Lawsuit Alleges 'Accounting Manipulations' at Interpublic

Current and Former Top Executives Named as Defendants

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NEW YORK ( -- Interpublic Group of Cos. and its senior management face a class action lawsuit that alleges "accounting manipulations," overstatement of operating profits by "as much as 500%" and the existence of a corporate culture that required lower-level executives to "cook the books."

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The incidents involving as much as a 500% overstatement only involve operations in Colombia, South America.

The federal securities class action suit was filed in U.S. District Court, Southern District of New York, on Jan. 10. The lead plaintiffs, identified as Private Asset Management, and two individual investors, Doyle G. McClain and Wayne Gardner, represent investors who purchased Interpublic stock between Oct. 28, 1997 and Oct. 16, 2002.

CEO John Dooner
Individual defendants named in the case include former Interpublic Chairman-CEO Philip Geier Jr.; current Interpublic Chairman-CEO John J. Dooner Jr.; Eugene Beard, former Interpublic chief financial officer; current Interpublic Chief Financial Officer Sean Orr; former Interpublic Vice President and Controller Joseph Studley; Frederick Molz, Interpublic vice president of financial planning and analysis; David Weatherseed, former Interpublic vice president and controller; and current Interpublic Vice President and Controller Richard Sneeder.

The case states that 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." A former finance executive at Interpublic's McCann-Erickson Worldwide, Colombia, unidentified in the suit, stated that "the net result of these accounting manipulations was that in certain years during the period 1997 through 2001 operating profit of the Colombia operations was overstated by as much as 500%" according to court papers.

Financial restatement
Plaintiffs claim in court papers that throughout that five-year period, "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."

Interpublic management on Nov. 13 said that it would restate financial results over the past five years by $181.3 million.

The suit includes information provided by a former vice president of finance and administration for McCann Colombia who was employed by McCann from January 1996 through July 2001. Court papers say that, according to the former financial executive, "beginning in 1997, McCann's Latin American regional and area CEOs and CFOs came under increased pressure from Interpublic and McCann's leadership to meet ... budgeted operating profit numbers at all costs, even if that required overstating reported revenues and understating reported expenses."

Furthermore, according to the former McCann vice president, "the improprieties disclosed ... were representative of much larger accounting manipulations that occurred during the Class Period throughout McCann's worldwide operations."

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