Even among senior Liberals, Red Leaf Communications is a mysterious organization that appears whenever an election is called, then slips from sight when the campaign is over. For the past 10 years the party’s advertising company has wielded unquestioned control over the Liberals’ English-language advertising strategy. And since its creation, Senator Keith Davey, who recently took control of John Turner’s election strategy, has been the chairman of the agency with Senator Jerry Grafstein, a lawyer, serving as Red Leaf president. But last month William Lee—the man Davey replaced —raised troubling questions about the way Red Leaf operated, unsuccessfully challenging Red Leaf’s monopoly on Liberal advertising for the first time in a decade.
Maclean's has obtained a series of private campaign documents that sheds new light on how Red Leaf operates and on how Lee attempted to change that system. Lee’s supporters argue that his confrontation with Grafstein and Davey was one of the key factors in his downfall. But the new Turner team insists that, since Lee’s departure, the campaign is running more smoothly. The documents indicate that Lee repeatedly demanded—and never received—a detailed budget from Red Leaf. They also show that the Prime Minister’s communications director, André Massé, contended that Red Leaf had not accounted for $300,000 in its $2.8-million budget estimate—Liberal funds, not public money. Still, taxpayers have a stake in political advertising spending. Under a new section of the Canada Elections Act the parties will receive a 22.5-per-cent rebate from the federal government on election advertising expenses. The Liberal share will be $630,000.
In a confidential memo to Lee last month, Massé wrote: “Red Leaf keeps giving us the runaround concerning their action plan.” He added: “It is clear to me that Senator Grafstein wishes to do his own thing as he has in the past four elections and that he has little time for your pedestrian questions—and mine. If he is not stopped right now, I am firmly convinced that he will get away with this again and that, again, the Liberal campaign will not get its money’s worth—far from it.” For his part, Davey dismissed the issues raised by the
memo. “If the question is one of money’s worth, I am more than satisfied that Red Leaf has performed,” he told Maclean's last week, adding that he was too busy to look at the memo. Davey also insisted that Red Leaf would be able to account for every dollar it spent. “If there is some question of financial integrity, I would stake my life on Red Leaf,” he declared.
The agency in question has no direct Conservative or New Democratic Party counterpart. Only the Liberals use an umbrella organization, with about 100 employees drawn from three large Toronto advertising firms: Vickers & Benson Advertising Ltd.; MacLaren Advertising; and Ronalds-Reynolds & Company Limited. The firms them-
selves have no direct relationship with Red Leaf. Grafstein runs Red Leaf from his Toronto law office and he has a simple hiring policy: Red Leaf employees, who continue to work in their agency offices, have to be “absolutely the best creative people—and committed Liberals.”
For their part, the Conservatives, who expect to spend almost $3 million in the campaign, also rely on three Toronto agencies: Foster Advertising Ltd., Hayhurst Advertising Limited and Media Buying Services Limited. Foster co-ordinates the combined effort. And the New Democrats, who have hired the small Vancouver firm Michael Morgan and Associates, will spend $1.4 million.
Lee’s troubles with Red Leaf began shortly after Turner called the election on July 9. As national campaign director— the man who would ultimately approve all the bills—Lee ordered the agency to give him a detailed budget and suggested that the party should consider seeking competitive bids and ask agencies from the Maritimes and Western Canada to join the consortium. “The West is opposed to the Toronto view of the world,” said one Liberal.
The request for a budget opened a three-week struggle between Lee and his party’s ad agency—a fight that ended with Lee leaving the Turner campaign. In mid-July Red Leaf responded when Michael Koskie, who is the president of Vickers & Benson Advertising Ltd., sent Lee an estimate showing how the party’s $2.8 million would be spent. Lee found the explanation unacceptable. In a July 20 telegram to Grafstein he called Kos£ kie’s figures “totally unacceptI able” and gave Red Leaf 24 hours to provide answers to 15 questions, ranging from the share of the television ads by province to Red Leaf’s administrative costs.
Red Leaf delivered its next set of estimates—a 24-page package—by the required deadline of 6 p.m. the next day and Lee called in Massé for expert advice. Massé, a former vice-president in Montreal of Houston Group Communications Limited, a large public relations firm, examined the documents and consulted several top Red Leaf executives before relaying his findings to Lee. He made the following observations in a July 23 memo:
•$300,000 appeared to be unaccounted for in the funds allocated for television, radio and print advertising. Massé warned Lee that Grafstein “is likely to tell you that this sum is spread all over the place for contingency”;
•No one had told provincial campaign officials how much advertising money was meant for their regions;
•The 100 members of Red Leaf expected to get $300,000 for their work, while members of the Liberal party’s Frenchlanguage advertising group, La Ma-
chine Rouge, would work without pay; •There were no cost estimates for market research. That meant that money for testing the ads would have to come out of a separate budget;
•Red Leaf’s production costs were, Massé wrote, “outrageously overestimated to the point of ridicule—this is even worse than the Canadian Sports Pool”—a reference to a money-losing federal betting pool for which MacLaren Advertising did the ad campaign;
•The ad agency said that it was developing 117 television spots, testing 50 and producing 35—a “ridiculously high number”;
•“Red Leaf cannot or will not tell me or tell you what are the five, eight or 10 main messages they are
working on,” Massé wrote.
