What the Nadal expenses row says about agency pay

Here’s an excerpt from an announcement from a US law firm – based on Madison Avenue as it happens – inviting shareholders in Miles Nadal’s MDC Partners to join a class action following the revelation of expenses irregularities.

It’s not the only such firm circling MDC but I’d be a bit worried I had a Wolf of Madison Avenue on my tail.

Wolf Haldenstein Adler Freeman & Herz LLP announces that it has commenced an investigation into potential violations of the securities laws by MDC Partners Inc. (NASDAQ:MDCA and TSE:MDZ/A). Purchasers of the securities of MDC Partners Inc. between October 30, 2014 and April 27, 2015, inclusive, on either the US or Canadian exchanges are urged to contact the firm immediately at [email protected] or (800) 575-0735 or (212) 545-4774.

On April 27, 2015, after the market closed, MDC Partners announced its financial results for the first quarter ended March 31, 2015. The Company also disclosed that in October 2014, it had received a US Securities and Exchange Commission (“SEC”) subpoena requesting production of documents relating to the reimbursement of $8.6 million of expenses to the Company by its CEO, Miles Nadal, in connection with certain payments made by the Company to or on behalf of Mr. Nadal and Nadal Management Limited from 2009 through 2014. The subpoena also requested production of documents relating to the Company’s goodwill and certain other accounting practices. In addition, the Company reassigned its Chief Accounting Officer to a new role in the Company.

On this news, MDC Partners common stock plummeted $7.78 per share or approximately 28%, to close at $20.20 per share on April 28, 2015.

The stock, we should say, recovered thereafter to show a loss of about eight per cent. But if you lost money by selling as it fell sharply you could try to recover those steeper losses.

Anyway, the flamboyant (in terms of lifestyle) Nadal – who earned about $18m from MDC last year on top of rather too generous expenses, is well and truly in the mire. The SEC hasn’t finished with him yet, investigating other aspects of the company.

What intrigues about the above is the stated payments to both Nadal and ‘Nadal Management.’ What might the latter entity be, one wonders?

Why should there be a need for it when the gentleman in question is so handsomely rewarded (MDC, owner of Anomaly, Crispin Porter and KBS among others has never made a profit) and recently sold about $80m of shares?

The conventional wisdom of the past decade or so has been that agencies, compared to the high old days of the 1980s, are no longer big payers. Even senior agency staff are peasants compared to bankers and others.

Well these revelations about Nadal – and the pay of rivals Sir Martin Sorrell of WPP ($70m) and Omnicom’s John Wren ($24m) – would seem to indicate that that isn’t quite the case.

Down in the agency boondocks pay isn’t so good and life is no more secure than it ever was. But in the upper levels of the holding companies there are lots of people pulling in $1m plus.

No wonder clients, as well as investors, are looking at all this with a decidedly beady eye.

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