Cooperative marketing fraud

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Cooperative marketing fraud

We never met a fraud we didn’t like. This one was not exceptional, but still sort of cute.

A client of ours is involved in the national sales of a commodity item. The product does not differ much from other similar products, nor are the distributors much different from others selling and distributing this or similar products. Because of these factors, the company relies heavily on advertising, which is, of course, the great differentiator.

The advertising is paid for through a cooperative marketing campaign in concert with the manufacturer of the product. The company pays for the advertising, and the manufacturer reimburses a portion or all of the advertising costs. Further, the local managers for the company place most of the advertising for their region, with the understanding that local managers know better which stations will attract the clientele interested in their product. Well – as always in this column – something goes wrong. It seems the advertising agency and one of the local managers were in league with one another to defraud the client.

The advertising agency claimed to have paid for 200 radio ads, but actually ran only 20 and added, with the help of a copy machine, an “0” to the number of adds run and to the total amount of the invoice. The funds for the 180 phantom ads were then split between the local manager and the owner of the advertising agency.

How do you avoid this? Upon request, each radio and TV station will supply an Affidavit of Performance that is signed and notarized. While these too can be subject to copier “creation” and alterations, the customer can require that they be sent directly from the station that ran the ads. The FCC also requires both TV and radio stations to maintain a log of everything that is broadcast. A client can simply call any or all of the TV and radio stations that are listed on an invoice and ask for a copy of the log showing the ads that were run. This log is a public document; the station is required to keep it and to make it available to the public.

For printed media the equivalent is a tear sheet (the advertisement torn out of the publication) sent to the client along with an “Affidavit of Publication”

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