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WPP’s war over the George Patterson sale ends with apology from Heraghty and McGrath

After three years, WPP has ended its reported $10m quest for damages from Pacific Equity Partners over the sale of advertising agency George Patterson.

Part of the deal was the issuing of “an unreserved apology” by former Patts senior executives MD Anthony Heraghty and executive creative director James McGrath. The legal dispute had hinged on the pair’s financial agreement to not leave the agency for at least a year after the sale, and whether that arrangement was disclosed to WPP’s senior management.  

The settlement comes in the same week that the agency – now George Patterson Y&R – celebrates its 75th birthday. Although the terms of the settlement were not disclosed, it has been reported that WPP was seeking $10m in damages.

In an announcement on WPP’s website today, PEP concedes that it had not disclosed the arrangement before selling The Communications Group – which included George Patterson, media agency Zenith and public relations agency PPR – citing advice from its lawfirm that it was unnecessary to do so.

The statement says: “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.”

At the time Hamish McLennan was leading operations in Australia. He is now the New York-based worldwide CEO of  Y&R Brands.

A year after the sale, Heraghty left to work for former client Foster’s, while McGrath moved to rival agency Clemenger BBDO. A few months later Foster’s sacked GPY&R as its agency saying it had lost confidence in it. Heraghty left Foster’s about six weeks ago.

The apology from Heraghty and McGrath says:

“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.

“We therefore extend our unreserved apologies accordingly.”

Mumbrella understands that the final stages of the settlement dragged on, potentially jeopardising an end to the case which may yet see further ramifications.

In an oblique reference, WPP boss Sir Martin Sorrell said in a statement:

“Delighted to see that (PEP MD) Tim Sims practices what he preaches. It was a classy decision by him and Heraghty and McGrath to settle our claim and issue an unreserved 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. Unfortunately this is not the last that you will hear of this issue.”

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