PERSPECTIVE: Propriety not loyalty could sway clients if IPG falls foul of SEC

It has been a busy week for Interpublic Group. Just when the very bottom of the trough seemed to have been scraped away and the only way was surely up, IPG managed another slump.

The last whimper of the Bozell name as IPG rolls it into Lowe New York is, perhaps, the least dramatic of the recent events. A merger driven by economic urgency rather than strategic fit, Bozell was nevertheless an anomaly within IPG - a standalone office cut adrift from a network after the rest of its agencies were merged into FCB at the end of the 90s. So this is one bit of housekeeping that IPG has been forced to get on top of.

Now rumours of senior executives' computers being snatched by financial investigators suggest the company's accounting drama, or at least the gossips' version of it, is hotting up. And while the Securities and Exchange Commission last month upgraded its investigation into IPG from informal to formal, JP Morgan this week downgraded its IPG rating from neutral to underweight. The 7 per cent fall in IPG shares that followed showed this was more than just a comment on the ad market.

In the middle of all of this, IPG is negotiating furiously with its banks to amend its credit agreements. As stock-market watchers know, the company has notched up $2.9 billion in debt and the SEC is investigating $181 million in overstated revenues, mainly driven out of McCann-Erickson in Europe.

Not surprisingly, the focus has shifted to how IPG clients feel about these issues. Certainly, clients could feel some effects if the SEC's ruling goes against IPG. For a start, it could make the buying of media for campaigns more difficult. Media owners here are more cautious about dealing with clients and agencies whose finances are in any way stretched, and insurance companies are already refusing media credit insurance to a surprising number of blue-chip advertisers.

Then there are signs that the financial difficulties could mean cutting loose some of IPG's smart marketing services companies. The impending fire sale of the prestigious research company NFO WorldGroup, which added an interesting depth to IPG's offering, is one example. Aegis and WPP are said to be circling this tasty morsel, although bids so far are well below the $600 million IPG paid it.

No wonder that IPG has received letters from a number of clients concerned by its position. IPG has responded with reassurances of its financial stability and liquidity. But the imminent SEC report will be critical in silencing their worries ... unless its findings lob the rule book at IPG. For companies such as Coca-Cola and Nestle, the need to be seen to be taking a stance against any impropriety in this post-Enron climate of financial morality could prove more compelling than ingrained agency relationships.

- Caroline Marshall is on maternity leave.