MDC Partners Founder, Chairman and CEO Miles Nadal announced last night that he will be stepping down immediately against the backdrop of an ongoing investigation into his finances conducted by the SEC.
The holding company, which owns 72andSunny, Anomaly, CP+B, Doner and more, has already chosen his replacement; last night’s announcement also included news regarding the resignation of Chief Accounting Officer Michael Sabatino, and it follows shareholders’ recent attempts to alter the company’s management structure by removing multiple executives from MDC’s board of directors.
Scott L. Kaufman, who served as presiding director of that board, will now assume the roles of chairman and CEO in replacing Nadal, who spent 35 years with the company he founded. Kaufman previously worked in media as a marketer at Playboy and VP of business development at Time Inc. before moving into the advertising technology field; he was CEO of several companies with names like AdKnowledge and Coremetrics and joined MDC in 2006.
MDC had little to say regarding Nadal but did offer this statement on Kaufman and the status of the business:
“MDC has never been in a better position to build on its financial and operational success. Through Scott’s nine-year tenure as a Board member, he is fluent in MDC’s culture and operations, and through his career as an entrepreneur and executive, he has proven himself a leader in the industry in which we compete and win. Under his leadership, we remain wholly committed to the values of innovation and partnership that drive us to attract the best talent in the industry, creating gains for our clients, and ultimately, performance for our shareholders.”
The statement from Nadal himself:
“I’m gratified knowing that after 35 years, I am leaving the Company in a strong position, with brilliant partners, exceptional talent, dedicated employees, wonderful clients, a strong shareholder base, and an incredible culture and reputation. I have every confidence that the Company’s deep leadership team will build on this strong foundation in the years ahead.”
News of the SEC investigation that preceded Nadal’s departure hit in April during the Q1 earnings call, which included the following sentence:
“In October, the company received a Subpoena from the Securities and Exchange Commission relating to CEO expenses, the company’s goodwill and certain other accounting practices, as well as trading in the company’s securities by third parties.”
MDC chose not to reveal this information to investors for six months, and Adweek’s Noreen O’Leary later discovered that the company had reimbursed Nadal for more than $1 million in personal expenses last year. His salary was also higher than that of both Martin Sorrell and Maurice Levy (he made $20.7 million in 2013), and the SEC noted that his reimbursements for travel, medical treatment and other unspecified expenses “lacked appropriate substantiation over the six-year period from 2009 to 2014.”
Nadal agreed to pay back $8.6 million as his company released a statement stating that it would continue actively working with the SEC and that the investigation would “have no impact on the integrity of our current or previously reported financial statements.”
This wasn’t the first time MDC’s board of directors made their displeasure known: Canada’s Globe and Mail (Nadal is a Canadian citizen) reports that “two directors left the board in the early 2000s after raising concerns about his pay,” which was consistently among the highest for any Canadian CEO despite MDC’s “wildly uneven results and poor returns” at the time.
A spokesperson for Nadal did not connect the executive’s retirement to his financial troubles but did tell The Wall Street Journal that he “plans to focus on his family and spend time on his philanthropic endeavors and other business interests” in his post-retirement life. He still owes MDC quite a bit of money: As O’Leary reports again this morning, Nadal must “repay $10.58 million in retention amounts received between 2012 and 2015”; that number includes the original total named in April as well as “an additional $1.88 million that was recently identified.” Sabatino also agreed to repay more than $200,000 in cash bonuses received during his tenure.
MDC stock prices fell 6 percent in trading yesterday, but analysts quoted by The Wall Street Journal see Nadal’s departure as a positive development:
“[We see Nadal’s] replacement, Scott Kauffman, who has served on MDCA’s board for the past nine years, as providing a seamless transition near term as the company continues its growth momentum.”
All sources describe the SEC investigation as “ongoing.”