To compound the woes of a stock price nearing freefall, a second class action lawsuit has landed on Omnicom Group’s doormat.
Filed in the United States District Court for the Southern District of New York by law firm Charles J Piven, the suit charges that Omnicom has violated federal security laws, “artificially inflating” its share price by “issuing a series of materially false and misleading statements to the market”.
The suit follows hard on the heels of a similar class action against Omnicom and several of its senior officers instigated last week by shareholder litigation specialist Wolf Popper in New York [WAMN: 14-Jun-02].
The latter suit – an act of selfless disinterest that sheds a new light on the public-spirited altruism of the US legal profession – purports to be “on behalf of everyone who bought common Omnicom stock between April 25, 2000 and June 11, 2002”.
It charges that "Omnicom fraudulently and misleadingly reported growth in ‘organic’ revenue that included revenue generated by newly acquired companies and failed to disclose Omnicom's future obligations relating to its prior acquisitions.”
Meantime, Omnicom chief executive John Wren squared-up to the group’s critics. Speaking on Sunday to the Financial Times, Wren vowed to mount a robust defence against allegations of corporate and individual malpractice
“There are no skeletons in the closet,” he insisted. “The integrity of this company, its management, its board of directors and its employees is paramount to everything we do, just as it always has been.
“We are going to go out and re-explain the company, what we do and how we do it, and I believe when people hear all the facts, and take a deep breath and pause, they will understand what's what.”
Wren continued: “You have an attitude on Wall Street that all acquirers are conglomerates. We're not: we're a holding company, and we're in an industry where acquisitions are important to everyone, but it's in the ether at the moment.”
It remains to be seen whether his words (or subsequent actions) will halt the freefall in Omnicom’s stock – at close of business Friday 36% below their level two weeks previously – a chain reaction to the high profile resignation of Robert Callander, the chairman of the group’s audit committee [WAMN: 10-Jun-02].
Data sourced from: Financial Times; additional content by WARC staff