Cyrus Mehri's Race Battle on Madison Avenue

The U.S. advertising industry, long adept at shaping the image of clients, soon may have to defend and burnish its own reputation.

Cyrus Mehri, a plaintiffs' attorney with a penchant for embarrassing powerful opponents, says he has filed racial discrimination charges with the Equal Employment Opportunity Commission against the Big Four advertising companies—Interpublic (IPG), Omnicom (OMC), Publicis (PUB), and WPP (WPPGY). The move could lead to a class action. "There's been a call for help by African Americans in this industry," Mehri says. "After decades of stonewalling, it's time to create a new day on Madison Avenue." Interpublic says it has diversity programs, is making progress, and hopes to continue a dialogue with Mehri. Omnicom declined to comment, and Publicis and WPP did not return calls.

The ad industry can expect a nasty fight. Over the years, Mehri, 48, has extracted hundreds of millions of dollars from companies, including Texaco (CVX) and Coca-Cola (KO), to settle similar allegations. "Cyrus is a master of creating publicity," says Hunter Hughes, who mediated the Coke settlement in 2000.

A son of Iranian immigrants, Mehri says he was drawn to advocacy early. His mother, he says, fled to the U.S. after denouncing the Shah of Iran. His great-grandfather, a cleric, got in trouble with Iran's religious Establishment for defending the Baha'i minority. Before getting a law degree from Cornell University, Mehri worked with Ralph Nader. "Trying to make things better is part of my lineage," says Mehri, who says that 20% to 28% of any settlement typically goes to him and other lawyers.

Mehri made his name in 1996 with the Texaco racial discrimination case. While his colleagues argued the case before the judge, he focused much of his energy on the court of public opinion. His coup de grace: announcing he had audio tapes of Texaco executives allegedly using racial slurs and talking about destroying evidence. The company denied its executives used racial epithets and settled for $176 million.

During the suit against Coke, Mehri hatched a plan to bus disgruntled Coke employees to a shareholder meeting and told the media he had evidence that the soda maker had shredded documents (an allegation Coke denied). The company settled for $192.5 million. More recently, Mehri set his sights on gender discrimination on Wall Street, settling with Morgan Stanley (MS) in 2007 for $46 million and a year later with Smith Barney for $33 million. Texaco, Coke, and the Wall Street firms all set up outside diversity monitors as well. "He's better at sound bites than almost any lawyer I know," says R. Lawrence Ashe Jr., who fought Mehri in the Coke case and a more recent racial discrimination suit against Johnson & Johnson (JNJ) that never got off the ground.

The outlines of Mehri's latest campaign are emerging. Last year he persuaded the National Association for the Advancement of Colored People to ask 25 major U.S. advertisers to order their agencies to create more diversity in the ranks. Since then, says NAACP General Counsel Angela Ciccolo, 14 have agreed to cooperate with her organization. GlaxoSmithKline (GSK), PepsiCo (PEP), Procter & Gamble (PG), Toyota Motor (TM), and Unilever all say they have encouraged their agencies to include more nonwhites on assignments.

What happens next? The EEOC will look for evidence that ad agencies discriminate. Mehri can still sue even if the commission decides otherwise, though his case would suffer a loss of legitimacy. As he assembles his legal strategy, he plans to crank up public pressure. In the next two months, he and the NAACP say they will hold a "summit" where they'll discuss the ways agencies discriminated against employees. It's classic Cyrus Mehri.

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