INCEPTA BUYS CUNNINGHAM FOR $75M

Incepta Group, London, which operates Citigate in the U.S. and which recently purchased Sard Verbinnen, added Cunningham Communication to its roster for up to $75 million in stock and cash over the next three years.

Cunningham, based in Palo Alto and founded in 1985 by Andrea "Andy" Cunningham, had $23.5M in fees in 1999 and 140 employees as of Dec. 31.

Proceeds will go to her, Joe Hamilton, president and COO, and about a dozen other executives. Cunningham was with high-tech pioneer Regis McKenna before starting her firm. Abbott Jones of AdMedia Partners represented the firm in the transaction.

Stock of Incept was up about three pence last week to 151 on the London Stock Exchange. It paid $59M in stock and cash last year for Sard Verbinnen, a financial firm with $7.5M in fees.

Incepta has revenues of about $200M and employes 1,500. Cunningham, who continues as CEO, will report to David Wright, CEO of Incepta. The firm will operate as Citigate Cunningham.

Clients include CiscoSystems, Hewlett-Packard, Motorola, Pitney Bowes and many smaller firms.

Giggo.com, Dallas, financial services unit of DaimlerChrysler Services, is looking for a national PR firm. Douglas Rozman, head of media relations, said the company prefers a local agency that is part of a large network. Some firms have been contacted based on their Internet experience... Interpublic's second quarter net fell to $136 million, or 45 cents a share, because of $52M in charges related to the restructuring of Lowe Lintas & Partners. Revenues were up 15% to $1.4B. The stock dropped about four points last week to $40, still far below its high of $58 before announcing its acquisition of NFO Worldwide... True North's second quarter net rose 29% to $27M, sending the stock to a new 52-week high of $49. New business wins totaled $537M and included Compaq Computer and Boeing... Richard George, who was promoted to principal and director of business operations, Publicis Dialog/New York, in May, joined Ogilvy PR Worldwide as VP-technology. He was PR director of PRSA until last October... Matthew Gonring, managing partner, worldwide comms. at Arthur Andersen & Co., will join Baxter Int'l as VP-CC around Labor Day... Randy Zane to United Way of New York as director, media rels. He was PR manager, CMP Media.

BASEBALL NAMES ISRAELI PR FIRM

Major League Baseball Int'l named Coast2Coast Communications, Israel, to promote baseball in Israel, Jordan and The Palestinian Authority.

Charles Harris, who was on the PR staff of the Los Angeles Dodgers four years, opened the PR firm in 1996 with Aaron Weil, former Washington, D.C., lobbyist. The firm has eight staffers and handles Dealtime, Versaware, and Virtual Jerusalem.

The Israel Assn. of Baseball, started in 1986, has 71 teams and 1,000 players including some Palestinians.<%0>

Ron Ricci, a principal and head of research and development at Cunningham Communication, joined client CiscoSystems as VP of marketing. He helped develop CC's "Momentum Management," which applies statistical research and diagnostic tools to build brands of tech and Internet clients.

PRSA 1999 LOSS IS $426,288, SAYS D&T

The long-awaited 1999 audit of PRSA has been published showing an operating loss of $426,288 instead of the $43,000 that had been predicted to the Assembly last year. The figure is also well above the loss of $83,853 reported earlier this year in an unaudited statement.

One reason for the increased loss is that Deloitte & Touche has upped the deferred dues account from $198,746 to $425,309. PRSA, unlike the American Society of Assn. Executives and most other groups, has been claiming that dues income does not carry a liability for future services.

A letter July 25 by PRSA chair Stephen Pisinski to the membership says PRSA will now "be in compliance with the method used by the ASAE" and that new computer software will "calculate dues income as it is earned."

Deferred Amount Is Still Small

However, the amount being set aside for future services is a small fraction of PRSA's dues income of about $3.3 million ($175 X 19,000 members).

The ASAE itself, with $5.1M in dues, sets aside $2.74M in a deferred dues account. The American Medical Assn., with dues of $66M, has $40M in DD. The American Bar Assn., as of Aug. 31, 1999, had $65.7M in dues income and deferred $50.1M of it. IABC defers $1.37M of its $2.3M in dues.
If PRSA put the usual six months or more of

(continued on page 7)

EDITORS MAY REJECT THIN MODELS

Editors from several British-based women's magazines, including Marie Claire and Vogue, agreed to monitor women in news pages and ads at a Body Image Summit that was held last month in London.

The summit was organized by Tessa Jowell, Britain's minister of women, after a report from the British Medical Assn. linked the country's rise in eating disorders to the news media's obsession with thinness.

