Essay Fifty-Five

RJ Dale Advertising and the Illinois State Lottery account continue to make news. Or rather, the Chicago media continue to make the events seem like news. The most recent stories simply regurgitate information already disclosed. And the repetitive hints of illegal misconduct have yet to draw any official charges. The following story appeared in the Chicago Tribune on June 13, 2005. MultiCultClassics offers its two cents below the newspaper report.

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Ad firm’s woes dismissed

State awarded deals despite money issues

By Rick Pearson
Tribune political reporter

June 13, 2005

Only days after Illinois Lottery officials acknowledged that R.J. Dale Advertising & Public Relations was having financial problems, they gave the firm a $7.1 million no-bid contract extension and made it the lottery’s chief advertising agency, state records show.

The records also show that even as the lottery was bumping up R.J. Dale Advertising’s contract, lottery officials knew the firm was having financial difficulties involving another R.J. Dale client, Jewel-Osco.

Lottery officials have previously said they required R.J. Dale to form an escrow account to ensure lottery vendor bills were paid. But that account was formed several months after R.J. Dale had established its own escrow account, when it had a smaller contract to provide black-oriented lottery advertising.

State records involving that escrow account, obtained by the Tribune, show that the lottery knew the firm was under financial pressure when it decided in early 2004 to give R.J. Dale a multimillion-dollar infusion of cash and added responsibilities.

Robert J. Dale, the ad agency’s owner, said Friday that the use of escrow accounts by advertising firms was “fairly common” and said such accounts assure that “vendors get paid.”

Asked if the early 2004 escrow agreement was an indication of financial problems, Dale said: “We're a small business and, like so many other businesses, we have financial difficulties. There’s no story in that.”

The earlier escrow agreement, signed by R.J. Dale and approved by lottery officials, raises new questions about the lottery’s relationship with the firm — an issue first brought to attention when a state audit last month contended the firm received millions of dollars from the lottery though it lacked the documentation to back up the payments. Dale disputes the audit finding and contends it is owed money by the state.

But lawmakers involved in state purchasing questioned whether it was wise for the lottery to enter into an expanded financial agreement with a financially troubled firm.

“I think it’s troubling when you have a state vendor struggling to meet its responsibilities for its contractual obligations and you give them a contract expansion while they’re still trying to reorganize,” said state Sen. Steve Rauschenberger of Elgin, a leading Republican on state procurement who also may run for governor.

The auditor general’s findings, as well as a previous inspector general’s investigation of the lottery that wrapped up Sept. 30, have formed the basis for an investigation of the lottery by Atty. Gen. Lisa Madigan. In addition, the state ordered a special forensic audit of lottery billings and payments involving R.J. Dale. The audit, with a price tag that has risen to $60,000, was to have been completed May 1, then mid-May, then mid-June and now is to be finished by the end of the month, lottery officials said.

Escrow agreement OKd

On Jan. 29 of last year, records show, lottery officials signed off on an escrow agreement in which R.J. Dale acknowledged it was “experiencing difficulties managing the payment of its debts and other obligations as they become due. Company has sought the advice and assistance of a consulting firm ... with respect to managing company’s collections of certain accounts receivable and accounts payable.”

The agreement notes that R.J. Dale’s creditors “will continue to do business with company, if company’s accounts receivable and payable are managed by an independent third party.”

The third party, a subsidiary of Associates for Quality Management Inc. of Libertyville, was given the responsibility by R.J. Dale to negotiate with the firm’s creditors involving media advertising for the lottery and Jewel-Osco and provide a system to pay them, according to the escrow agreement. Jewel-Osco officials declined to comment.

Only days after lottery officials signed off on the escrow agreement on Feb. 3 of last year, lottery officials began on an emergency basis the process of turning over to R.J. Dale the duties of serving as the state’s primary lottery ad agency, replacing DDB/Chicago for the remainder of the 2004 fiscal year. DDB/Chicago gave up the state contract, contending the lottery wanted to focus too much of its energies on sales to the black community.

In replacing DDB/Chicago, the lottery gave R.J. Dale a $7.1 million, no-bid contract extension, state records show.

“My question is why this was approved when, by their own admission and their own escrow, R.J. Dale was in financial trouble already?” asked state Rep. Frank Mautino (D-Spring Valley), who co-chairs the Legislative Audit Commission. Mautino said he would seek answers from the lottery when his panel reviews the lottery’s state audit.

But a lottery spokeswoman said DDB/Chicago’s decision to give up the lottery ad contract “created a need to find someone to step in fast.”

“R.J. Dale had done good work for lottery, was already on board, and was [the] logical choice after their impressive presentation to win” the contract for African-American-oriented advertising in 2003, said Geraldine Conrad, a spokeswoman for the lottery’s parent agency, the state Department of Revenue.

Conrad said that later in 2004, the lottery required R.J. Dale to maintain an escrow account to assure the payment of vendors later after the ad firm won a two-year, $38 million contract as the lottery’s prime advertising agency against 12 other firms.

