SEC REJECTS IPG REQUEST TO KILL SALE PROPOSAL

Action Could Lead to Referendum to Put Holding Company on Block

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LOS ANGELES (AdAge.com -- The Securities and Exchange Commission has denied Interpublic Group of Cos.’ request to kill a shareholder proposal for the sale of the company, an action that could lead to a shareholder referendum this fall on whether to put Interpublic on the block.
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Interpublic in July asked the SEC to concur on the company’s desire to keep a proposal by activist shareholder Charles Miller off the proxy for its 2005 annual meeting.

Request denied
But the SEC, in a letter to Interpublic’s attorney, has turned down Interpublic’s request, saying the SEC did not concur with the two arguments cited by Interpublic.

At issue is whether shareholders will get to vote on Mr. Miller’s “Maximum Value Resolution,” a non-binding proposal urging Interpublic’s board “to arrange for the prompt sale” of Interpublic “to the highest bidder.”

Interpublic’s first argument was that the proposal could be excluded under SEC rules because it “deals with a matter relating to the ordinary business operations of the company.” Its second was that the proposal “is contrary to the commission’s proxy rules.”

But the SEC disagreed. “We do not believe Interpublic may omit the proposal from its proxy” based on its two arguments, the SEC wrote in a three-paragraph response to Interpublic’s five-page letter.

No comment
An Interpublic spokesman did not have any immediate comment on the SEC’s action. Mr. Miller, a Great Neck, N.Y., psychologist, late today hadn’t responded to a message left at his office.

Interpublic is expected to release its proxy statement around Oct. 7, contingent on its plan to file restated financial results for 2000-04 and quarterly results for 2005 by Sept. 30.

The troubled holding company is the subject of an ongoing SEC inquiry that began after Interpublic discovered accounting irregularities in 2002. Interpublic last week revealed that its own investigation had uncovered “employee misconduct” including falsifying records, misappropriating assets and “inappropriate customer charges and dealing with vendors.”

Floundering stock
Interpublic stock plunged three years ago when accounting and operating problems became apparent, and it has floundered since then, as the No. 3 ad holding company has struggled with restatements, weak operating performance, management turnover and the SEC probe. The stock closed today at $11.05, down 22 cents for the day and down 68% from its 2002 high point.

As Interpublic labors on a turnaround, industry executives have speculated on whether Interpublic could be bought or broken up. There’s no evidence of any real deal. In the July letter to the SEC, Interpublic’s attorney said the company "has not received inquiries" about any transaction, "notwithstanding the fact that the company has little in the way of formal anti-takeover defenses."

Mr. Miller has for years taken on a range of companies from Bausch & Lomb to RJR Nabisco on issues from executive pay to election rules for directors. He has been an Interpublic shareholder since at least 2001 and owned 600 shares as of September 2004.

Sharholder displeasure
Mr. Miller wrote in his proposal that his goal was to “send a message” to the board supporting a sale. “I believe that a strong and or majority vote by the shareholders would indicate to the board the displeasure felt by the shareholders of the shareholder returns over many years and the drastic action that should be taken,” Mr. Miller said in the proposal. The referendum would not be binding, but Mr. Miller said that “if this resolution receives substantial support from the shareholders, the board may choose to carry out the request set forth in the resolution.”

If the resolution passes, Mr. Miller said in the proposal that he believes “the management and the board will interpret such adoption as a message ... that it is no longer acceptable for the board to continue with its current management plan and strategies.”

Shareholders voted on almost identically worded proposals at more than 40 companies from 1997 to 2005, according to an analysis by Advertising Age.

Common practice
Mr. Miller put his up-for-sale proposal on the proxies of at least six firms -- P.H. Glatfelter Co., Lawson Products, Occidental Petroleum Corp., Rite Aid Corp., A. Schulman Inc., Whirlpool Corp. -- from 1997 to 2000. All proposals failed -- and all remain independent -- but shareholders had the opportunity to vote. William Steiner, a shareholder activist who at times has worked with Mr. Miller, has used similar language on proxy proposals seeking the sale of at least three dozen companies since 1998.

Mr. Miller has at times succeeded on shareholder proposals. His proposal to bar golden parachutes passed at Angelica Corp. In May, Baxter International shareholders approved his proposal to elect board members annually.

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