Rare is the controversy so touchy that public relations men won't talk about it, but two of the biggest PR firms in Washington are both saying "no comment" to questions about a multimillion-dollar lawsuit they're involved in.
Robert K. Gray, chairman of Gray & Co. and an old friend of President Reagan, is suing his former employer, Hill & Knowlton Inc. Gray claims that he was cheated when Hill & Knowlton was sold in 1980 to the J. Walter Thompson advertising agency.
Gray headed the local Hill & Knowlton office before it was bought out by Thompson and at that time owned 8 percent of the firm, usually ranked as the biggest public relations outfit in the country with 11 offices.
Gray opposed the sale and soon afterward left to start his own firm, which in barely two years has become the fastest-growing PR agency in Washington.
Now in a lawsuit filed in U.S. District Court, Gray says he didn't get a fair price for his stake in Hill & Knowlton because of lies, fraud and securities law violations by J. Walter Thompson executives.
The lawsuit says Gray lost $1,150,000 on the deal and claims he's entitled to triple damages for that loss plus other expenses and $5 million in punitive damages. In all, Gray wants $9.2 million.
Neither Gray & Co. nor Hill & Knowlton would comment yesterday on the lawsuit.
"Our position is that we're still studying the documents, and we'd rather not comment," said Bob John Robison, managing director of the local Hill & Knowlton branch. "The firm will defend the suit vigorously."
As for Gray, "He's trying to avoid a public airing of the case," said John Jesser, the PR man's PR man.
Gray rarely maintains such a low profile. He was the highly visible chairman of Reagan's inauguration, is a leader in the fund drive to rebuild Wolf Trap and flaunts his firm's influence by listing its address as The Power House because the building it occupies once was one.
When he left Hill & Knowlton after 20 years and started his own firm, Gray quickly attracted a blue-chip clientele willing to pay top dollar for his influence and visibility.
For his 8 percent interest in Hill & Knowlton, Gray got an undisclosed amount of cash, plus J. Walter Thompson stock that was valued at $2.3 million, the lawsuit says.
Gray claims Thompson was guilty of fraud, because the shares proved to be worth much less. In the suit, Gray maintains officials of J. Walter Thompson falsely inflated the value of that company's stock by padding profits. In its 1981 annual report, the ad agency disclosed that it had uncovered $30 million in "falsely reported earnings" due to "fictitious accounting" by a television program subsidiary.
Thompson was forced to refigure its earnings, and as a result the price of its stock plummeted and the value of Gray's shares dropped by more than $1 million.
Gray also charges J. Walter Thompson violated federal securities laws by not telling him that the stock he got in the deal could not be sold for two years and that he was defrauded because of other false statements made during negotiations.