[KS] And now for something completely different....

John Ohnesorge ohnesorg at law.harvard.edu
Thu Jan 13 10:03:30 EST 2000


I ran across this today, and thought list members might find it interesting.

John Ohnesorge

>
>                 Sam Loewenberg 
>                 Legal Times 
>                 January 11, 2000 
>
>
>
>
>                 A contentious two-year dispute between one of the
>                 District of Columbia's most prominent law firms
>                 and one of its top public affairs outfits has landed
>                 in court, offering a rare glimpse into the inner
>                 workings of a major public-influence campaign
>                 normally shrouded in secrecy.
>
>                 APCO Associates has sued Akin, Gump, Strauss,
>                 Hauer & Feld for $1.3 million over allegations of
>                 fraud and breach of contract.
>
>                 The suit, filed Jan. 7 in D.C. Superior Court,
>                 alleges that Akin, Gump failed to pay APCO for
>                 eight months of work it had subcontracted to the
>                 public affairs firm in 1997 on behalf of the Korea
>                 International Trade Association (KITA), which
>                 represents about 80,000 South Korean
>                 businesses. Akin, Gump denies the allegations.
>
>                 APCO's job was to design a grass-roots lobbying
>                 program to generate support for South Korea in the
>                 United States.
>
>                 APCO's complaint alleges that Akin, Gump, which
>                 employs 278 lawyers in the District and generated
>                 revenues of $120.5 million in 1998, breached its
>                 $35,000 per month, one-year contract. APCO,
>                 which had gross 1999 revenue of $36 million, is
>                 asking for $280,000 in unpaid fees plus $25,000 in
>                 travel expenses.
>
>                 Containing eight other counts, the complaint seeks
>                 treble damages based on APCO's contention that
>                 Akin, Gump either misled APCO or was negligent
>                 in allowing the public affairs firm to continue
>                 working -- even as the law firm knew, or should
>                 have known, that APCO would not be paid.
>
>                 But Sukhan Kim, Akin, Gump's lead partner on the
>                 KITA matter, says it is APCO that failed to live up
>                 to its end of the bargain. An Akin, Gump internal
>                 investigation of the firm's dealings with APCO
>                 concluded that payment was withheld because of
>                 unsatisfactory work.
>
>                 "Their work was very, very poor," says Kim, who
>                 has represented KITA for 13 years. "It didn't meet
>                 minimum standards."
>
>                 KITA is also a named defendant in the suit, but it
>                 is not the primary target because it appears to
>                 have acted in good faith, says Margery Kraus,
>                 APCO's president and chief executive officer. She
>                 maintains that KITA was happy with her firm's work
>                 product, and that Akin, Gump, which brought in
>                 APCO, never informed the public affairs company
>                 of serious problems and was simply trying to save
>                 a few bucks by not paying.
>
>                 Yet Sang Lee, former head of KITA's Washington
>                 office, says KITA officials in Korea found APCO's
>                 work to be below par. (KITA has since closed its
>                 Washington office.)
>
>                 "That's news to me," says Kraus. In the
>                 discussions APCO had with KITA, she says,
>                 "there was never any dissatisfaction expressed."
>
>                 APCO was paid $287,000, plus $20,000 for travel
>                 expenses, according to APCO's complaint. Akin,
>                 Gump will likely try to recover these fees in a
>                 countersuit alleging that APCO failed to provide the
>                 services it had promised, says Akin, Gump's
>                 outside attorney, David Tobin of D.C.'s Tobin,
>                 O'Connor & Ewing.
>
>                 APCO is being represented by Jonathan Hill of
>                 D.C.'s Dow, Lohnes & Albertson.
>
>
>                 OUT OF THE SHADOWS
>                 Internal documents provided by APCO shed light
>                 on the usually secretive methods used by a PR
>                 shop in a grass-roots campaign -- especially one
>                 involving a foreign entity.
>
>                 One of APCO's specialties is generating popular
>                 support for companies and countries that might not
>                 otherwise enjoy it. Past clients include countries
>                 with poor human rights records, such as Nigeria
>                 and Romania. The firm has also done extensive
>                 work for major corporate interests, including the
>                 American Tort Reform Association.
>
>                 A key part of APCO's work for the South Korean
>                 business group was "to develop a comprehensive
>                 network of U.S. interests that are sympathetic to
>                 Korea and would be willing to support Korea's
