Angry investors have filed a class action lawsuit in US District Court, Southern District of New York, naming Interpublic Group and senior executives, past and present.
The suit alleges the inflation of operating profits by “as much as 500%” by dint of “accounting manipulations” and a corporate culture that leaned on lower-level executives to “cook the books.”
Lead plaintiffs in the action are Private Asset Management plus two individual investors, Wayne Gardner and Doyle G McClain, all claiming to represent investors who purchased IPG stock between October 1997 and October 2002.
Among those indicted in the document are four former IPG directors: ex-chairman/ceo Philip Geier Junior; chief financial officer Eugene Beard; and two vice president/controllers, Joseph Studley and David Weatherseed.
Also fingered are four current executive board members: chairman/ceo John J Dooner Junior; chief financial officer Sean Orr; vice president of financial planning and analysis Frederick Molz; and vice president/controller Richard Sneeder.
The defendants engaged in “various accounting manipulations designed to overstate revenues and understate Interpublic’s expenses in order to maintain the appearance of continued earnings growth,” alleges the document
It cites an unidentified former finance executive at IPG unit McCann-Erickson Worldwide who has attested: “The net result of these accounting manipulations was that in certain years during the period 1997 through 2001 operating profit was overstated by as much as 500%.”
During the five years in question, the plaintiffs aver that “there existed within Interpublic a corporate culture and leadership that permitted and required lower-level executives to cook the company's books. These former Interpublic employees claim that the announced $181.3 million restatement represents only a fraction of the Company's historical overstatement of its financial results.”
As yet, Interpublic has offered no comment on the allegations.
Data sourced from: AdAge.com; additional content by WARC staff