Interpublic faces US inquiry

Troubled advertising giant Interpublic is facing an investigation by the chief US financial watchdog after admitting it had mis-stated its accounts to the tune of £113m.

IPG, which owns the McCann-Erickson and Lowe advertising agencies, said the securities and exchange commission had asked for information related to its earnings restatement.

But it insisted it had now fixed the costly accounting problems.

The world's second-largest advertising group was savaged by the markets after admitting in August that it had mis-stated earnings at its flagship McCann-Erickson agency.

Interpublic at first said it had overstated results by £42.7m, but last week it revealed the final figure was £113.2m.

The group yesterday confirmed it had completed an internal investigation and published delayed third quarter results.

"We have been diligent and thorough in our review process and are confident that we are taking the necessary steps to ensure the mistakes that led to the restatement do not recur," said John Dooner, the chairman and chief executive of Interpublic.

But his attempt to draw a line under the embarrassing affair was undermined immediately by news that the securities and exchange commission had launched an investigation into the accounting mistakes.

Interpublic said the SEC had informed executives it was conducting an "informal inquiry".

The group said it had mis-stated £63.5m-worth of earnings at McCann-Erickson, while the rest of the restatements came from "understated liabilities" and other items at various Interpublic units.

The third quarter results saw Interpublic reverse a £302m loss made in the same period last year, due to restructuring charges and asset write-downs.

Profit for the three months to September was £4.7m, but total revenues fell to £940m from £1.02bn last year. US turnover, accounting for 56% of the total, fell 7%.

Sean F Orr, the company's chief financial officer, admitted Interpublic had missed analysts' earnings estimates, which was "unacceptable".

He blamed the shortfall on the accounting problems at McCann-Erickson.

Interpublic said it faced an "uncertain revenue outlook" for the rest of the year.