If a Tree Falls in the Forest…

3 Jan

OversightThis past December the former COO/ CEO of global PR firm Weber Shandwick was sentenced to prison after pleading guilty to embezzling $16 million from the firm and ultimately its holding company, Interpublic Group, over a 9-year time frame. The fraud was perpetrated in part through the generation of “false and misleading invoices.”

This news should raise concerns for clients of the firm aside from the character of the individual. The lack of solid agency (and holding company) internal controls over a prolonged period raises an obvious question; “How do these lax controls impact our business and were any of these erroneous charges billed back to us?” Moreover, if it happened at one agency, could this be occurring elsewhere?

Given the nature of the marketing/ advertising industry’s use of estimated billing and the submission of invoices to clients, without accompanying third-party vendor invoices, it makes sense for marketers to conduct periodic contract compliance and financial management audits of their agency service providers to assess those providers financial stewardship practices, mitigate financial risks and allay potential concerns.

In the words of Norman MacDonald, author of Maxims and Moral Reflections: “Though we may not desire to detect fraud, we must not, on that account, endeavor to be insensible of it, for, as cunning is a crime, so is duplicity a fault…”

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