Y&R Chief McLennan Accused of "Deceptive and Misleading Conduct" in George Patterson Acquisition Lawsuit

(MoneyWatch)  Y&R Advertising chief Hamish McLennan can be sued for "misleading and deceptive conduct" in WPP's acquisition of The Communications Group and the ad agency George Patterson, an Australian judge said. The move comes in a tangled lawsuit in Sydney that, so far, seems to be going horribly wrong for the plaintiff, WPP.

The back story: WPP bought TCG for $80 million from Pacific Equity Partners. It sued PEP when two key executives left Patterson and the shop lost clients such as Foster's, National Australia Bank and Cricket Australia. WPP claimed that the two execs, Anthony Heraghty and James McGrath, had been given "secret payments" to induce them to stay with the agency for one year; had WPP known of the payments -- and the consequent likelihood the pair would leave when the year was up -- it would have paid much less, WPP claims. WPP's Y&R Brands is seeking $10 million AUD in damages.

The Sydney Morning Herald reports that former TCG chairman Alex Hamill revoked his affidavit in the case (he previously claimed he didn't know about the payments), and now says he knew of the payments.

PEP claims, per the Herald:

... that in the final days of negotiations on August 17 and 18, 2005, Mr Hamill made a telephone call and emailed PEP director Tim Sims, enlisting his support to retain Mr Heraghty and Mr McGrath.

[PEP] claims Mr Sims phoned Mr McLennan -- then the highest WPP executive in Australia -- to get his approval of the strategy and to raise the possibility of the payments.

Another call was placed by Mr Sims to Mr Hamill telling him they had agreed to stay at the agency.

To sum up, everybody in the case except McLennan and WPP now claims that McLennan et al knew about the payments prior to WPP buying TCG, PEP alleged in a cross-claim filed last week.

When the judge gave PEP permission to sue McLennan, he said:

"Sounds like everybody is blaming everybody in this case".

• Previously:
• WPP Alleges "Secret Payments" Spoiled Deal With George Patterson, Communications Group