updated 1/7/2004 5:36:11 PM ET 2004-01-07T22:36:11

A senior executive at the Ogilvy & Mather advertising agency's New York office has stepped down after being charged with conspiracy for allegedly overbilling the federal government for a public service campaign against drugs.

Thomas Early, 48, director of finance at Ogilvy's New York office, and Shona Seifert, who once directed Ogilvy's $684 million contract with the government, were accused Tuesday in a federal indictment with directing employees to exaggerate their work on the project when they filled out time sheets.

In a statement Wednesday, the company said Early has resigned "in order to devote his full energies to obtaining a full vindication in this matter."

Seifert left the agency two years ago, and now works at another agency. She has also denied any wrongdoing.

Calls to lawyers for Early and Seifert were not immediately returned.

Early and Seifert allegedly caused the company to submit false vouchers to the government to support inflated labor costs, according to an indictment filed in the U.S. District Court in Manhattan.

The overbilling occurred as the agency worked on a national media campaign for the Office of the National Drug Control Policy, a branch of the executive office of the U.S. president, the government said.

Ogilvy was awarded a contract in December 1998 to create a print and broadcast campaign to discourage drug use among the nation's young people by educating them about the dangers of illegal drugs. The campaign continued until last week.

Laurence Urgenson, a lawyer for Early, had said on Tuesday, "Sometimes the government gets it wrong. We believe that this is such a case. We fully expect that Tom Early will be completely vindicated."

Seifert, now president of TBWA/Chiat/Day, New York, said Tuesday: "Neither with respect to the indictment announced by the U.S. attorney's office nor at any other time in my life have I ever committed any criminal misdeed of any nature."

If convicted, each could face up to five years in prison on each of 11 counts in the indictment and millions of dollars in fines.

Ogilvy, which was not charged, said it was unprepared for complex and unique federal recordkeeping rules when it first signed the contract but changed its procedures when it realized it was not meeting federal requirements.

The agency said it stopped billing the government in the summer of 2000 until its recordkeeping system was changed, billing missteps were disclosed and the government was overcompensated in a civil settlement.

After its new system was certified by outside and government auditors, Ogilvy "instituted the most rigorous accounting compliance program in our industry," the agency said.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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