Fed Probe Ups Ante at IPG

New YORK—Now that the Securities and Exchange Commission has formalized its investigation into Interpublic Group’s accounting imbalance, several board members are growing more vocal about their frustration with certain senior managers, sources said.

Last week, at least two influential board members were pushing for more changes at the top, and all eyes were on McCann WorldGroup CEO Jim Heekin and IPG CFO Sean Orr, sources said.

“There’s a healthy dynamic going on,” said one source about the debate over the future of Orr and Heekin. “Given the performance [of IPG] … it’s not surprising that people would have different points of view.”

Fueling the frustration is the federal probe into a $181.3 million accounting imbalance IPG reported last year—$137 million of which traces back to McCann offices in Europe. The imbalance triggered an informal SEC inquiry that recently escalated to a formal investigation, as many do.

With Heekin in particular, the feeling among some board members and also within the tarnished agency is that he must take responsibility, sources said. The embattled executive remains under fire even after the exits of WorldGroup chief financial officer Sal La Greca, as well as the agency’s CEO and CFO in Europe.

Still, the WorldGroup boss has his defenders, most notably IPG CEO John Dooner. And Hee kin’s departure could up set major global clients such as Nestlé and Johnson & Johnson. His job appears safe for the short term, but some sources said it is just a matter of time before the board acts.

Heekin, Dooner and Orr declined comment, and board members did not return calls.

Perhaps the more tenuous situation is that of Sean Orr. He is credited with discovering the imbalance—originally estimated at $68.5 million over five years—but is stained by the financial trouble, given his position and three and a half years with the company.

Sources believe Orr’s fate may be linked to the outcome of IPG’s search for a COO, particularly if that executive has strong financial skills.

IPG remains under pressure from Wall Street, given the ongoing renegotiation of the terms of its bank notes and the wait-and-see attitude of analysts and credit-rating firms. Its lenders have granted a four-week extension on the renegotiation, to Feb. 10, but IPG had to agree to limit cash acquisitions and halt stock dividends. IPG is expected to report its fourth-quarter results in early March.