Lawsuit Says UM Used ‘Puppet’ Agency for Army’s Minority Recruitment, Then Left Media Unpaid

Urban One claims it is owed $1.8 million in damages

The business had been with IPG for 12 years. Getty Images
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Urban One, a media company focused on African-American audiences, is suing IPG-owned media agency UM, which is accused of misleading and defrauding the plaintiff through ad buys made on behalf of the U.S. Army as part of a minority recruitment push.

The suit, filed late last week in the U.S. District Court for the District of Maryland, states that UM (named in the filing as Universal McCann Worldwide) “conspired to defraud and mislead” Urban One by way of what the plaintiff calls a “sham buying agent”: Penn, Good & Associates or PGA (now known as Penngood).

Urban One claims UM used Penngood, an African American-owned agency, as a “puppet” to qualify for hundreds of thousands of dollars in government incentives aimed at encouraging contractors to work with minority-owned companies, as defined by the U.S. Small Business Administration.

When Penngood was used to buy U.S. Army ads on Urban One’s TV and radio networks, a credit check reportedly showed that the shop had a “poor credit rating and history,” according to the lawsuit. Urban One also says it felt pressured “at the direction of McCann” to accept the ad buys on credit with assurances that payments would eventually come. The lawsuit cites a 2009 email from a UM svp pledging that Penngood had the “financial capacity and integrity to manage the account.”

Penngood then allegedly failed to pay Urban One $930,268.11 in ad placement costs. All told, Urban One says it is owed $1.8 million in damages, plus interest, assorted costs and attorney’s fees.

UM says claims are ‘baseless’

Urban One describes itself as “the largest distributor of urban content in the country,” and plaintiffs in this suit include its cable network, TV One, and Reach Media, which produces national radio shows by celebrities like D.L. Hughley and Al Sharpton.

This is not the first time the company has pursued legal action over its relationship with the Army’s agency partners, a fact UM points to as a sign that this lawsuit will not go in the plaintiff’s favor.

“A related case brought in 2015 by TV One was summarily dismissed in court earlier this year, and we fully believe this case will be dismissed as well, as the claims are baseless,” a UM spokesperson told Adweek.

A separate suit was indeed filed in the Superior Court of the District of Columbia in August 2015 and dismissed, in part, six months ago.

That filing focused on Penngood and Carol H. Williams Advertising, which partnered with the UM organization for more than 10 years to help plan and execute Army recruiting campaigns targeting African-American consumers. The earlier lawsuit accused those two agencies and their principals of breach of contract while naming UM as a third-party defendant.

"A related case brought in 2015 by TV One was summarily dismissed in court earlier this year, and we fully believe this case will be dismissed as well, as the claims are baseless."
A UM spokesperson

The first phase of that case ended on Feb. 9, 2018, when Associate Judge John Campbell of the D.C. court granted a summary judgment in favor of the Williams agency and Carol H. Williams herself, stating that “the Williams defendants are not the party to have recourse against.”

But the judge allowed the claims against Penngood and its co-presidents, Clyde Penn and Garrick Good, to proceed. According to court documents, a separate non-jury trial in that matter is scheduled to begin in December.

“Carol has reviewed the allegations in the complaint TV One has filed in federal court in Maryland,” wrote John J. McNutt, counsel for Carol H. Williams Advertising. “In the complaint, TV One included several allegations against Carol related to her role as a subcontractor to McCann on the U.S. Army advertising contract from 2006 to 2017.  Many of these unsupported allegations were previously included in a lawsuit TV One filed against Carol in 2015 in D.C. Superior Court. Carol denies the allegations and is proud of her agency’s many years of work on the U.S. Army contract. In February 2018, the judge in the D.C. case rejected TV One’s allegations against Carol and dismissed all of TV One’s claims against Carol. TV One’s allegations against Carol have been refuted in a court of law.”

After that judgment, Urban One went on to hire the law firm of Morris, Manning and Martin and take action against UM last week. The latest suit mentions Carol H. Williams Advertising several times but does not name the agency as a defendant.

Mounting pressure, overdue bills

At the heart of the new lawsuit is Urban One’s claim that it felt pressured by UM to work with its minority-owned agency partner, Penngood, despite UM allegedly knowing that Penngood had “cash flow problems” that would eventually leave it unable to pay its bills, the suit states.

In January 2009, UM tapped Penngood, according to the lawsuit, despite the small agency emerging from a Chapter 11 bankruptcy filing only five months before taking on the business. The lawsuit also states that “Garrick Good, one of the principals of PGA, had been involved in approximately a dozen lawsuits prior to McCann engaging PGA as its ‘buying agent.'”

Urban One continued to run Army ads on its cable and radio platforms while extending credit to Penngood thanks to what it calls “the assurances of and a longstanding business relationship with” UM, which allegedly agreed to be “jointly and severally liable for the advertising buys” while “fraudulently misrepresent[ing] the financial status and capabilities” of its buying partner, the lawsuit states.

Penngood’s financial struggles only grew more pronounced with time. Garrick Good filed for Chapter 7 bankruptcy in late 2012, but Urban One claims that it did not learn until 2017 that UM had “only performed a cursory check” of the agency’s finances and qualifications.

In addition to the nearly $1 million owed to TV One, the lawsuit also states that radio brand Reach and its local division, Radio One, went through similar experiences after expressing concern over Penngood’s finances several years ago. The agency now allegedly owes these two divisions $375,218.60 and $545,000.00, respectively, for uncompensated ads purchased on credit.

A spokesperson for Urban One’s law firm had not provided additional comment at the time of publication. The listed press contact for Penngood has not responded to a request for comment.

The suit comes less than two weeks after the larger McCann organization filed a bid with the U.S. Government Accountability Office to protest its second elimination from the U.S. Army review in just over a year. That review has now been extended until at least mid-November, and the protest also required the government to extend McCann’s contract beyond its expiration date of Sept. 30 this year.

You can view the lawsuit filing in its entirety below:

@PatrickCoffee Patrick Coffee is a senior editor for Adweek.