Posted by Amanda Chapel
In a trial that has sent shock waves throughout the PR Industry, jurors have found former Fleishman-Hillard execs Douglas Dowie and John Stodder guilty on all counts. Dowie, was convicted Tuesday of 15 counts of conspiracy and fraud in a scheme to overbill Los Angeles taxpayers for public relations consulting services. Stodder was convicted of 12 similar charges.
The foreperson said a combination of precise billing records and e-mails presented by prosecutors convinced jurors of the existence of the criminal enterprise. Another juror cited a series of e-mails among Dowie, Stodder and other Fleishman-Hillard executives in Los Angeles and the firm's headquarters in St. Louis. In them, Dowie asked that the billing be "padded" to help meet monthly revenue projections, and Stodder repeatedly directed his subordinates to bill more time to the city.
Dowie and Stodder were indicted last year after seven former Fleishman-Hillard employees told The LA Times they were encouraged -- sometimes told -- to falsify the hours they worked on the Department of Water and Power account.
The defendants' former colleagues said each repeatedly justified their billing practices as "value billing," which they described as charging for the value of the services provided rather than the hours worked. Witnesses for clients, including the DWP, testified that their contracts specified billing hourly.
Billing sheets and invoices dominated the trial, along with 1.2 million e-mails Fleishman-Hillard surrendered.
Testifying under a grant of immunity from prosecution, Monique Moret, a former Fleishman executive, spent 14 hours on the witness stand implicating Stodder in the overbilling scheme.
The Fleishman-Hillard scandal has had a broad effect on the public relations industry. Mike Cherenson, an official with the Public Relations Society of America, said, "The entire profession has taken note of this case." PRSA put out a memorandum to its 20,000 members reminding them to only "charge for the work we do," Cherenson said.
Each man was convicted of one count of conspiracy, which can be punished by five years in prison. Dowie's 14 wire fraud convictions and Stodder's 11 are punishable by prison terms that range up to a maximum of 20 years per count. A sentencing date was not set.
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Ummmm.....I know I'm not in this industry, specifically, but I am in an industry where I bill for time.
Is there perhaps a problem when an industry support organization has to remind its members to only bill for what work has been provided?
Is that something new? Should I be in the middle of a career change?
The problem is with the industry support organizations, not the industry itself. Most PR agencies and professionals I know bill their clients in an accurate, ethical way. Unfortunately, the trade organizations that represent our industry are, for the most part, out of touch and largely ineffective. They lack leadership and real opinions and often, as in this case, their "advice" does more harm than good.
"The problem is with the industry support organizations."
Excuse me but the industry support organizations are comprised of industry executives.
With regard to "Most PR agencies and professionals I know bill their clients in an accurate, ethical way"... YISSSH!
With all due respect Jane, I think you're delusional. I think it is rare for an account executive not to feel pressure to pad their hours and act on that. The scary thing about F-H scandal was that they (HQ) was apparently aware.
"Another juror cited a series of e-mails among Dowie, Stodder and other Fleishman-Hillard executives in Los Angeles and the firm's headquarters in St. Louis. In them, Dowie asked that the billing be "padded" to help meet monthly revenue projections, and Stodder repeatedly directed his subordinates to bill more time to the city."
It's not that padding is rare, the question is what percent of the industy's revenues does it represent?
Are there AEs who feel pressure to pad their hours? Yes, I think that's a fair assumption to make. That issue exists, I would imagine, in any billable industry. But in my experience, overservicing clients and not billing them for hours and hours of work is much more prevalent than the occasional lowly AE who feels pressure to stay fully billable. And even more so than the AE who actually acts on that and pads his/her hours.
The F-H scandal is really scary, I agree. But I also think it's pretty dangerous to say, as you did in the title of your post, "PR Found Guilty." F-H's executives were found guilty, not this industry. I'm wary of any kind of over-generalization like that, as should you be. It may make for sexier reading, but it takes away from the very specific issue at hand.
Getting back to my original point: I confess to not really understanding how the PRSA is run or being familiar enough with its leadership to form an honest opinion. But I do now how the Council of PR Firms is run, and who runs it. I challenge you to find one person who would say that the Council is run by top industry leaders. It's a couple of industry has beens, who, in my opinion, would have a very difficult time getting hired by any PR agency who is familiar with them, their work, and their responses to issues like these.
As to "dangerous to say, as you did in the title of your post, 'PR Found Guilty.' F-H's executives were found guilty, not this industry"... You are wrong Jane. First off... It's dangerous NOT to recognize for with it is. This IS an indictment of the Industry. Padding IS a common practice. Again, the question is not if it happens; the question is to what degree it represents the sum total of Industry revenues.
Bottom line, we sell intangibles. We make shit up! And that creativity doesn't just stop when accounting for time or preparing the client bill.
Add to that the demands of Wall Street. Profit expectations (as most firms are now owned) IS an absolute recipe for malfeasance. Why did the F-H scandal happen? Because Dowie had to fulfill the expectations of St Louis. Simple as that.
As to your experience, "over-servicing clients and not billing them for hours and hours of work is much more prevalent than the occasional lowly AE who feels pressure to stay fully billable"... I cannot help you with that. It sounds either naÃ¯ve or sheltered.
Here.. just imagine the look on the face of any CEO of any top firm when his secretary says, "Eliot Spitzer's on line one."
I don't think a single BigPR firm could stand up to the kind of billing scruitiny we see here and get off without people going to jail. I didn't even know the trial was going on. But I do know that the practice of "value billing" (and its wide definition) has been alive and well in PR forever. Jane, AEs, SAEs, VPs and SVPs don't "feel pressured," they ARE pressured.
This one will have ripple effects right down to the business model layer.