Jailhouse Rocker: Mosallem vs. WPP

NEW YORK -- Mitch Mosallem, the former chief print buyer at Grey Global Group who was convicted of taking kickbacks to assign the agency's printing contracts, has sued his former employer, claiming the agency wrongly framed him for the scandal, and alleging further wrongdoing in Grey's London office, according to the suit.

He has also written a letter from his jail cell to WPP Group CEO Martin Sorrell, threatening to release "close to twenty boxes of records, memos, computer printouts, and other information conclusively proving that Grey, Grey senior management, and others shared my guilt and in several instances took leadership roles in the crimes I have been convicted of," according to a copy of the letter. WPP acquired Grey in 2004, three years after the kickback scandal was discovered.

Mosallem's Dec. 16, 2005, letter suggests that WPP pay off his legal obligations as "settlement" of the case. He wants $4 million, per the suit.

Grey's lawyers have filed a motion to dismiss Mosallem's suit. They attached the letter in an attempt to demonstrate that Mosallem failed to serve WPP properly with legal papers, and that his claim must therefore be thrown out. Arguments in the case will be heard May 23 in State Supreme Court in New York.

The suit names the agency, chairman Ed Meyer, CFO Steven Felsher and former vice chairman/general manager Bob Berenson as defendants. "It is our company policy to never comment on pending litigation," said a rep for Grey. A lawyer for the firm that represented Grey during the kickback investigation said, "We think the complaint has absolutely no merit."

A representative for Sorrell declined to comment.

Observers gave Mosallem's suit slim odds of success. "There's no way in my opinion that a court is going to award him damages from his company for the suffering that has occurred as a result of his criminal conviction," said Barry Boss, an attorney at Cozen O'Connor in Washington, who has white-collar crime experience.

The Grey printing scandal occurred between 1991 and 2001. Mosallem and two colleagues at Grey were accused of conspiring with sales executives at Color Wheel, a New York printer, in a kickback scheme in which Grey staffers were showered with cash, gifts, tickets to sporting events, vacations—and, on two occasions, prostitutes—by Color Wheel executives. Color Wheel then recouped the charges by inflating print bills for Grey's clients. Procter & Gamble and Brown & Williamson were the most heavily defrauded clients in the scheme. A total of $3.5 million was added to bills for P&G and B&W, which spent $20 million and $13 million in print reimbursables, respectively. Ultimately, the investigation that spiraled out of Grey led to the indictment of 22 people in the New York print advertising business. All but one were convicted. Mosallem pled guilty to fraud and antitrust violations in 2003 (Brandweek, Nov. 8, 2004).

Mosallem's new complaint alleges that Grey's London office also had an under-the-table scheme with its printer, Wace.

According to Mosallem's suit, Wace sent a proposal to Roger Edwards, Grey London's managing director/group chairman in the early 1990s. "The proposal was for a global arrangement involving kick-backs, bid-rigging, discounts and client overbilling in the form of cash, free work and other benefits to both Wace and Grey," the suit states. The Wace proposal later became the subject of memos sent between Meyer, Berenson and Felsher, Mosallem alleges.

Grey London's Edwards "proceeded with the proposals set forth by Wace," Mosallem's suit claims. "Grey did not, however, reveal the extent of the corporate discounts and rebates it received that were not passed on to its client," the suit says. Generally, clients require agencies to pass on savings from work contracted out to printers.

Edwards reportedly left the company in 1999. He could not be reached for comment last week. Four other former senior Grey U.K. executives who worked with Edwards at the time all either declined to comment or did not return messages last week.

Wace has since been acquired in a chain of mergers and essentially no longer exists except in name. Reps at two successor companies said either that no Wace staffers from the period remain at the new entities, or did not return messages for comment.

In the jailhouse letter to Sorrell, Mosallem claims he can document the Grey-Wace relationship and "can prove that Grey never adequately reimbursed its clients even after the conclusions of the London scandal. Many of these companies are still Grey clients who are totally unaware of how Grey ripped them off." Documents backing that claim have not been produced in court.

Reached in federal prison in Brooklyn, N.Y., Mosallem declined to comment for the record. He was moved there from prison in Allenwood, Pa., where he started his 70-month sentence in December 2003.

Mosallem's specific legal claims, which he filed without a lawyer, are that Grey withheld documents from federal investigators' subpoenas when he was being investigated; that Grey prejudiced his joint defense agreement with the agency by communicating to the feds information he had told Grey's lawyers in confidence; and that Grey falsely overstated Mosallem's role in the scandal.

Grey's defense papers argue that by pleading guilty Mosallem was the architect of his own fate and that therefore as a matter of law he may not profit from his conviction.

--Jim Edwards