Company Settles Charges Over Undisclosed Perks and Improper Use of Non-GAAP Measures
MDC Partners agreed to pay a $1.5 million penalty to settle SEC charges for concealing over $11 million in personal perks to its former CEO and manipulating non-GAAP financial metrics by secretly adding an undisclosed reconciling item to inflate organic revenue growth.
MDC Partners paid a $1.5 million penalty to resolve SEC charges for failing to disclose over $11.285 million in personal benefits provided to its former CEO between 2009 and 2014, including private aircraft use, cosmetic surgery, luxury vehicles, yacht expenses, and charitable donations, despite publicly disclosing only a $500,000 annual allowance. The company also violated disclosure rules by altering its 'organic revenue growth' metric without informing investors, incorporating a third reconciling item from Q2 2012 to year-end 2013, and failing to give GAAP measures equal or greater prominence in earnings reports. The former CEO returned all improperly received benefits, and MDC consented to a cease-and-desist order without admitting or denying the allegations.
MDC Partners, a New York-based marketing company, agreed to pay a $1.5 million penalty to settle SEC charges related to deceptive executive compensation disclosures and improper use of non-GAAP financial measures. Between 2009 and 2014, the company provided its then-CEO with over $11.285 million in undisclosed personal benefits—including private jet usage, cosmetic surgery, yacht and sports car expenses, jewelry, pet care, charitable donations, and personal travel—while only publicly disclosing a $500,000 annual perquisite allowance. The CEO later resigned and returned all improperly received perks and reimbursements. Separately, the SEC found that MDC Partners manipulated its 'organic revenue growth' metric by secretly adding a third reconciling item—beyond the disclosed exclusions of acquisitions and foreign exchange impacts—between Q2 2012 and year-end 2013, artificially inflating reported growth. The company also violated disclosure rules by failing to give GAAP financial measures equal or greater prominence than non-GAAP metrics in its earnings releases, misleading investors about its true performance. MDC Partners consented to a cease-and-desist order without admitting or denying the allegations, and the SEC’s ongoing investigation is being led by its Philadelphia office. The SEC emphasized that full transparency in executive compensation and accurate, comparable non-GAAP disclosures are essential to investor protection.
Exhibits & Attached Documents (1)
Extracted insights
- $11.29M $11.285 million $10M–$100M
- $1.50M $1.5 million $1M–$10M
- $500K $500,000 $100K–$1M
- person Brendan P. McGlynn
- person Brian R. Higgins
- company from mdc partners
- person G. Jeffrey Boujoukos
- person Lisa M. Candera
- company mdc partners
- person Oreste P. McClung
- agency sec’s cease-and-desist order
- agency sec’s continuing investigation
- MDC Partners agreed to pay $1.5 million penalty
- MDC Partners failed to disclose perks enjoyed by its then-CEO
- MDC Partners violated non-GAAP financial measure disclosure rules
- MDC Partners disclosed annual $500,000 perquisite allowance
- MDC Partners failed to disclose additional personal benefits paid on the CEO’s behalf
- The CEO resigned from MDC Partners
- The CEO returned $11.285 million worth of perks
- MDC Partners failed to give shareholders relevant information about executive compensation
- MDC Partners presented metric called 'organic revenue growth'
- MDC Partners incorporated third reconciling item into its calculation
- MDC Partners failed to give GAAP metrics equal or greater prominence
- MDC Partners consented to SEC’s cease-and-desist order
- Brendan P. McGlynn conducts SEC’s continuing investigation
- Oreste P. McClung conducts SEC’s continuing investigation
- Lisa M. Candera conducts SEC’s continuing investigation
- Brian R. Higgins conducts SEC’s continuing investigation
- G. Jeffrey Boujoukos supervises SEC’s continuing investigation
