Holding company MDC Partners, which owns CP+B, 72andSunny, Doner, and various other agencies, suffered a hit to its stock price this morning after revealing the following (as transcribed by Seeking Alpha) during yesterday’s Q1 earnings call:
“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.”
In short, chief Miles Nadal charged “reimbursed expenses, medical expenses, travel expenses and other expenses for which information was incomplete” over a period of six years in what may constitute a violation of SEC rules. As noted in The Wall Street Journal, the company’s share value dropped 33 percent and analysts updated the stock’s status to “hold” after the news broke. Its price picked up a bit this afternoon for a total daily decline of 27.81 percent.
In her initial report, Noreen O’Leary of Adweek wrote that the most significant elements of the story were the fact that MDC chose not to reveal the information to investors for six months and that Nadal’s base salary last year was higher than that of both Martin Sorrell and Maurice Levy. In a follow-up story, she uncovered a few more details:
“Nadal received $926,005 in company-paid expenses last year to help support his Bahamas-based lifestyle.
Of that, $500,000 was for unspecified perks. Another $91,038 went toward Nadal’s personal use of aircraft, including travel between his residences in the Bahamas and West Palm Beach, Fla., and MDC’s corporate office in New York.”
Nadal has agreed to reimburse MDC for $8.6 million.
Here’s the full statement given to us by MDC:
“MDC Partners has been actively cooperating with the SEC and continues to do so. We are committed to the highest standards of corporate governance and transparency, and in response to this situation have taken a number of steps to strengthen our procedures and internal controls, the details of which are outlined in our most recent earnings release and proxystatement filed with the SEC.
We expect these circumstances to have no impact on the integrity of our current or previously reported financial statements, and we remain laser-focused on continuing to execute on our strategy and plan. Our business is very strong and we are confident in our ability to achieve our financial guidance for this year, as well as enthusiastic about our overall growth prospects for 2015 and beyond.”
The company says that none of these developments will affect day-to-day operations at its various agencies.