Massé urged Lee to appoint a special comptroller to oversee the Red Leaf budget, recommending that the campaign director choose someone outside Red Leaf “for obvious reasons.” He added, “Remember that Grafstein knows that we know that there is something going on in there.” Massé told Lee to be firm: unless Red Leaf followed his orders, there would be no money. “Provide Red Leaf with a clear set of instructions,” he wrote. “If you do not do that, I am afraid that the senator will claim again that you have no strategy and that, in the meantime, he has to go in a variety of directions.” He concluded, “I am beginning to think that they [provin-
cial campaign co-chairmen] should also be in the know, and if we really want to protect our own bums, even the PM himself.”
For his part, Grafstein denied that he had ignored Lee’s wishes. He told Maclean’s that he had understood his role to include recommending choices that the national director could accept or reject. As for the $300,000 that Massé could not pin down in the budget for media ads, Grafstein said that it was in fact a contingency fund. Declared the senator: “You prepare a number of alternative strategies. You want to be ready for any eventuality.”
Davey rejected several of Massé’s criticisms. He pointed out that the Liberals had won two majority govern-
ments in the three federal elections fought since Red Leaf’s creation. Said Davey: “And I give Red Leaf and Senator Grafstein a great deal of the credit.” As for money that did not appear to be allocated to specific ad campaigns, Davey said funds were needed for late-campaign changes. “We are in a situation right now with money we have not spent in the ad campaign,” he added. He said that he and other Red Leaf principals are still weighing the usefulness of newspaper advertising, considering magazine ads and contemplating “heavying up” partisan Liberal messages in ridings where the race is close. Declared Davey: “To suggest that [the contingency fund] is some kind of money floating
around is ridiculous.” He added that Red Leaf will submit audited statements to the party, as usual.
Still, Maclean’s submitted the Red Leaf estimates and the Massé memo to a senior advertising executive, who requested anonymity “because this is a small community.” His finding: a
$100,000 allocation for radio production was disturbingly high. “For a hundred grand, you could hire Orson Welles and the big bands,” he said. At the same time, he noted that Red Leaf’s cost estimates for television production did not include the normal itemized breakdowns, such as talent costs. The advertising executive also said that he found it strange that Red Leaf’s three-member account staff was getting $1,250 a day—four times as much as the creative staff—and he said he was surprised by Red Leaf’s cavalier attitude toward Lee. “He is paying the bill and he does not know what they’re doing,” he said.
Lee studied Massé’s suggestions and then asked friend Murray Kierans, a Toronto lawyer and accountant, to examine Red Leaf’s estimates. Kierans refused to give Maclean's details of that investigation, but party insiders said that Kierans met Massé and Koskie before handing Lee his report.
Early in August, with the Turner campaign in disarray and Davey returning ostensibly to restore momentum in the fight for crucial Ontario ridings, Lee presented Turner with an ultimatum: he demanded complete control of the campaign if he was to continue in his job (.Maclean's, Aug. 13). Turner refused, and on Aug. 4 he accepted Lee’s resignation at the Prime Minister’s summer residence on Harrington Lake. As the two men discussed the troubled campaign, Lee told Turner that, as director, he had incurred the enmity of the party’s old guard by probing Red Leaf’s affairs. Turner said nothing.
Clearly, the issue has more significance than a hidden power struggle in Liberal campaign back rooms. Advertising is the largest single expense for all three major parties. For the Tories and New Democrats it accounts for close to 50 per cent of campaign spending, with the Liberals not far behind with 45 per cent. And with the new election act rebates, in addition to the Liberals’ $630,000, taxpayers will pay the Tories $675,000 and the NDP $315,000.
For the advertising agencies, however, the partisan election messages may lead to future profits if their side wins. Last year the federal government, by far
the largest single advertiser in the country, spent $62 million providing Canadians with messages paid for out of their taxes. The process is simple and not regulated: whenever a federal department wants to hire an ad agency, the minister responsible takes the request to a cabinet committee. Since Turner took over in early July, Secretary of State Serge Joyal has handled those matters, with advice from an advertising management group of three private advertising consultants on contract to the federal government. (The Toronto Star reported on Saturday that a 21month contract for federal government advertising will be awarded before the
election to Canadian Media Corp., owned by Vickers & Benson, RonaldsReynolds and BCP Advertising Limited of Montreal.) One of those in-house experts, Peter Zarry, told Maclean's last week that he has a list of 26 agencies that serve the government, adding that Vickers & Benson, MacLaren and Ronalds-Reynolds got a good deal of advertising contracts.
Vickers & Benson and RonaldsReynolds handle English-language advertising in the lucrative United States market for the federal tourism department, the biggest spender of federal advertising dollars (yearly budget: $15 million). Other large advertisers include the department of employment and immigration, which takes most of its $7million business to MacLaren, and the ministry of health and welfare, which makes wide use of Ronalds-Reynolds.
Crown corporations may choose their own advertisers, but government guidelines “encourage” them to seek the advice of Zarry’s group. Air Canada uses mainly Ronalds-Reynolds for its advertising needs, Canadian National sends business to MacLaren and Vickers & Benson, and Via Rail favors MacLaren. Zarry acknowledged that the system would change radically if the Conservatives win the Sept. 4 election. “If we have new bosses, we’ll go out,” he said, referring to the advertising management trio. “The PCs would undoubtedly have their own people.” That could mean that only the players are shuffled, while the process remains unchanged, because the federal government has no clear guidelines for choosing an advertising firm—although some senior Liberals believe it should.«^
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