Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Thursday, May 1, 2008

McCann-Erickson Settles Accounting Fraud Charges

The SEC filed a civil injunctive action against McCann-Erickson Worldwide, Inc. (“McCann”) and the Interpublic Group of Companies, Inc. (“IPG”) alleging that McCann committed securities fraud when it misstated its financial results by failing to expense properly intercompany charges and IPG negligently failed to address the intercompany problems at its largest subsidiary, McCann. IPG also violated the reporting, internal controls and books and records provisions of the securities laws in connection with a variety of issues that were reflected in various restatements IPG issued from August 2002 through September 2005 totaling more than $600 million. IPG and McCann agreed to settle the Commission’s charges, and McCann agreed to pay a $12 million civil penalty.

The SEC also brought settled charges against Salvatore LaGreca and Brian Watson for their role in failing to reconcile intercompany accounts that resulted in the 2002 restatement. LaGreca served as McCann’s Vice-Chairman, Finance and Operations and CFO from January 1996 to October 2002. Watson joined McCann’s European-Middle-East-Asia region (“EMEA”) as Director of Operations in 1996, from 2000 served as Chief Operating Officer and in approximately May 2002 became Deputy Regional Director of EMEA and, from approximately the middle of 1998 until January 2000, and from early 2001 to May 2002, when EMEA did not have a Finance Director, Watson handled many aspects of the Finance Director’s responsibilities.

IPG, McCann, LaGreca and Watson settled the Commission’s charges without admitting or denying the allegations in the Commission's complaints.

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