fields asked incredulously. “That file was also destroyed.”

Field said a trial in the royalties case should be set before the end of the year.

Fields said that damages could reach into the hundreds of millions of dollars.

“Disney announced publicly that Pooh licensing revenue was $3.3 billion for one year — 1998,” Fields said. “Stock analysts estimated that in the year 2000 it was $4.5 billion. Disney’s internal projection was $6 billion.”

More Chapter 11 Horrors

Crompton Corporation, a U.S.-based pesticide manufacturer, notified Canadian authorities in November 2001 that it intends to pursue a $100 million claim against Canada for Health Canada’s de-registration of the toxic pesticide lindane for treatment of Canadian canola crops.

The claim is to be filed under NAFTA’s Chapter 11, which gives corporations standing to sue governments directly for compensation related to regulatory decisions that can be characterized as an “expropriation” of company property [see “NAFTA’s Investor Rights: A Corporate Dream, a Citizen Nightmare,” Multinational Monitor, April 2001].

“Lindane is known to be a powerful toxin,” says Kristin Schafer of Pesticide Action Network North America. “It is already banned in Europe and many other countries. No government should be forced to import such a toxin or to pay fines when it takes steps to protect public health.” According to the Pesticide Action Network, lindane is also banned for use on canola in the United States.

Lindane is persistent in the environment, highly toxic, a suspected endocrine disrupter and has been linked to breast cancer.

Documented health effects include dizziness, seizures, nervous system damage, immune system damage and birth defects.
Lindane has been found in breast milk and blood samples throughout the world, and it is found more often than any other persistent chemical in the arctic environment.

Environmental groups called on Canada to stand up to Crompton and to neither pay the money demanded nor settle the suit. “The government of Canada must not give in to corporate bullies like Crompton,” says Angela Rickman of Sierra Club Canada. “Canada must demonstrate that it will not let narrow corporate interests dictate the health of its citizens.”

— Russell Mokhiber