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.
PEP counterclaimed, arguing that it informed McLennan and Alex Hamill, a former TCG chair, about the payments prior to the deal. McLennan now says that PEP's attorneys, Clayton Utz, behaved disengenuously in the days leading up the deal by advising their clients that they did not need to disclose the payments (even as PEP simultaneously claims that the payments were indeed disclosed). See if you can figure out what's going on from this take by The Australian:
... lawyers for Mr McLennan argued Clayton Utz itself engaged in misleading or deceptive conduct by advising PEP by phone on August 19 that it did not need to disclose the payments.It's a shame the paper doesn't provide a link to a copy of McLennan's brief -- the crucial unanswered question here is whether he admits he knew of the payments or not before the deal went down. If the court were to see evidence that he did know of the payments, that might put McLennan in a very odd position vis-a-vis his boss, WPP chief Martin Sorrell, who brought this suit on the basis that he didn't.
Clayton Utz also supplied written advice on September 5 stating the payments were lawful and did not need to be disclosed to Y&R Brands.
The crux of WPP's legal argument appears to be that PEP obtained written advice that it did not need to disclose the payments on September 5 -- more than two weeks after PEP maintains it already had disclosed the payments.
- WPP's Sorrell on Y&R Lawsuit: "Bring It On!"
- Y&R Chief McLennan Accused of "Deceptive and Misleading Conduct" in George Patterson Acquisition Lawsuit
- WPP Alleges "Secret Payments" Spoiled Deal With George Patterson, Communications Group