The Securities and Exchange Commission has filed enforcement actions against global advertising network McCann-Erickson Worldwide, its parent company Interpublic Group of Companies, and two of its former executives, charging them with accounting fraud.

Without admitting or denying the allegations, IPC and McCann agreed to pay the SEC $12 million to settle the charges. The SEC complaint alleges that McCann, which owns hundreds of regional and local advertising agencies around the world, fraudulently misstated its financial results by failing to expense intercompany charges that were instead recorded as receivables. Its holding company, Interpublic, also failed to address the accounting problems at McCann, said the SEC, resulting in material misstatements in its own financial reporting.

The SEC also charged McCann's former CFO, Salvatore LaGreca, and former director of operations for the Europe-Middle East-Africa region Brian Watson. They, along with other employees, allegedly failed to ensure that McCann reconciled its intercompany accounts for at least six years. The SEC said they knew the restatements would result in write-offs that would interfere with McCann's ability to hit internal annual profit targets. Ultimately, in the fall of 2002, McCann had to restate its 1997 to 2002 financial results by $181 million. Later, in 2005, it restated its financial results for 2000 through 2003 and the first nine months of 2004 by $420 million.

"We are very pleased to have settled with the SEC and we believe this matter is now behind us," said Interpublic chairman and CEO Michael I. Roth in a statement. He noted that the accounting practices were addressed in the company's restatement of its 1997 to 2002 results and that the two former employees have not been with the company since 2003. The company has also been working on remediating its financial control weaknesses and improving its financial reporting, and now claims to be in full compliance with Sarbanes-Oxley.

LaGreca and Watson also agreed to pay penalties of $25,000 and $50,000, respectively, and pay disgorgement and pre-judgment interest of $46,947 and $17,325, respectively.

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