Federal judge rules IPG must fight class action suit in court

Interpublic's woes increased further this week as it emerged that the debt-laden company will be forced to defend a class action accusing it of defrauding investors.

The New York holding company, parent of the McCann-Erickson and Lowe networks, is accused in a lawsuit filed by angry shareholders in IPG and True North Communications, which IPG purchased in 2001.

The lawsuit alleges that IPG issued misleading financial statements largely tied to questionable accounting practices at McCann. It arose in August 2002 when IPG announced it wanted to restate inter-company charges that had been incorrectly referred to as income in the European offices of McCann. Since then, IPG issued five more restatements, each time increasing the amount of money involved until a figure of $347 million was reached in March.

IPG's attempts to dismiss the case were thrown out by a New York federal judge who commented: "... the decision to grow by acquisition motivated (IPG) to inflate its reported earnings over that same period in order to have a higher stock price than it would otherwise have had."

Those named as individual defendants include the former chief executives John Dooner and Phil Geier, the chief financial officer, Sean Orr, and the former chief finance officer Eugene Beard.