Saatchi accused over missing files

Founder sets up new agency as top clients walk out

Maurice Saatchi, the deposed chairman of the advertising agency which bears his name, was last night involved in a row over missing company files after a day in which two of the agency's top clients quit.

The row emerged as Mr Saatchi announced he was setting up his own rival agency with three colleagues who resigned in protest after he was sacked. Yesterday, four more executives resigned from Saatchi & Saatchi.

Last night, the company lost British Airways and Mirror Group Newspapers as clients and with them more than £120m of business. Dixon's, the high street retail chain, is considering withdrawing its £40m account and the confectionery group Mars could be next.

The losses came as the company alleged Mr Saatchi, who founded Saatchi & Saatchi with his brother, Charles, in the 1970s, had removed filing cabinets containing confidential papers and kept them at an address in north London.

The company threatened to sue for the return of the papers and to sue all former employees if they started up as rivals before the end of contracts banning them from competing for at least 12 months.

Maurice Saatchi plans to call his business The New Saatchi Agency, and will cover the start-up costs with his own money.

He will be joined by Jeremy Sinclair, who was Saatchi's chief creative director and acting chairman for three weeks, Bill Muirhead, who was US branch chief, and David Kershaw, who was in charge of European operations.

The four who resigned were Moray MacLennan and Nick Hurell, joint managing directors of the London agency, and Simon Dicketts and James Lowther, joint creative directors. They worked on accounts such as Schweppes, Gillette, British Telecom and the National Lottery. It is unclear whether they will join the new agency.

Saatchi & Saatchi said it threatened Maurice with legal action after finding 15 filing cabinets, some containing confidential information about clients, had been taken from it's London headquarters.

Some 21 crates were returned yesterday, but Maurice Saatchi is refusing to return the rest. He insists they be kept in a locked room with the only keys held by his and the company's lawyers.

Maurice Saatchi left the company completely a few days into the new year. Three weeks earlier, he had been ousted as chairman following weeks of boardroom politics involving some big shareholders, particularly in America.

The company intends to raise the removal of the files - which was discovered by accident - with Charles Saatchi who is still president of the agency.

Wendy Smyth, finance director, said: "We did not know any files had been removed until last Thursday, when a staff member, who was working late, saw files being removed from the building. After stopping those files leaving, we investigated Maurice's offices." The company discovered that 15 filing cabinets were missing, and on Friday ordered their return.

The company said the request to return the files had not been complied with, and it therefore decided to threaten legal action.

The decisions by Mirror Group and BA, which served Saatchi with four months' notice on its £85m-a-year contract, were announced after the stock market closed. The moves will put more pressure on Saatchi's share price. The shares fell 4.5p to 107.5p yesterday.

The Conservative Party is a client of Saatchi & Saatchi. Any bid to move to Maurice Saatchi's new agency would be hampered by the fees the party owes from the 1992 election. The debt is said to have been turned into a £1m loan from Saatchi & Saatchi. However, Conservative Central Office confirmed that Maurice Saatchi met Jeremy Hanley, the Conservative Party chairman, yesterday.

Robert Ayling, managing director of BA, wrote to Charles Scott, chief executive of Saatchi, yesterday, saying he had asked for a "general review" of BA's advertising needs and that Saatchi & Saatchi might regain the contract. "In the short term, however,we have decided to terminate the existing contract. . ."

David Montgomery, chief executive of Mirror Group, made a stinging attack against Saatchi's directors. He said: "The board of Saatchi ignored the Mirror Group's concerns about the departure of Maurice Saatchi and now the talent that looks after its newspaper accounts is deserting the agency. Mirror Group is withdrawing its business across all titles."

Stanley Kalms, chief executive of Dixons, said yesterday that Saatchi was one of the "worst examples of corporate governance" he had seen.

Senior managers of Saatchi last night crammed into the Pregnant Man pub in the company's head office complex to try to find a way of ending the current crisis, which industry observers believe could have long-lasting damaging effects.

Pressure on shares, page 32