The Securities and Exchange Commission today announced that New York-based marketing company MDC Partners has agreed to pay a $1.5 million penalty to settle charges that it failed to disclose certain perks enjoyed by its then-CEO and separately violated non-GAAP financial measure disclosure rules. The SEC’s order finds that MDC Partners disclosed an annual $500,000 perquisite allowance for its senior-most executive, but failed to disclose additional personal benefits the company paid on the CEO’s behalf such as private aircraft usage, club memberships, cosmetic surgery, yacht and sports car expenses, jewelry, charitable donations, pet care, and personal travel expenses. The CEO later resigned and returned $11.285 million worth of perks, personal expense reimbursements, and other items of value improperly received from 2009 to 2014. “Compensation paid to high-ranking executives must be fully disclosed,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement. “MDC Partners failed to give its shareholders all of the relevant information about how its top executive was being compensated by the company.” The SEC’s order also finds improper use of non-GAAP measures, which are allowed under SEC rules to convey information to investors that a company believes is relevant and useful in understanding performance. But non-GAAP measures must be accurate and must be reconciled to the appropriate GAAP measures so investors and analysts can compare them. According to the SEC’s order, MDC Partners presented a metric called “organic revenue growth” that represented the company’s growth in revenue excluding the effects of two reconciling items: acquisitions and foreign exchange impacts. But from the second quarter of 2012 to year end 2013, MDC Partners incorporated a third reconciling item into its calculation without informing investors of the change, which resulted in higher “organic revenue growth” results. MDC Partners also failed to give GAAP metrics equal or greater prominence to non-GAAP metrics in its earnings releases. “The reason these rules are in place is so investors can compare non-GAAP financial measures to those consistently defined under GAAP requirements,” said G. Jeffrey Boujoukos, Director of the SEC’s Philadelphia Regional Office. “The lack of equal or greater prominence for GAAP measures is a practice that we will continue to focus upon.” MDC Partners consented to the SEC’s cease-and-desist order without admitting or denying the findings. The SEC’s continuing investigation is being conducted by Brendan P. McGlynn, Oreste P. McClung, Lisa M. Candera, and Brian R. Higgins of the Philadelphia office, and supervised by Mr. Boujoukos.
The Securities and Exchange Commission today announced that New York-based marketing company MDC Partners has agreed to pay a $1.5 million penalty to settle charges that it failed to disclose certain perks enjoyed by its then-CEO and separately violated non-GAAP financial measure disclosure rules. The SEC’s order finds that MDC Partners disclosed an annual $500,000 perquisite allowance for its senior-most executive, but failed to disclose additional personal benefits the company paid on the CEO’s behalf such as private aircraft usage, club memberships, cosmetic surgery, yacht and sports car expenses, jewelry, charitable donations, pet care, and personal travel expenses. The CEO later resigned and returned $11.285 million worth of perks, personal expense reimbursements, and other items of value improperly received from 2009 to 2014. “Compensation paid to high-ranking executives must be fully disclosed,” said Stephanie Avakian, Acting Director of the SEC’s Division of Enforcement. “MDC Partners failed to give its shareholders all of the relevant information about how its top executive was being compensated by the company.” The SEC’s order also finds improper use of non-GAAP measures, which are allowed under SEC rules to convey information to investors that a company believes is relevant and useful in understanding performance. But non-GAAP measures must be accurate and must be reconciled to the appropriate GAAP measures so investors and analysts can compare them. According to the SEC’s order, MDC Partners presented a metric called “organic revenue growth” that represented the company’s growth in revenue excluding the effects of two reconciling items: acquisitions and foreign exchange impacts. But from the second quarter of 2012 to year end 2013, MDC Partners incorporated a third reconciling item into its calculation without informing investors of the change, which resulted in higher “organic revenue growth” results. MDC Partners also failed to give GAAP metrics equal or greater prominence to non-GAAP metrics in its earnings releases. “The reason these rules are in place is so investors can compare non-GAAP financial measures to those consistently defined under GAAP requirements,” said G. Jeffrey Boujoukos, Director of the SEC’s Philadelphia Regional Office. “The lack of equal or greater prominence for GAAP measures is a practice that we will continue to focus upon.” MDC Partners consented to the SEC’s cease-and-desist order without admitting or denying the findings. The SEC’s continuing investigation is being conducted by Brendan P. McGlynn, Oreste P. McClung, Lisa M. Candera, and Brian R. Higgins of the Philadelphia office, and supervised by Mr. Boujoukos.