A $30 million irregularity
The scandal had all the ingredients of a prime-time television soap opera.
Millions of dollars were suddenly discovered missing at a major corporation. The main characters: an ambitious, up-from-the-secretarial-pool woman executive known as the Godmother and a hard-driving chief executive whose profit goals were unexpectedly shattered by a series of mysterious losses.
That was no mere melodrama. Last week Don Johnston, chairman of the JWT Group Inc., the parent company of J. Walter Thompson Co., the world's second largest advertising agency after Young & Rubicam, admitted that more than $30 million in phony revenues had turned up in the firm's records. Writing off the losses pushed J. Walter Thompson's 1981 earnings down 43%, to $7.1 million. Moreover, the company also admitted that two clients had been charged for television commercials that were never aired. The agency belatedly returned the money to the two firms.
The J. Walter Thompson drama began unfolding on Feb. 4 with the surprise announcement that Senior Vice President Marie Luisi, 46, had been suspended without pay. An investigation had disclosed that computer records in her department had been doctored to record fictitious revenue.
The announcement was a shocker.
Dark-haired and vivacious, Luisi was a Madison Avenue success story. She had started at J. Walter Thompson at 17, straight out of a Brooklyn high school, and worked her way up from secretary to a position near the very top of the company.
One of Luisi's key responsibilities as the head of the agency's syndication department was to supervise a system known as barter. She bought television programs, such as The Osmonds at the Ohio State Fair, from independent producers and then sold them to television stations. Instead of paying cash for the shows, the stations gave the agency advertising time on the air. The agency stored the unused commercial allotments in a computer "time bank" until they were sold to clients. Barter, which is used by several leading advertising agencies, can be very profitable when the time is sold for more than the programs cost to buy.
According to J. Walter Thompson officials, Luisi's department in 1978 began falling behind the aggressive profit projections that Johnston set for all parts of the agency. Luisi was having a harder time getting television stations to run the company's programs, and commercial time was not being sold. Meanwhile, her department was spending $30 million on new programs.
Someone with access to the company computer then began boosting revenues artificially by recording entries for programs that had never run and commercial time that had never been put in the time bank or sold. As profit goals rose higher, more fictitious accounts were created. There is no evidence, however, that any money was illegally expropriated.
The deception went undetected until last May, when a team of accountants discovered a discrepancy in the department's records. An inquiry was launched that eventually developed into a full-scale investigation. As attention began to focus on Luisi, she hired Criminal Lawyer Ivan Fisher, whose clients have included Convict-Author Jack Henry Abbott.