The Securities and Exchange Commission had been conducting an informal investigation into the irregularities at the Interpublic Group of Companies since last summer, with which Interpublic says it has been fully cooperating.
Interpublic revealed the formal investigation just prior to the market closing for the weekend. Its share price fell by 2.9%, or 42 cents, to $14.18 before the market closed, and was down to $13.99 in after-hours trading.
The company has seen its share price tumble and heads roll after revenues over seven years had been inflated by as much as $181.3m. Much of this comes from the company's McCann-Erickson offices in Europe, where revenue for single clients was booked by more than one office.
In the wake of the revelation, McCann-Erickson's chief financial officer Sal LaGreca has left the company, while vice-chairman David Bell had his responsibilities reduced. LaGreca has been replaced by Art D'Angelo, who joined from Cordiant Communications. The company has also named Thomas Dowling to the new role of chief risk officer.
The news will come as a blow for the ad company, which is attempting to put what CEO John Dooner called "the stupids" behind it and move on. Last week, it said that it had appointed Goldman Sachs to look at a potential disposal of NFO WorldGroup, the market research arm it bought for $500m. It is likely to get much less for a sale.
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