MDC Partners in Trouble with Investors Over CEO Spending

Chief executive agrees to pay back millions owed to his own company.

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MDC Partners, the holding company that owns Allison+Partners, Kwittken, Sloane & Company, and quite a few ad agencies, took a big hit on the stock market today thanks to an SEC investigation into CEO Miles Nadal’s previously undisclosed expenses.

During yesterday’s earnings call as transcribed by Seeking Alpha, CFO David Doft revealed this:

“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, Nadal charged “reimbursed expenses, medical expenses, travel expenses and other expenses for which information was incomplete” to his own company over a period of six years, and MCD knew about it for six months before revealing the information to investors yesterday.

As noted in The Wall Street Journal, those investors did not respond positively to this information as the company’s share value dropped 33 percent and analysts updated the stock’s status to “hold.”

Noreen O’Leary of Adweek writes that the news is significant both because MDC sat on it for six months and because Nadal’s $17 million 2014 salary was significantly higher than that of his more visible colleagues Martin Sorrell of WPP and Maurice Levy of Omnicom despite the fact that those orgs are several times larger than MDC.

Nadal effectively admitted that he was in the wrong by “voluntarily” agreeing to pay his own company $8.6 million for the expenses charged.

MDC has not responded to our request for comment; here’s what they told the WSJ:

“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.”

Fortunately, this problem will not affect the day-to-day operations of MDC’s agencies unless the company is unable to resolve it with the SEC.