A report in Saturday's Business section misrepresented the relationship between the Kennedy Center for the Performing Arts and Gray & Co., the public relations firm that handles its advertising. The $2.3 million reported as Gray & Co. revenues from the Kennedy Center account represents gross media billings paid to Gray to advertise Kennedy Center productions. Gray & Co.'s fee is 15 percent of that figure, the standard commission retained by advertising agencies.
Gray & Co., a politically influential but troubled Washington public relations and lobbying firm, recently held discussions with two major advertising firms that may be interested in buying the company, a spokesman for Gray confirmed yesterday.
The firm has held talks with Ogilvy & Mather Worldwide, a large New York-based advertising and public relations firm, and at least one other unidentified advertising agency about the possibility of a sale, said Frank Mankiewicz, executive vice president of Gray.
Mankiewicz said the Ogilvy & Mather discussions were "very preliminary" and no figures were discussed about a possible purchase price. "The talks were mutual," he said, but added: "It hardly could have been us who wanted to acquire them."
Late yesterday, Robert Keith Gray, the company's chairman and owner of 70 percent of its stock, attempted to put a damper on speculation that Gray was looking to be bought out. The speculation had been triggered by a report of the Ogilvy & Mather talks in a New York newsletter.
"From the day we became a public company, we have known we not only should, but must, listen seriously to any offer that could affect our stockholders," Gray said in a memo to his staff read to a reporter by Mankiewicz. "Even when firms are determined to sell -- and we are not -- the prospects of any particular corporate marriage coming off are about one in 100."
The talks about a possible sale of the firm comes just 16 months after Gray opened his company to outside investors, making it the first lobbying firm to go public. It is now the largest lobbying and public relations firm in the city, with $18.05 million in revenue during its last fiscal year, 185 foreign and domestic clients, 180 employes and another 57 specialized consultants.
The firm, which has been best known for recruiting a bipartisan stable of well-connected Washington functionaries, has attracted clients ranging from the governments of Canada, Turkey and Haiti to the National Broadcasting Co. and the American Trucking Assocation. Its biggest client, however, remains the Kennedy Center for the Performing Arts, from which it received $2.3 million in revenue last year for handling its publicity and advertising.
Despite the rapid growth of the firm, it recently encountered a number of difficulties. It has found itself immersed in a murky international scandal involving some of its employes that has forced the resignation of its vice chairman, former OAS secretary general Alejandro Orfila, and has triggered ongoing investigations of the firm by the Justice Department and Securities and Exchange Commission.
The incident involved the apparent transfer of $250,000 from a Spanish utility company, which had been a Gray & Co. client in Madrid, to the public relation firm's bank account in Baltimore. The money was reported to have been paid to a Spanish legislator for work on energy legislation in that country, but the legislator has denied that he received the funds and the utility company has denied that it was trying to bribe him.
Nevertheless, Gray & Co. recently disclosed to the SEC that it has been forced to spend $650,000 in legal fees and other expenses related to the Spanish matter, including a $250,000 severance agreement with Orfila. The Washington law firm of Arent Fox Kintner Plotkin & Kahn, which was commissioned by Gray's board to conduct an outside review of the incident, recently completed its report on the incident, and the report has been turned over to the SEC, Mankiewicz said.
According to Mankiewicz, the discussions with Ogilvy took place about a month ago at Gray's Georgetown office building, called the Power House. Four Ogilvy executives, including Chairman William Phillips and President Kenneth Roman, came for lunch and talked to a number of Gray's top officers.
Roman isssued a brief statement yesterday saying the company was "exploring a broad range of options. Those options run all the way from talking to individuals in the public relations field to looking at small and large firms. But we have made no offers and quoted no prices at this point, and any speculation beyond that is incorrect and and untrue."