NY Judge Dismisses Case against MDC Partners

A US Federal Judge in New York has dismissed a shareholder law suit against marcoms holding company MDC Partners, which claimed the company had been involved in a pattern of fraudulent behavior and that several of its former execs had violated the Securities Exchange Act.

The class action suit was brought last year by multiple law firms representing investors, who claimed MDC had made 'false and misleading statements and/or failed to disclose materially adverse information' during the period from September 2013 to April 2015, leading to shareholders losing money as the company's stock price dropped. This followed the news that the SEC had been investigating founder and former CEO Miles Nadal for claiming bogus expenses and unearned incentive bonuses.

Nadal was forced to repay around $21m in expenses - including medical expenses, travel and commuting costs, plus charitable and other unspecified spending. According to the company's 2015 proxy statement, Nadal received $926,005 in 2014 in company-paid expenses, including $500,000 for unspecified perks, and $91,038 for his personal use of aircraft. In addition, the company also paid $71,967 for his personal use of an MDC-owned apartment, when he was in New York; and $263,000 for his legal fees, incurred as part of his sale of 3.5 million MDC shares. At the time, the SEC said these expenses 'lacked appropriate substantiation'.

Nadal was named in the suit, along with CFO David Doft, former Chief Accounting Officer Michael Sabatino (who left around the time that Nadal did, after agreeing to repay the company $208,535 in cash bonus payments received between 2012 and 2014), General Counsel Mitchell Gendel and former Board member and audit committee head George Kirby. However, last Friday, Judge Richard Sullivan ruled that while the company may have been mismanaged and that negligence may have occurred, the plaintiffs had failed to prove any fraud on the part of the company or its officials. In a prepared statement, MDC Partners Chairman and CEO Scott Kauffman (pictured) said: 'We defended and promptly moved to dismiss this suit because we believed strongly that the plaintiffs' allegations concerning the company's accounting practices and disclosures were without merit, and it is gratifying that the court dismissed this class action case in its entirety'.

MDC Partners, which operates a Consumer Insights Group and has invested in a number of market research and analytics firms, is online at: www.mdc-partners.com .