While the accounting scandal at Aegis Group’s Posterscope USA is being reported widely now, in the wake of the arrests of the two former executives allegedly behind it, Aegis discovered that something was amiss back in 2009. That's when it recognized five years of overstated revenues and profits for the division in its annual report for that year, the company said Wednesday.
But the legal pursuit of the alleged perpetrators of the scheme -- former Posterscope USA President Todd Hansen and company financial director James Buckley -- was just beginning.
After it had uncovered the irregularities, Aegis went to U.S. authorities. “This prosecution was sought and initiated by Aegis, and the evidence was provided by Aegis to U.S. prosecutors as we do not treat such matters lightly,” an Aegis Group spokeswoman explained.
The U.S. Attorney for Manhattan and the Federal Bureau of Investigation jointly carried out the criminal investigation that culminated in the arrests and charges against Hansen and Buckley two weeks ago. The government alleges that the pair systematically overstated revenues and profits at Posterscope USA to meet performance goals that would guarantee them certain salary and bonus levels.
“We will not have to reissue any financial statements,” the spokeswoman added. “This matter was dealt with for accounting purposes in 2009 [and] there are no further outstanding implications for the business going forward, financial or otherwise.”
Indeed, a reader of the company’s 2009 annual report, issued in late April of 2010 (one month after a press release was issued detailing 2009 financial results) would have come across a sidebar with a few sentences noting that an internal “comprehensive investigation” into Posterscope USA’s accounting practices concluded that unnamed “former senior managers” at the unit had “improperly reported over-stated revenues and profits between 2004 and 2008….this has been reversed in full through underlying revenue in 2009.”
Both Hansen and Buckley left the company “of their own volition” while the investigation was ongoing, the spokeswoman confirmed.
The company’s annual report indicated that the internal investigation was launched by the then-new regional management team put in place in North America. That team is headed by Nigel Morris, who was named North American CEO of Ageis Media North America in May of 2009. He has declined to comment on the matter.
The criminal trial of Hansen and Buckley will be held at the U.S. District Court in Manhattan.
Earlier this week, Hansen’s lawyer William Portanova confirmed that Hansen had been arrested in California, where he resides, and was released on his own recognizance. Portanova said Hansen would appear at the U.S. District Court in Manhattan to formally enter a not guilty plea within the next week. Buckley’s lawyer, Jennifer Brown, did not immediately return a call seeking comment. Buckley resides in New Jersey.
Both of the former Posterscope executives were charged with one count of conspiracy to commit wire fraud and one count of wire fraud. Hansen was charged with an additional count of mail fraud. Each count carries a maximum term of 20 years in prison.