>                 position on issues that arise between it and the
>                 United States," according to a June 11, 1997,
>                 memorandum to KITA from Akin, Gump and
>                 APCO.
>
>                 APCO would do this by developing "a
>                 computerized database of potential U.S. allies
>                 containing detailed information about each
>                 potential ally's business interests, political ties,
>                 and willingness to support a Korean coalition." The
>                 allies were to include Congress members,
>                 business leaders, and the media, who were to
>                 receive targeted lobbying materials. (The document
>                 did not name specific legislators or companies.)
>
>                 The database and outreach program, while never
>                 completed, was used at least once. The memo
>                 detailed an effort to reach possible allies to
>                 persuade them to back Korea in its quest to be
>                 taken off the Office of the U.S. Trade
>                 Representative's list of the countries with the worst
>                 records for the protection of intellectual property.
>                 (Korea was subsequently removed from the list,
>                 known as "Special 301," although this was not
>                 likely a result of the APCO program, according to
>                 the memo.)
>
>                 APCO also provided software to KITA that tracks
>                 media coverage of Korea, broken down by a variety
>                 of factors, including congressional district,
>                 geography, and industrial sector.
>
>                 Trouble between APCO and Akin, Gump began in
>                 May 1997, when the law firm ceased payment in
>                 APCO's sixth month of work. APCO worked for
>                 another seven months at the urging of Akin, Gump
>                 attorneys, according to APCO's complaint. Kraus
>                 said they did that to curry favor with the powerful
>                 law firm, since at that time her company was much
>                 smaller than it is now.
>
>                 Mark MacDougall, an Akin, Gump partner
>                 speaking for the firm, says payments were stopped
>                 because software APCO provided to KITA did not
>                 work properly and contained faulty data. He
>                 rebutted APCO's argument that it did not know of
>                 any problems, citing a May 28, 1997,
>                 memorandum to APCO from KITA listing 13
>                 glitches with the software and data provided by
>                 APCO.
>
>                 Kraus says she viewed that KITA memo as the
>                 standard give-and-take that occurs during a
>                 complicated public affairs project. She says a June
>                 11 memo responding to KITA, written jointly by
>                 APCO and Akin, Gump personnel, shows that
>                 Akin, Gump was working with APCO to solve the
>                 problems.
>
>                 Kraus also says that Akin, Gump did not allege
>                 that KITA was dissatisfied until nearly a year after
>                 the dispute began. APCO then sent one of its
>                 members, a former senior U.S. government official,
>                 to Korea to talk with KITA. Kraus would not name
>                 this person, but a likely possibility is former
>                 Reagan administration National Security Adviser
>                 Richard Allen, who has long done business with
>                 the Korean government and is now a member of
>                 APCO. Allen did not return a telephone call
>                 seeking comment.
>
>                 Kraus says KITA told her colleague that they were
>                 satisfied with APCO's work, and she says that
>                 KITA had even attempted to hire her firm directly,
>                 without going through Akin, Gump.
>
>                 Akin, Gump's Kim says APCO's decision to send
>                 a former official to talk to KITA was not only "a
>                 desperate measure" but also "inappropriate"
>                 because KITA was Akin, Gump's client. But Kraus
>                 says she dispatched an APCO representative to
>                 speak with KITA directly because Akin, Gump was
>                 not responding to her firm's payment demands, nor
>                 was it offering any explanation for the holdout.
>
>                 "I think the stonewalling was because they thought
>                 they were Akin, Gump and we were APCO, and we
>                 would go away," she says. "I am bewildered by the
>                 arrogance."
>
>                 MacDougall insists the firm responds promptly to
>                 all complaints.
>
>                 Kraus says she suspects that the real reason for
>                 the nonpayment was the sudden devaluation the
>                 Korean currency suffered in November 1997. She
>                 speculates that since Akin, Gump received
>                 reduced fees as a result, perhaps the firm tried to
>                 cut out APCO entirely.
>
>                 MacDougall says this explanation is merely "legal
>                 posturing." 
>


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