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Invoices, Lies & Four Trips to The Pokey

November 2002
We're in the nation's third-largest manufacturing business—I believe that's what I read about the commercial printing industry a while back. So naturally, given its size (and highly fragmented nature, you consolidators out there love to point out), there is bound to be a certain measure of the corrupt among us.

We are reminded of this periodically and, as a news outlet, there's an obligation for us to report on even the most sordid and shameful escapades of our brethren (and sisteren). A most recent example capped a federal investigation into New York printers and an advertising agency amidst charges of bid rigging, bribery, mail fraud and other offenses.

Entering the Hall of Shame are four gentlemen who pleaded guilty in September for conspiratorial activities:

The Guilty

Gabriel Casas, a former salesman for Manhattan-based The Color Wheel; Howard Marlin, CEO/owner of print broker Caysun Graphics; and Bertram Cohen, owner of Darby Offset, all of whom will celebrate the new year with January sentencing dates. Joseph Panaccione (aka Joe Payne), vice president and manager of graphics services at Grey Advertising, later entered a plea of guilty.

Casas pleaded guilty to two counts of conspiracy to commit mail fraud and one count of antitrust conspiracy. Marlin pleaded guilty to one count of conspiracy to commit mail fraud and one count of conspiracy to commit tax fraud. Cohen was nailed for one count of conspiracy to commit mail fraud, one count of conspiracy to defraud the Internal Revenue Service and to commit tax fraud.

Papers were filed on all the aforementioned, along with a laundry list of co-conspirators, in U.S. District Court, Southern District of New York. Haluk Ergulec, Color Wheel owner, and Birj Deckmejian—like Casas, a salesman with Color Wheel—were indicted this past May by a federal grand jury for conspiring to defraud certain Grey clients in a rigged billing plot in a period from 1991 until 2000.

Ex-Grey Executive Vice President Mitchell Mosallem, Panaccione's boss, is also named as co-conspirator. And now, the juicy plot, courtesy of the court papers on the case against Casas:

Casas was primarily responsible for servicing Grey Advertising of Manhattan, which provides advertising, marketing, public relations and media services. With 12,000 employees in 90 countries, it is one of the largest ad agencies in the known universe. One of Grey's customers was Brown & Williamson Tobacco (B&W), best known for its line of smokes, including Kool, Lucky Strike and Pall Mall.

Color Wheel supplied graphic services to Grey, including retouching. Grey used these services in the course of developing advertising and marketing campaigns. Mosallem was responsible for establishing procedures for the selection and supervision of graphics suppliers, including the initial review and authorization of their bills for payment.

Enter B&W. To ensure that it received the best value on goods and services from third-party providers working with Grey, B&W required Grey to obtain at least three competitive bids for any single contract exceeding $25,000.

Casas submitted bids for Color Wheel to Grey for retouching work, with the understanding that Color Wheel would be awarded all of the B&W contracts. Casas submitted bids with inflated prices, given that: 1. he knew Color Wheel would receive the retouching contract, 2. the inflated prices had been agreed upon beforehand and 3. a number of co-conspirators submitted intentionally high non-competitive bids. On the third count, the bogus bids would make it appear that B&W's agency, Grey, had received competition for its contracts, which was not the case. In exchange for their submission of phony high bids, these actual graphics suppliers could bid and win contracts with Grey to do work for other Grey clients.

Fuzzy Math

Certain line items on the invoices were inflated to allow Color Wheel to recover three types of expenses: a. the cost of tickets to theater, sporting and cultural events for Mosallem, Panaccione, other Grey senior employees or executives and family members; b.recover the cost of printing wedding invitations, holiday cards and other personal items for the same people; and c. charges for work Color Wheel had performed on earlier jobs for other Grey clients that were not recovered due to, among other things, budget overruns.

Casas tracked the amounts of Color Wheel's expenses while Panaccione identified which jobs should be inflated, along with where and how the price puffs should appear on the invoices.

Since much of the work, by the printers and the ad agency, involved crossing state lines, it became a federal offense. This is in violation of the Sherman Anti-trust Act. Since much of the material was mailed, it also became a matter of mail fraud.

Let this be a lesson to all printers who seek to defraud customers via second- or even third-party conspiracies—stick with counterfeiting. As Homer Simpson would say, that's a victimless crime.

By Erik Cagle
 

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