WPP's Request To Dismiss SOX Suit Denied

by Steve McClellan, May 22, 2012, 6:17 PM

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A New York District Court judge has denied a request by WPP and its operating units Ogilvy & Mather and Neo@Ogilvy to dismiss a lawsuit brought against them for alleged wrongdoings barred by the Sarbanes-Oxley Act (SOX).

The suit was filed last year by Neo@Ogilvy planner Audrey Gladitsch alleging fraudulent over-billing of client IBM amounting to several million dollars over a three-year period between 2006 and 2009. The suit also alleges unlawful retaliation by the defendants under the "whistle blower" provisions of SOX, after Gladitsch brought the over-billing matter to the attention of higher-ups at the agencies.

In its petition to have the case tossed, WPP argued that SOX didn’t apply because Gladitsch worked for a subsidiary of WPP, not the publicly traded company. Wrong, said U.S. District Judge Deborah Batts, noting a 2010 amendment that clarified that the law applied to “any subsidiary or affiliate whose financial information is included in the consolidated financial statements” of the parent company.

Defendants also tried to get creative agency Ogilvy & Mather removed from the case, arguing that it was separate and distinct from digital shop Neo@Ogilvy, where Gladitsch is employed. Wrong again, ruled Judge Batts, noting that Neo and Ogilvy “share common ownership, premises, directors and/or officers and financial control.”

The defendants tried to argue that Gladitsch’s earlier complaint (required before taking court action) to regulatory body OSHA was filed too late, because it was not filed within 90 days after the alleged retaliatory action took place. That argument failed as well, Batts concluded, because the deadline fell on a weekend, legally giving Gladitsch the extra day she took to file the complaint.

Batts also ruled that WPP and its shops were incorrect when it argued that Gladitsch did not engage in “protected activity” under SOX. Such activity must relate to potential harm -- in this case to WPP shareholders, the defendants stated, arguing that over-billing a client (IBM) wouldn’t hurt holders of WPP stock. Again Batts sided with the plaintiff, noting that she raised the point that over-billing clients could lead to “artificially inflated revenues” that when uncovered could “potentially cripple shareholder confidence.”

Batts noted that Gladitsch alleged she heard an agency supervisor on the IBM account state: “We knew it was wrong, but we did it anyway.” Ogilvy planning director Addam Berger, also named as a defendant in the suit, allegedly told Gladitsch: “You need to be careful about how you handle this, because heads could roll over something like this.”

Taken together, ruled Batts, those comments demonstrate that Gladitsch “reasonably believed an intentional misrepresentation was occurring in violation of SOX.”

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2 comments on "WPP's Request To Dismiss SOX Suit Denied".

1. kristin gerrick from awaremedia
   

   commented on: May 23, 2012 at 11:30 a.m.
   Is this a pattern with WPP? There seems to be a lot of SOX issues as well as issues with client overbilling.
2. Walter Sabo from SABO media
   

   commented on: May 23, 2012 at 11:38 p.m.
   everyone dreads going there.

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