For nearly two decades, CEO Roger Schaffner’s two sons-in-law were employed at his Santa Monica ad agency, Palisades Media Group. One was a creative designer and the other was an account coordinator, according to an org chart. They each received $65,000 a year, said a person with direct knowledge of their earnings.
There was just one problem. Officials of the now defunct agency say the sons failed to perform their duties and rarely showed up for work.
They said the same about another person close to the CEO: his housekeeper. She was listed as an administrative assistant/receptionist in an organizational chart, but former employees said they didn’t know what job she actually did at the once prominent actor in Hollywood’s advertising industry.
The payouts caught the attention of many of the roughly 90 employees who lost their jobs when the company, which ran advertising campaigns for Netflix and other major clients, abruptly closed after citing problems cash.
Last month, the president and chief operating officer of Palisades told senior executives that the company had received $14 million to $16 million from their customers, but hadn’t paid it to vendors who ran ads, according to two people familiar with the discussions who declined to be named. The New York Times and Los Angeles Times are among the companies that owe money, sources said.
“It’s unethical for them to keep these people on our payroll while the company is struggling,” said a former employee who declined to be named for fear of retaliation. “It was just very inappropriate.”
The payments raise bigger questions about how the company used the funds at a time when it faced serious financial problems after Netflix cut its business with Palisades Media Group earlier this year.
During the time the sons and housekeeper were compensated, Palisades received federal loans through the Paycheck Protection Program, which was intended to help businesses offset business losses caused by the COVID pandemic. -19. In 2020 and 2021, Palisades took out $3.89 million in federal loans under the program, to cover costs, including payroll and health care, according to ProPublica.
Adam and Brent Burnett, Shaffner’s stepsons from his wife’s first marriage, did not return multiple requests for comment.
In an email, Schaffner did not respond to questions about payments to his sons or housekeeper, but cited what he described as “inaccuracies” and “innuendos” propagated by ” disgruntled employees”.
“All the misinformation you think you have so cleverly gathered has absolutely nothing to do with why I closed the business,” he wrote.
Earlier this year, Schaffner wrote, customers reduced their down payments to Palisades by $6.4 million, 33% less than the previous year. He said he only closed Palisades Media after unsuccessful efforts to sell the business, find new revenue streams and cut costs as “red ink mounted”.
“It was a perfect financial storm that would be difficult to weather,” Schaffner wrote.
Schaffner started Palisades Media Group in 1996, after working at media agency ICG, where he created an entertainment division representing independent film studios, according to his LinkedIn page.
Palisades has handled media buys for various Hollywood clients, including Fox Searchlight and Miramax, the influential studio founded by Bob Weinstein and his brother, Harvey, the former movie mogul who was convicted in 2020 of committing an act criminal sex and third degree rape.
The agency has built a reputation for having talented professionals who have worked with studios and brands such as Mercury Insurance and the Los Angeles Philharmonic. In 2000, Schaffner described Palisades as a $250 million business for Ad Age.
During the pandemic, however, the company’s fortunes began to shift and tensions grew internally over spending practices, according to emails seen by The Times.
Chief Financial Officer Russell Dean raised concerns about expenses Schaffner and his wife, Marlene, allegedly charged to an American Express account. In an October 28, 2020 email to Laura Jean Bracken, the company’s chief operating officer and president, Dean said the latest Amex bill was just over $17,000; the previous month was over $16,000.
“It’s so incredibly irresponsible,” Bracken replied in an email.
Earlier that month, Schaffner asked Dean to pay Jaguar, telephone and American Express bills before paying rent to the business owner as cash flow problems worsened, according to e -emails viewed by the Times.
“We have overdue notices on anything that will impact our credit rating,” Schaffner wrote in an Oct. 9, 2020, email. “Don’t pay rent to our indifferent landlord and pay our bills.” I’m not asking you, I’m telling you to do this!
Dean responded later that day saying he had already paid the Jaguar and American Express bill on September 30, as well as an AT&T mobile bill on October 8. “Any delays in payment are due to cash flow issues of which I have made you aware,” Dean wrote in an email.
Dean and Bracken did not respond to requests for comment. Three sources close to Palisades confirmed that Dean told Schaffner about his concerns about Amex’s spending.
Schaffner declined to discuss the email communications, but in his statement he said, “In over 26 years, we have never once missed a rent payment.”
The employment of Schaffner’s stepsons has also drawn internal attention.
On LinkedIn, Adam Burnett describes himself as a designer at Palisades from 2003 to 2022, with clients including Focus Features, the Weinstein Co. and United Artists.
However, three people who knew of those accounts and who were not authorized to speak publicly, said they did not believe Burnett worked for those clients or provided work to Palisades for at least a decade.
“It’s completely falsified,” said a former senior executive who declined to be named for fear of reprisal, referring to Burnett’s LinkedIn description of his work at Palisades. After The Times contacted Adam Burnett for comment, his LinkedIn page was taken down.
While employed at Palisades, Burnett held other jobs over the same period, including as music director at Café Claude from January 2019 to March 2020, designer at Belding Associates from 2010 to 2018, and as as a songwriter and music producer, according to his LinkedIn page.
Brent Burnett’s performance at Palisades had been the subject of concern among his bosses, according to interviews and emails seen by The Times. Like his brother, he also worked in the music business and was a member of metal band Combichrist, according to his Instagram profile.
Around the office, it was known that “Adam and Brent weren’t real employees,” said a second former Palisades manager who declined to be named. “He came when he wanted and left when he wanted,” the former manager said of Brent Burnett. “You couldn’t give him any real responsibilities. You didn’t know if he was going to show up the next day.
Palisades officials were asked by Schaffner to give Brent Burnett assignments in 2020 after Schaffner told them his son wanted to do more work in the office, former employees said.
Brent Burnett’s work ethic was questioned by managers after he arrived late at work in February 2020, citing excuses such as oversleeping or, in one case, wanting to follow through on plans to meet friends at the San Pedro Artwalk instead of going to the office, according to the emails.
“He’s usually 1-2 hours late every day,” a manager wrote in a memo of Brent Burnett’s performance. “When working from home, he is often incommunicado. He will need to significantly improve his attendance, punctuality and skills to keep pace with a junior designer.
After learning of Brent Burnett’s work performance, senior agency officials acknowledged they could not rely on him, according to two people familiar with the discussions who declined to be named for fear of reprisal. Those people and a third source familiar with Brent Burnett’s employment said they don’t believe he was working for Palisades in 2021.
Brent Burnett did not respond to a request for comment.
Alba Hernandez-Vindel had worked at Palisades since 1998 and recently received an annual salary of $49,500, according to a person familiar with her compensation who declined to be named because she was not authorized to speak on the matter. .
Four former employees said they were told by Schaffner or his wife that Hernandez-Vindel was their housekeeper. Former staffers said they had never seen Hernandez-Vindel in the office or knew she was performing duties at Palisades Media.
Hernandez-Vindel could not be reached for comment.
“It was just pure waste for a company struggling to survive to have multiple people on their payroll who weren’t contributing,” said a former employee who requested anonymity. “It was just very inappropriate.”
Times writer Steven Vargas and researcher Scott Wilson contributed to this report.