Interpublic Group agreed to pay $12 million to settle Securities and Exchange Commission charges of accounting fraud. A separate consent decree was signed by two former executives of IPG’s McCann-Erickson Worldwide unit, including a one-time CFO.

In the first case, the SEC alleged that McCann-Erickson, IPG’s huge global advertising unit, along with some of its executives, engaged in faulty “intercompany transactions” that resulted in misstatements in its financial reporting. Further, the company was negligent in addressing the problems, the complaint said.

“A subsidiary that feeds misleading financial results to its parent defrauds the parent’s public shareholders and will be held accountable,” said Linda Thomsen, director of the SEC’s division of enforcement.

According to the SEC’s complaint, IPG restated its financials in 2002 to account for intercompany transactions of $181 million from the previous five years that McCann did not accurately report. But problems persisted after this restatement. In 2005 IPG restated pretax income from 2000 to 2003 and part of 2004 for $420 million. Nearly half of that was related to improperly recognized revenue, vendor discounts and credits taken that violated contracts with certain clients. IPC consented to the charges without admitting to or denying them.

The SEC filed separate charges against McCann executives Salvatore LaGreca, vice chairman of finance and operations and CFO from 1996 until 2002, and Brian Watson, director of operations for the European-Middle East-Africa region. The regulator alleged that LaGreca and Watson purposely delayed reconciling intercompany accounts because they knew that restatements would lead to write-offs and missed profit targets. Without admitting to or denying the charges, LaGreca agreed to pay a penalty of $71,947 and Watson agreed to pay $67,325.

“McCann ignored its intercompany problems year after year, and even worse purposely avoided addressing the problems to ensure it hit profit targets,” said Mark Schonfeld, Director of the SEC’s New York regional office.

In a regulatory filing last June IPG acknowledged “possible employee misconduct” relating to its accounting errors and said that “In all cases, culpable employees have been terminated or are in the process of being terminated or are otherwise no longer with the company.”

The company noted on Thursday that it has been compliant with the Sarbanes-Oxley Act standards since 2007. “Under current management, we have devoted considerable resources to replacing and expanding staff in the relevant areas and our efforts to remediate material financial control weaknesses,” said Michael Roth, IPG’s chairman and CEO.

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