It’s lucky for Aegis Group – as my old chum Stephen Foster points out – that its financial performance continues to delight shareholders. Only the other day we had Quarter 3 numbers that revealed an astonishing 11% organic growth rate. And, a little earlier, Aegis managed with considerable aplomb to unload its margin-sapping research business Synovate on Ipsos. All of which reflects very favourably on CEO Jerry Buhlmann’s grasp of the Big Picture.
If I were him, though, I’d be a little worried about some of the Detail that keeps emerging. Granted media buying companies, with their inherent penchant for surcommission (backhanders), are more prone to financial shenanigans than other arms of the marketing services business; but let’s face it, Aegis seems more unfortunate than most. Maybe it’s simply that rivals are better at covering their tracks. Whatever, Buhlmann is beginning to look a bit of a Mole Whacker.
First we had the Ruzicka scandal, which resulted in the German head of Aegis going to jail for a number of years. Then the Rumasa affair, as a consequence of which the company had to write off over £25m it had failed to collect in time (which was rather careless, to say the least). Now comes news that 2 senior executives who used to work in its US outdoor operation, Posterscope USA, have been indicted for fraud by the federal government.
Briefly, the facts are as follows. Todd Hansen, former US division president, and James Buckley, former finance director, have been charged with a $19.75m accounting fraud that stretched over 5 years (from 2004 to 2009) apparently without being detected. The two are accused of deliberately and artificially inflating company revenues in order to meet personal performance targets involving higher salaries, bonuses and stock options. In all, Hansen is alleged to have illegally salted away an extra $1.1m, and Buckley $650,000. If convicted, they face up to 20 years in prison.
Presumably another Aegis financial restatement is on the way. Although its size is hardly likely to cause more than a ripple of embarrassment.
UPDATE: On this last point, apparently not. This is what Aegis has to say: “We can confirm that the events that led to this action will have no implications, financial or otherwise, for Aegis and its US business, as from an accounting perspective the matter was closed in 2009.” Aegis adds that it initiated the investigation into Hansen and Buckley.