“Lottery picked Dale for its creative capabilities and presentation of ideas,” Conrad said. “This is a small, local firm whose creative work landed a big contract. (The Department of) Revenue made certain that an escrow agreement was set up to assure that vendors were paid and lottery got services it paid for. This system is working.”

Award-winning firm

Dale’s firm last week touted its five awards for lottery TV advertising in 2004 and 2005, including a spot featuring comedian Bernie Mac. Dale and lottery officials also have said the firm is responsible for an 8 percent increase in sales last fiscal year over the year before.

In Oct. 22 of last year, a second escrow agreement involving the lottery and R.J. Dale replaced the earlier one. That escrow agreement, which the lottery said it requested, says “certain of the company’s vendors and customers have requested an independent paying agent be appointed” to pay invoices.

Dale, the ad firm’s owner, said it was “hard to answer” whether anyone looking at the language of the earlier January 2004 escrow agreement would view his company as being in financial trouble.

“The way the vendors look at [the escrow agreement] is that it is just the best assurance they could possibly have that they would receive their money in a timely basis,” Dale said. “It’s not uncommon for a small business to have financial struggles, and we work through them.”

Dale, whose firm became the first African-American-owned business to get the lottery’s primary ad contract, maintained the heightened scrutiny that his firm has undergone is a result of “some people inside government and outside government who would like to see this contract revert to the place where it’s always been — large, white-owned [ad] agencies.”

“If you looked at it from a black person’s perspective, you would understand how we arrive there,” Dale said.

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After carefully reading and re-reading the latest Chicago Tribune story, MultiCultClassics asks, “So what’s the real problem here?”

RJ Dale Advertising struggles with financial woes. Big, fucking deal. The newspaper’s investigative reporter would have more difficulty finding a Chicago advertising agency not struggling with financial woes. Count all the companies that have literally vanished over the last decade. Or take a look at Chi-town shops like J. Walter Thompson, Campbell Mithun or Euro RSCG. RJ Dale’s money hassles make the company completely typical in today’s industry. So what’s the real problem here?

Lottery officials openly admit to having known of RJ Dale’s cash dilemmas before awarding the entire account. It could be assumed that decision-makers from both parties held honest, straightforward discussions early on, which actually demonstrates a tremendous amount of professionalism and integrity. So what’s the real problem here?

It’s not unprecedented for governmental institutions to make special arrangements with businesses. How many airlines, automakers, department stores, construction firms, manufacturers and other corporations have benefited from legitimate governmental partnerships and assistance? (There are plenty of semi-similar scenarios in the advertising industry. For example, Leo Burnett pays annual fines to the City of Chicago for deliberately breaking the law by allowing employees to smoke in its building — an action obviously bankrolled by the company’s client, Philip Morris.) When speaking about RJ Dale’s escrow agreement, a spokeswoman from the state Department of Revenue clearly said, “This system is working.” Additionally, everyone points to increased lottery sales and award-winning work. So what’s the real problem here?

Another increasingly annoying note involves DDB, the agency that handled the Lottery account before RJ Dale. DDB allegedly “gave up the state contract, contending the lottery wanted to focus too much of its energies on sales to the black community.” Let’s get real — lotteries are technically legalized gambling. So it might be controversial to target lower-income folks with this product (although no one has stated the Lottery is focusing on lower-income Blacks). However, it seems hypocritical for DDB to take such a noble stance. After all, they have a relationship with Spike Lee’s advertising agency. Additionally, DDB creates messages targeting Blacks for State Farm Insurance, Budweiser and the artery-clogging edibles from McDonald’s. These efforts are arguably as controversial as lottery ads — hey, insurance is much more despised than lotteries. So what’s the real problem here?

The media often zeroes in on all the auditing of RJ Dale. But anyone familiar with the industry knows there are few ad agencies on Earth that don’t undergo regular audits from holding companies, clients and the government. Granted, the majority of agencies are not subjected to the scrutiny this minority shop has experienced. Yet based on the information made public so far, there is little visible wrongdoing. Even the critical politicians merely pose questions versus spew condemnation. So what’s the real problem here?

Now Attorney General Amy Madigan — whose own career, incidentally, was aided by political family ties that could easily be deemed suspicious — is leading further investigations. Perhaps Madigan will succeed in exposing the smoking gun others have failed to uncover thus far. Regardless, the media and assorted pundits might consider delaying final judgments until damning evidence is presented. Or any damned evidence, for that matter. Instead, everyone submits accusations and negative implications. So what’s the real problem here?

Agency owner Robert J. Dale believes his company is being targeted with discriminatory and racist actions. “If you looked at it from a black person’s perspective, you would understand how we arrive there,” Dale said. Lots of individuals associated with Black-owned businesses share Mr. Dale’s point of view. Conversely, most critics are incapable of seeing things from a Black person’s perspective.

So is that the real problem here?