Tories may be poised to ditch Saatchi

Saatchi & Saatchi may lose the Conservative Party's prestigious advertising account, and in New York the Securities and Exchange Commission may launch an inquiry into dealings in Saatchi shares.

An emergency board meeting will be held today to discuss how to underpin the embattled company.

Michael Dobbs, deputy Conservative chairman, yesterday refused to rule out switching the account to The New Saatchi Agency which is being formed by Maurice Saatchi, who was deposed last month from the company he founded.

John Major, the Prime Minister, and Jeremy Hanley, the Conservative chairman, are said to want to stay with Mr Saatchi, who was a key adviser during elections.

Mr Dobbs added: "It's a problem which is one for the agency at the moment, not the Conservative Party. We are simply sitting back and looking at what happens." The Tories, however, still have a £600,000 bill to settle with the agency before they can movethe account. This would be a much bigger blow than last week's loss of the British Airways and Mirror Group accounts.

Tom Russel, the New York-based non-executive director of Saatchi & Saatchi, yesterday raised the possibility of a US inquiry into US dealings to follow the present one by the Stock Exchange in London. He said: "I wouldn't be surprised if the SEC got involved in any way."

Millions of shares were traded, and the price fell 16p to 124p last Monday during the four hours it took before investors were formally informed of the resignations of three senior executives, who included Jeremy Sinclair, the acting chairman and chief creative director.

Today's agenda will also include a mountain of legal matters, the choice of another chairman, and the delicate subject of what to do about Charles Saatchi.

Besides preparing to go to court for restrictive injunctions against Maurice Saatchi and other defectors, the company is taking legal advice on a complicated dispute with Robert Louis Dreyfus, its former chief executive, and is said to be facing a $150m (£95m) lawsuit from disgruntled US investors, particularly Arkhurst Investments in California. Mr Russel and others involved with Saatchi expressed amazement because none of them had ever heard of Arkhurst, which is said to have instructed its lawyers inLos Angeles to claim for destruction of the "economic goodwill and credibility of the business".

Saatchi's shares have dropped from 155p to 102p since Mr Saatchi was ousted.

The affair with Mr Louis-Dreyfus, who resigned at the start of the December board meeting, revolves around a estimated $40m settlement the Saatchi brothers received over a legal dispute they had with him and Adidas, the German sports shoe company he heads.

A spokesman for Saatchi & Saatchi said yesterday: "Certain matters have been drawn to our attention relating to apparent payment of a significant amount of money paid to Charles and Maurice by shareholders in Adidas, when the brothers were full time employees of Saatchi & Saatchi in return for marketing skills."

Sir Tim Bell, the public relations guru and spokesman for Maurice Saatchi, said: "Maurice and Charles were completely free to make private investments."

Meanwhile, Charles, the company's co-founder and elder brother of Maurice, has not been seen at his office this year. "We don't even know if he is alive," said Mr Russel.

Saatchi & Saatchi wants to discuss the removal of 15 filing cabinets, containing personal and confidential client files, from Maurice Saatchi's office over Christmas.

Charles Saatchi, who is honourary president but not a director, is excluded from today's meeting and the normal monthly gathering scheduled for 25 January. It could cost the company at least £1.3m to sack him, because he still has four years remaining ofa five-year contract, paying £26,000 a month.

Saatchi is under intense pressure to regroup, as speculation mounts that Maurice Saatchi is in talks with other agencies with the aim of establishing a global advertising network. There is a separate rumour that he wants to buy an agency outright.