IPG Moves to Settle Shareholder Suit

NEW YORK Interpublic Group has agreed to settle a federal lawsuit in New York that accused the company of misleading investors about a $181.3 million accounting imbalance that surfaced last year. IPG also is close to resolving a state suit in Chicago that’s related to the same discrepancy.

The cost of settling both actions is estimated at $115 million, the bulk of which ($95 million) will be paid in stock, IPG said. That will require the issuance of 6.5 million shares. The remaining $20 million will be paid in cash. U.S. District Court Judge Denise Cote still must approve the settlement.

The imbalance was originally estimated at $68.5 million in August 2002, but IPG subsequently increased the estimate twice. Roughly two-thirds of the imbalance, which involved the multiple booking of revenue, was traceable to offices of McCann-Erickson in Europe.

The Chicago suit, which is still pending, was brought by former True North Communications shareholders, who accused IPG of misleading them about IPG’s financial health prior to IPG’s purchase of TN in 2001.

IPG signaled its desire to resolve the shareholder suits in November, when it reported that it would take a charge of $127.6 million to cover legal liabilities related to the actions and another unrelated suit.