About 40 representatives from the British government, medical groups, youth organizations, clothing manufacturers, ad/PR agencies, broadcast companies, fashion magazines and major London newspapers attended the summit.

Liz Jones, who is editor of Marie Claire, which recently put talk show star Rosie O'Donnell on its cover, went on record saying: "A code of self-regulation would mean if an (ad agency) sent us a very thin model whose bones were showing through her skin, we would send her back and write the agency as well as other magazines telling them not to use her."

"Some girls are naturally very small but we have decided not to use girls who are known to have an eating problem. We also have a policy not to use girls of a certain age," said Jones, who has spoken publicly about her own eating disorders.

Same Old Sizes

Alexandra Shulman, editor of Vogue, who agreed that joining together for the cause was a good idea for leading fashion publications, told The London Daily Telegraph that Jones "gave a presentation which led one to believe Marie Claire had suddenly morphed into Health Weekly"when in fact "it's a women's magazine whose recent issues featured models with exactly the same statistics as models in Vogue--approximately 33-22-34--not a lot of groundbreaking in that."

Shulman said designers at the summit thought "schools could do more, magazine editors thought retailers should change their sizing, TV presenters felt that editors should use bigger models, therapists felt that rot began at home and four seemingly confident and attractive teenage girls representing their generation felt that we were all to blame."

Julia Robson, deputy fashion editor at the Daily Telegraph, said Brazilian fashion models, who are increasingly in demand these days, could be a positive trend for women everywhere because those models will help bring in fashions that need curves.

Robson said many European models are "slightly frightening" because they are tall and thin, while American models are `more perfect' looking because American magazines use more airbrushing.

Hillary Alexander, fashion editor of the Daily Telegraph, also wondered why no one discussed the increase in average body weight among British women and men at the summit. About one in five individuals are classified as obese, said Alexander.

NEW MEDIA NETWORK IS LAUNCHED

WebFN.com, a new Internet/TV hybrid, was launched by Chicago-based Weigel Broadcasting and Bridge Information System.

One difference between WebFN and the other business Internet sites and business news outlets on cable is a system that eventually will let viewers watch a traditional business newscast while they access financial data via the computer or on TV.

The network also plans to build a system that allows reporters to interview various stock analysts and other business news sources on camera from their offices, and to tap into BIS's worldwide reporting network, as well as a video-on-demand component.

Bob Reichblum, former VP of primetime programming for CNBC and a former executive producer for ABC's "Good Morning America," is the architect behind the new venture, which is owned by Weigel, which produces "The Stock Market Observer," a decades-old TV show, and BIS, a New York-based business news provider.

During the testing stage, viewers can get about eight to 10 hours a day of live business and financial news reporting by watching their computer. The TV version will come later. WCIU-TV and WFBT, the two Chicago stations Weigel owns, will eventually carry some WebFN content.

Lynn Holley, who was previously a reporter for WMAQ-AM in Chicago, currently hosts three separate one-hour shows, at 8 a.m., 10 a.m. and noon.

The other reporters are David Jennings, who also was at WMAQ radio before joining WebFN; Jack Taylor, who hosts "The Stock Market Observer," and Gary Salem, a veteran Chicago broadcaster.

RADIO STATION EXITS DIAL FOR 'NET.

KACD, a small radio station in Santa Monica, stopped sending its over-the-air signal and began transmitting exclusively over the Internet.

Worldclassrock.com can be picked up in any time zone via a computer and a phone line.

MAG REVENUES CLIMB AS CIRC. DROPS.

Overall, magazine revenues grew slightly in 1999, according to Folio magazine's 8th annual study.

Total revenues of $27.6 billion were up from $26.1 billion in 1998 and $24.9 billion in 1997.

Other trends included a downturn in circulation (only 204 of the 500 titles showed total circulation gains, down from 252 in 1998, and 163 registered losses, up from 132 in 1998); and a boom in Internet-focused magazines.

Top performers in the Internet category include Red Herring, up 53% in revenues and 93% in circulation for the year; Business 2.0, up 213% in revenue and 48% in circulation; and Yahoo! Internet Life, up 163% in revenue and 65% in circulation. Fast Company was up 20% in revenues and 49% in circulation.

D&T'S AUDIT OF PRSA RELEASED (cont'd)

dues in a deferred account ($1.65M), it would not be able to claim "unrestricted net assets" of $1.48M, as it now does. Payables exceeded receivables by $300K+ on Dec. 31, 1999.

