• by Larissa Faw , July 20, 2015

Over the past 35 years, Miles Nadal has guided MDC Partners to become an advertising powerhouse. The holding company's compounded growth stands at 11% compared to an industry average of 2% in recent years and its various agencies -- including 72andSunny and Crispin, Porter+Bogusky (CP+B) -- have continually landed major clients including Budweiser, BMW, and Samsung. 

Yet for all of the growth and success, the holding company now finds itself forced to rebuild its reputation after the resignation of Nadal on Monday. 

Nadal was by all accounts an excellent leader and visionary, but his lavish lifestyle and greed caught up with him, and his agency holding company is now paying the price. The company’s stock traded at a 365-day low on the NASDAQ Exchange Monday. 

In April the company disclosed that it was under a Securities and Exchange Commission (SEC) investigation for trading and accounting irregularities, including millions in illicit corporate expenses taken by Nadal. 

The matter grew from a subpoena issued last October by the SEC seeking additional information related to the reimbursement of expenses by Nadal between 2009 and 2014 for items including travel and commutation expenses, charitable donations, and medical expenses. Although MDC Partners paid Nadal $16.8 million in compensation, the company paid for other perks, such as $91,038 in aircraft costs to fly him from his home in Nassau, in the Caribbean, according to its 2015 proxy statement. 

MDC then formed a special committee of independent directors advised by Bruch Hanna LLP, as special independent advisor, and by Simpson Thacher & Bartlett LLP, as legal counsel. The Special Committee, through its counsel, reviewed and analyzed thousands of documents, emails and other accounting information, and interviewed a number of  individuals. 

Nadal cooperated fully with the review and agreed to reimburse MDC $8.6 million. Today it was revealed that Nadal agreed to pay an additional $1.8 million for other red-flagged expenses.   

Meanwhile, many shareholders were unhappy with these developments and expressed their dissatisfaction at the company’s annual meeting last month. Some 5.1 million shareholders voted to withhold Nadal's nomination to the Board. He still was approved with an overwhelming majority, but this dissent was notable in comparison to 2014 when only 343,807 votes were cast negatively. 

Another development at the meeting: The company announced that the Board of Directors agreed to reduce the number of Management Directors to one: Nadal. Stephen Pustil, vice chairman of MDC Partners, and Lori Senecal, global CEO of CP+B, resigned as members. 

Nadal was expected to remain in charge for several more years. There is no word on what exactly sparked his departure at this time. There are rumors that Nadal claimed that all improper payments had been disclosed and when another $1.8 million came to light, the holding company requested his resignation — with no golden parachute. He will not receive any compensation payments or severance. 

Now, MDC will be guided by Scott Kauffman, who has spent the past nine years on the Board of Directors and has served as presiding director since March 2012. His career has included stints in both media and technology. 

Kauffman will oversee a company that claims to be still performing well. MDC reaffirms its annual financial guidance and, based on a preliminary review, believes its second quarter 2015 results are tracking consistent with internal expectations. MDC will announce its results for the period ending June 30, 2015, on August 6, 2015.