WPP wins Patts “secret payments” case and gets apology Tim Addington
The protracted legal battle between WPP and Pacific Equity Partners over secret payments made to two executives during the $80 million sale of George Patterson has finally been settled with PEP backing down and former Patts managing director Anthony Heraghty and creative director James McGrath issuing an unreserved apology to the marketing services giant.
It is also understood that PEP has agreed to pay close to $10 million in damages to WPP in a bid to head off Federal Court action set down for March next year.
But WPP boss Sir Martin Sorrell warned that legal action may not be finished, although he refused to disclose what that would consist of.
It comes in the week that GPY&R will celebrate its 75th anniversary with a party in Sydney on Wednesday night.
Speaking to B&T Today Sorrell said: “Delighted to see that Tim Sims [founder and managing director at PEP] practices what he preaches. It was a classy decision by him and Heraghty and McGrath to settle our claim and issue an unresevered apology vindicating Hamish McLennan and his colleagues completely.
“Although the implementation of their decision was not as good as it could have been involving a breach of the settlement agreement they had only recently executed some 31 days ago.
“Unfortunately this is not the last that you will hear of this issue.”
Sources have told B&T that PEP, which agreed to the settlement more than a month ago, only made the payment to WPP at the eleventh hour last week after repeatedly failing to meet promised deadlines.
A statement on the WPP website said: ”WPP and PEP have resolved the dispute between them arising from the sale of the remaining shares in The Communications Group (TCG) to WPP in 2005. The dispute related to agreements under which PEP made payments to two TCG employees [Heraghty and McGrath] that were conditional on the employees not resigning for 12 months after the sale. PEP accepts that WPP and its representatives including Mr Hamish McLennan were not aware of the agreements. PEP maintains that it acted in good faith and on the basis of Clayton Utz's legal advice that the agreements did not need to be disclosed to WPP.”
The long running stoush surrounds allegations that PEP gave $1.5 million in secret payments to Heraghty and McGrath in order to lock them into their jobs for a year after the sale went through in order that WPP would pay a higher price for the business.
WPP claimed it would have paid less for the business had it known of the arrangement.
In response PEP alleged the payments were not secret claiming Young & Rubicam global boss Hamish McLennan was aware of them, a claim which Heraghty and McGrath now concede was untrue.
Shortly after staying at George Patterson for 12 months, Heraghty resigned to become the marketing head at Foster’s, at the time one of GPY&R’s clients. McGrath also left shortly after the year to become executive creative director at Clemenger BBDO Melbourne.
Heraghty and McGrath’s statement reads: “This unreserved apology is given by Anthony Heraghty and James McGrath to George Patterson Y&R Pty Ltd (GPYR), Y&R Brands, George Patterson Partners Pty Limited, The Communications Group Holdings Pty Limited and Hamish McLennan. It is given in relation to the agreements that Mr Heraghty and Mr McGrath entered into with the representative of a group of former shareholders in 2005 (agreements) and their conduct pursuant to the agreements.
“Throughout 2005 and 2006 GPYR, and subsequently Y&R globally, made offers of ongoing employment to us within the Y&R network.
“Y&R CEO Hamish McLennan applied himself to making those opportunities available. We accept that Mr McLennan was not aware of the agreements at the time of proffering those opportunities, and that he did so on the basis that we would be staying with the business for the foreseeable future. The offers were made, and received, in good faith.
“In retrospect, we could have taken steps to more clearly enunciate our intentions to Y&R and Mr McLennan.
Asked if he thought the ongoing legal battle had been damaging to GPY&R, Sorrell said: “If it’s damaging to pursue people for having done the wrong thing then you’d be correct. If it’s damaging to pursue people for having breached a legal agreement then you’d be correct.”
On the further threat of legal action, Sorrell would only say: “There is some other stuff to come, just leave it like that.”