Heavy Spending on Computers

The value of PRSA's computer equipment jumped from $563,124 at the end of 1998 to $993,437 at the end of 1999, a gain of $430,313.

Pisinski's letter noted that both the awards program and the annual conference lost money last year rather than "making their usual profits." Conference revenues were $880,907 but costs were $922,228.

The National Investor Relations Institute, which has encouraged exhibitors while PRSA closed its exhibit hall in 1995, grossed $2.2M on its conference in June in San Francisco.

The audit by D&T shaves $45,000 off the accounts receivable of $544,097 that had previously been claimed. The new total of receivables is $509,097 with $7,000 described as "doubtful." It is a tradition at PRSA that only $7,000 of receivables is considered doubtful. It was $7,000 in 1989 when receivables were only $106,129.

John Colletti, a CPA from D&T, is working full time at PRSA as a temporary replacement for Joe Cussick, who quit as CFO in June. Cussick said he no longer wanted to do the commute between New York and Randolph, N.J., and has his own financial planning practice. Randolph is about 40 miles from New York.

McDermott Says Not Given Audit

Michael McDermott, last year's official candidate for treasurer of PRSA and who again ran for the nomination for treasurer, said the nominating committee did not treat him "fairly" because he did not get the D&T audit while it was given to his opponent for the nomination, Reed Byrum, a director. Also getting the audit as a member of the board was Art Stevens, nominated for chair-elect.

McDermott said his presentation to the committee would have been "completely changed" if he had had the up-to-date figures. "It's as if my candidacy was doomed before I even entered the room," he said. "I did not know I was wasting two days plus hundreds of dollars only to find out the playing field was anything but level...why didn't PRSA disclose the audited numbers on its website? I believe the 20,000 members deserve an honest, complete and timely answer from those responsible for this fiasco." Mary Cusick is chair of the nominating committee.

Two Directors' Posts Unfilled

The nominating committee was unable to find members to represent two districts, the first time there has been such a void. No one ran from the Northeast in 1997 and Robin Perrin was eventually appointed to the post by the board.

The Northeast district again lacks a candidate as does the North Pacific.

Nominated to represent the Midwest was Dean Kruckeberg, Univ. of Northern Iowa; Tri-state, Grace Leong, Hunter & Assocs., N.Y.; open representation, Carold Gorney of Lehigh University, Bethlehem, Pa., and Michael Jackson, Dow Corning, Midland, Mich. (brother of 1980 PRSA president Patrick Jackson).

KETCHUM'S NEW DIGS SPORT A REC ROOM

Ketchum is moving its worldwide headquarters and New York operation from 292 Madison ave. to 711 Third Ave. (between 44th and 45th str.)

The main phone number is now 646/935-3900.

Ray Kotcher, CEO of Ketchum, which is owned by the Omnicom Group, said the New York office has grown 100% in the past three years, and "this move will allow us to accommodate that growth and provide future capacity," The new offices occupy nearly five florrs and 80,000 sq. ft of space.

The new offices feature focus group facilities within the Communications Training Center's Schenker Studio and an expanded graphics studio and full-service vidoe edit suites.

The new offices also feature a "think tank" room, a series of laptop portals in the reception area, conference rooms with plasma screen technology, a Chase Manhattan ATM and an Adirondack style "rec room."

DIAMONDS FACE NEW SANCTIONS

The World Diamond Congress has imposed new measures to stop African rebel groups from selling gems to pay for African wars, according to The Associated Press.

The AP said the new measures include a certification system to track rough diamonds from the time they are mined as well as penalties against dealers who break U.N. embargoes on diamond sales by rebels in Angola and Sierra Leone.

"We will immediately close off all the legal loopholes, by which conflict diamonds may currently be entering the market," said a statement issued at the end of the WDC meeting, held July 19 in Antwerp, Belgium.

Pressure on the diamond trade had come from the U.N., Western governments and human rights groups, which warned of a consumer backlash against the $6 billion-a-year industry unless it cuts with rebels behind some of Africa's most brutal civil wars.

"Young men will require proof that the diamonds they place on their fiancees' fingers have not been the cause of the amputation of a finfer, or an arm, of a person in Sierra Leone," Robert Fowler, Canada's U.N. Ambassador told the WDC. He urged the diamond industry to take the "lead in demonstrating publicly that its products are conflict free."

Diamonds mined and sold by De Beers Consolidated Mines will bear the name of Diamond Trading Company or D.T.C., as a guarantee to retailers that the diamonds were mined under humane work conditions from reputable mines, said Joan Parker, who is director of the Diamond Information Center, run by J. Walter Thompson, the ad agency for De Beers.

