Holding Company Seeks to Defend Itself As More Lawsuits Are Filed

NEW YORK — Omnicom Group scrambled to come up with a plan to defend its reputation and restore shareholder confidence last week, even as five more law firms filed shareholder class-action suits against the ad holding company.

The actions, which bring the number of suits filed against the company to seven, allege that Omnicom made “material misrepresentations” to shareholders, reiterating published concerns about Omnicom’s accounting practices and its handling of the transfer of Internet assets into a newly formed entity called Seneca.

Suits have been filed by Scott + Scott, Colchester, Conn.; Schiffrin & Barroway, Bala Cynwyd, Pa.; Cauley Geller Bowman & Coates, Little Rock, Ark.; and New York law firms Stull, Stull & Brody, Milberg Weiss Bershad Hynes & Lerach, Wolf Popper and the law offices of Charles J. Piven.

While most observers believed Omnicom will be vindicated, the actions nonetheless continued to draw negative attention to questions raised in a June 12 feature in The Wall Street Journal. Publication of that story triggered a 30 percent slide in Omnicom’s stock, with the share price hitting an all-time low of $50.94 on June 13 [Adweek, June 17]. This past Friday, Omnicom stock closed at $53.04, off 1.08 percent from its closing price the day before.

Omnicom’s leadership rushed to dispute the WSJ’s attack on its financial integrity. Since June 12, top Omnicom executives have met with analysts at investment houses such as Merrill Lynch, Bear Stearns and Salomon Smith Barney.

On the evening of Sunday, June 16, Omnicom briefed board members on efforts to manage through the current crisis. The next day, the holding company said it complied with an informal request from the Securities and Exchange Commission for information related to Omnicom’s recent change in auditors and the resignation of two board members. The company also disclosed that John Wren, Omnicom’s CEO, and Randy Weisenburger, its chief financial officer, made a $2.2 million vote of confidence in the company, with each buying 20,000 shares in it at $55.10 a share on June 13.