A colorful Memphis businessman whose company is one of the biggest buyers and sellers of televison and radio advertising time is under investigation on charges that he gave kickbacks to clients and skimmed millions of dollars from the company for his own use.
The businessman, William B. Tanner, heads William B. Tanner Co. Inc., which has been owned for the past year by Media General Inc., the Richmond communications giant that publishes the Richmond Times-Dispatch and News-Leader. Media General has not been implicated in the case.
Federal authorities charge that Tanner Co. gave clients sexual favors, new cars and envelopes full of cash in return for their business; that William Tanner controls a hidden inventory of television time that may be worth as much as $83 million, providing as much as $8 million a year in unreported income; and, in one instance, that he bought a group of Las Vegas slot machines with corporate funds and then kept the proceeds from the machines for himself. The government charges that Tanner may have maintained the allegedly hidden accounts as far back as the 1950s.
Agents from the FBI and Internal Revenue Service, armed with a search warrant alleging tax fraud, mail fraud and wire fraud and conspiracy, seized documents and records from the company on Wednesday after sealing the office building housing the firm.
The search warrant was accompanied by a 17-page FBI affidavit containing allegations of kickbacks and payoffs involving executives of some of the nation's biggest advertisers, as well as allegations of hidden accounts and front companies that Tanner allegedly used to "funnel money back to him personally," according to the search warrant.
Tanner could not be reached for comment. Media General Vice Chairman Alan S. Donnohoe said the investigation did not involve Media General but rather was focused on William Tanner himself. Donnohoe said Media General had sent a team of executives to Memphis to conduct its own investigation. "If any of these actions took place, they are clearly in opposition to the practices of our company," Donnohoe said. Media General bought Tanner Co. last year for $39 million, and William Tanner stayed on to run the company.
Companies such as Tanner Co. buy blocks of television and radio time and sell it to advertisers and advertising agencies, using cash, goods and services as currency. Tanner Co. reportedly has annual revenue of about $100 million from its barter deals involving about 200 large advertisers and 6,000 radio and television stations. Tanner himself uses barter to pay for everything from his suits to his $85,000 Stutz Blackhawk automobile, and even obtained the company's seven-story headquarters in a barter deal, according to a 1982 Fortune magazine profile that dubbed him "the Sultan of Swap."
The FBI affidavit is based on interviews with two former Tanner executives and the manager of corporate security of a Tanner client company that conducted its own investigation of Tanner's practices. According to the affidavit, Tanner controlled a system of payoffs and hidden accounts that was concealed from his company's outside auditors and from most employes.
Information supplied by one of the former Tanner Co. executives alleged that the company was "engaged in the practice of making payoffs as a normal procedure in the day-to-day operations," the FBI affidavit says. "These payoffs were in various forms such as cash, automobiles, trips and other gratuities." In one instance, a former Tanner employe who had gone to work for a client as a media manager directed the client's advertising business to Tanner in return for a 6 percent cut of the client's bill, the affidavit says. Invoices were sent directly to the former employe at the client company and charged to an "overbilling account" at Tanner, according to the affidavit.
The other former Tanner employe charged that "cash payments were made constantly," according to the affidavit. "For example, an individual who handled the media advertising account for a particular company may have an envelope filled with cash dropped on his or her desk or find a new automobile parked in their driveway one day."
The affidavit also lists 70 companies and individuals that one of the former employes believed were receiving payoffs or were the names of fictitious accounts set up by Tanner to "funnel" money from the company for his own use.
According to the affidavit, Tanner also kept a hidden inventory of television and radio commercial time received in barter but not accounted for at fair-market value. The air time was obtained in exchange for radio and TV stations "jingles," promotional spots and other items prepared by the company's production department. "These ad-time spots are recorded on a separate set of inventory records which are 'hidden,' and the value of these spots is never carried into the general accounting system," the FBI affidavit alleges. This commercial time then would be sold to clients, with its actual cost never appearing on the company's books--and the profits apparently going to William Tanner.
One of the former employes gave the FBI a computation of the value of the hidden inventory prepared by Tanner's "right-hand man" that indicated it was worth $53 million in October 1979. Since then, the value of the hidden inventory had increased by as much as $30 million, and it appeared that it had been producing about $8 million a year in income since 1978, the ex-employe estimated. This income apparently had not been reported to the IRS.
Tanner allegedly also would keep advertising credits that were supposed to go to clients as compensation for incorrect airing of commercials by radio and television stations. In one case cited in the affidavit, a station that had aired spots for Mrs. Paul's frozen foods at incorrect times gave Tanner Co. a $10,000 credit for advertising time that was not forwarded to the Mrs. Paul's account. "Occasionally, clients were advised that their commercials were aired at times other than those contracted, but they were never made aware the Tanner Co. received a credit as a result of the practice," the affidavit says.