Parker said the D.T.C. monogram and logo, called the "forevermark," will show up on ads, though not necessarily on the jewelry products themselves.

PRSA and auditor Deloitte & Touche are finally letting the reality of PRSA s finances seep out but both have a long way to go before members get a true picture.

The numbers reveal where the power lies at PRSA–in the staff. Staff payroll of $3.15 million is 40.4% of revenues of $7.8M. The average payroll costs of groups in the $5-$10M range is 26.8% and the median is 26.2%, says the American Society of Assn. Executives.

PRSA has one of the most generous pension plans going–8% of pay for all employees and an additional 13.7% for wages over $62,700. Top staffers also have their own expense accounts. COO Ray Gaulke s was $49,000 in one recent year, or nearly $1,000 a week, according to a tax filing.

PRSA spent $581,877 on staff and member travel in 1999, up 27.4%. Why all this traveling when so many forms of electronic communication exist? The APR and ethics boards now get their travel paid ($19,389 and $17,278, respectively) where they didn t a couple of years ago.

Only a couple of PRSA members are ever allowed to work at h.q. because the mostly non-New York leadership of PRSA doesn t want too much power in New York in the hands of PR pros.

However, PRSA members don t get to see how <%-2>their money is spent on a day-in, day-out basis. Power<%0> flows to the staff, which is obviously making many key decisions no matter what board policy is set.

The poor financial results reflect bad choices in many areas. The loss on the unpopular APR program was $326,434 in 1999; the national conference, having closed its exhibit hall when exhibitors are crying for venues, lost money; the awards program also lost partly because the PR Week and Inside PR awards programs are getting so much attention (PR Week was brought to the U.S. with the enthusiastic assistance of PRSA staff and officers but without full board approval); PRSA has two publications when it can only afford one, especially in view of the many legitimate publications now in the PR field; $93,229 was spent in Code of Ethics revision when there has been no visible enforcement of the current code for many years. The weak code doesn t even force counselors to disclose clients when questions arise.

What is sad about the PRSA nominations is that no one can be found to serve from two of the districts after a year of trying, which has never happened before. Who wants to serve on a board where you are muzzled for life? You must sit idly by while noxious policies like a year-long press boycott are enforced. You become part of a conspiracy to withhold important facts from the membership such as the $880,000 in payables.

The unfair treatment given Michael McDermott, candidate for treasurer, is illustrative of the politics of PRSA. He was not given the audit while it went to other candidates who were on the board. He may openly run for treasurer, discussing all the issues at hand. Art Stevens, meanwhile, nominee for chair-elect, has said he prefers to discuss the issues only in front of the Assembly, the "duly-elected representatives of the 20,000 members." However, only APRs can be elected to the Assembly and 16,000 of the members are not APR.

The British tend to overpay for their acquisitions, an international business exec told us in relation to Incepta paying $75M for Cunningham Communication. Incepta paid almost eight times sales for Sard Verbinnen. Shandwick paid large multiples of annual sales for many of its 30+ purchases, running up a debt of $100M. With these kinds of offers being thrown around, U.S. conglomerates such as Omnicom and Interpublic are priced out of the market... the retirement of Kathie Lee Gifford from her ABC morning show brought up the subject of her company s use of cheap foreign labor to make clothing. Columnist Phil Mushnick of the New York Post<D> said Gifford has been unfairly pilloried for a situation she corrected while the press has wimped out on Michael Jordan s 17-year association with Nike, long a user of foreign labor. Jordan, according to Mushnick, blamed retailers for setting high prices of $150 and up for Jordan-signature sneakers. But Nike sets those prices to keep profits up while holding costs down with cheap labor, wrote Mushnick July 28... PRSA should take back the title of "president" from the staff. The idea, backed by 1980 PRSA president Pat Jackson, was to have "vice chairs" who would head important committees and travel the country promoting PR. This never happened... Michael Jackson, new board member from Midland, Mich., is the brother of Patrick Jackson... we asked IABC why Deloitte & Touche designates about six months of dues as a liability on the IABC balance sheet. "Because we told them to," was the answer from spokesperson Shel Holtz... the treasurer s post at PRSA was usually held by a New York PR pro some years ago so that a close eye could be kept on the books. The mania for geographical balance sent the post all over the country... "the sisterhood of PRSA" is not happy about Art Stevens trying to leapfrog over the secretary and treasurer s posts to become chair-elect ahead of Joann Killeen, who has served in both posts, a member said.