Omnicom's Wren: Article Inaccurate, Irresponsible | Adweek Omnicom's Wren: Article Inaccurate, Irresponsible | Adweek
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Omnicom's Wren: Article Inaccurate, Irresponsible

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NEW YORK -- In a conference call Wednesday, Omnicom president and CEO John Wren reacted to an article in today's Wall Street Journal, saying that he understood the need for more corporate scrutiny in the current environment, but that such scrutiny is "irresponsible when it's done by someone who lacks understanding or may have a biased point of view."

"There is nothing new ... in the article," Wren said. "The only thing new is innuendo."

Omnicom Group shares had plummeted more than 25 percent, to just below $58, by midday Wednesday, undermined by investors' fears that an accounting scandal could be brewing at the holding company.

Typically Wall Street's star ad industry performer, Omnicom's stock started the week down 18% from its May 28 close, when investors got wind of the Journal story suggesting that the resignation of board member Robert Callander was spurred by a disagreement over accounting for dot-com agency investments [Adweek, June 10]. With the appearance of that story today, OMC shares swooned to four-year lows, with heavy volume, before recovering somewhat.

The article focuses on the accounting for Seneca, a company set up to control Omnicom's investments in more than a dozen besieged Internet firms. In exchange for contributing its holdings in these companies, Omincom received preferred stock, an accounting strategy that has been an investor hot-button following the collapse of Enron and other complexly-structured companies. Omnicom, like Enron, is a former client of auditor Arthur Anderson; CEO John Wren is, in fact, a former Anderson consultant.

During the call, Wren strenuously objected to the article's characterization of the Seneca arrangement. "Seneca was not financial engineering," he said. "It has a very sound business purpose and strategy. And it's working." He also said that there was "no turmoil or dissent on the board."

Given the acquisitive nature of the ad industry , and of Omnicom especially, the Callander imbroglio and the specter of "Enron-itis" fueled some speculation about Omnicom's robust billings growth. But Merrill Lynch analyst Lauren Rich Fine, who helped spark the sell-off when she downgraded OMC to a "buy" from a "strong buy" on May 30, dismissed concerns about the company's write-down reporting or organic growth in a report released just before the call on Wednesday.

"There was no new information in the article and nothing in the article changes our opinion of the company," Rich wrote. "We maintain our Strong Buy rating and our $100 price target."