IPG Restatement Totals $550 Mil.

NEW YORK Interpublic Group today said the material restatement resulting from its six-month internal financial review totaled $550 million for the period of 2000-04. Roughly half of that reduction in earnings and shareholder equity came before 2002, IPG said.

About $441 million, or 80 percent, of the restatement was due to poor accounting for revenue, said IPG. The next biggest chunk, about $105 million, stemmed from acquisition accounting problems. Roughly 10 percent, or $55 million, resulted from employee malfeasance, including the falsifying of books; violations of laws, regulations and company policies; the misappropriation of assets; and inappropriate customer charges and dealings with vendors.

A positive adjustment related to goodwill and impairment charges reduced the size of the restatement, which was reported on the last day possible to comply with the terms of IPG’s bank loans and avert a possible delisting from the New York Stock Exchange. IPG also finally reported its numbers for 2004 and the first half of 2005.

During an 8 a.m. call with industry analysts to explain the numbers, IPG CEO Michael Roth stressed that following this long-awaited filing, he hoped to move away from the situation IPG has found itself in “and move to the forefront of disclosure and transparency.”

For 2004, the holding company reported a net loss of $558.2 million, up from a restated loss of $539.1 million for 2003. Revenue grew nearly 4 percent to $6.3 billion last year, but that was offset by skyrocketing professional fees, such as those paid to outside accounting firm PricewaterhouseCoopers. IPG paid PWC a staggering $92.6 million for its work in 2004, compared to $39 million for 2003.

“The high professional fees, the time and effort we put into this [indicate] we wanted to do it right and we wanted to do it for the last time,” Roth said during the call. “We’ve looked under every rock, every nook and cranny of the multinational company. . . We’re confident these are the right numbers.”

The No. 3 holding company also reported a loss for the first half of 2005. The net loss was $139.4 million, down from a restated $182 million net loss for the same period last year. First-half revenue grew 1.5 percent to $2.95 billion, but again increased expenses offset the growth.

“We are clearly not yet where we need to be on revenue or on the expense side,” said Roth, in a statement. “We have identified a number of areas that could drive significant improvement and we will pursue them vigorously. The investments we are making in bringing top talent and management teams to many of our companies should also begin to yield continued and improved top-line performance.”