This ad agency's former CEO is being investigated by the SEC and owes the company $12 million -- but the agency says it hasn't scared off any clients

Ad agency holding group MDC Partners sought to reassure investors on its Q2 earnings call Thursday that an SEC investigation into former CEO Miles Nadal’s expenses and the company’s accounting practices hasn’t scared off clients or affected new business.

Nadal retired from MDC — which owns agencies including 72andSunny and Crispin, Porter + Bogusky — three weeks ago. His resignation came three months after the company revealed the SEC was investigating his multi-million dollar expenses bill, as well as MDC’s goodwill, accounting practices, and the third-party trading of its shares.

In June, Nadal’s perks package — which included free air travel from his home in the Bahamas to the company’s New York HQ, where he also had an apartment funded by the company — was ranked by Business Insider as the most extravagant in the advertising industry.

MDC said on the earnings call on Thursday that Nadal has already paid the company back $US8.6 million and that he owes an additional $US12.7 million. The company also disclosed that it has paid $US3.9 million in legal fees related to the investigation into Nadal, but that the company hopes its insurance policy will recoup some of the bill.

But despite all the negative news swirling MDC at the moment — and its stock falling more than 40% since it disclosed the SEC inquiry — the company insisted that investors have nothing to worry about.

Scott Kauffman, MDC’s new chief executive, said on the call: “I can say that we have not lost any business and our pipeline is as robust as I have ever seen it — new business activity — and you’ll probably be hearing more about that in the days and weeks ahead as its looks like there is a lot of really attractive accounts that are in the review process now and we’ve got many of our partner agencies well positioned in them. So, we’re reaffirming our guidance. We think the second half is on track, and as we said all along, it’s business as usual.”

MDC did not provide much further detail about the progress of the SEC investigation, but Kauffman said the company continues to “co-operate fully.”

Revenue rose 12% to $US336.6 million in the second quarter. Net profit increased 79% to $US29.6 million. The company reaffirmed its full-year guidance, expecting revenue to increase 6.5% to 8.5% to a range of $US1.3 billion to $US1.33 billion.

Adweek’s Agency Spy reported earlier this month that multiple New York-area law firms are looking to file class action lawsuits against MDC on behalf of its investors. The firms claim that MDC made false and misleading statements and/or failed to disclose materially adverse information between September 2013 and April 2015, causing investors to lose money as the company’s stock value dropped.

NOW WATCH: Here are the best quotes from the GOP debate

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.