Mediacom staff forged campaign reports to clients and sold discounted TV ads given to them by media owners, audit reveals
The staff of one of Australia’s biggest media agencies deliberately faked campaign reports for three of its biggest clients for at least two years, an audit has revealed.
And Mediacom also breached the policy of its own parent company GroupM by selling back to clients free or heavily discounted advertising time given to it by TV stations.
The audit confirms Mumbrella’s revelations of nearly four months ago that Mediacom had uncovered reporting discrepancies, leading to the abrupt departure of about a dozen staff.
The investigation found that after some campaigns ended, employees went back and altered the original demographic audience targets to make it appear they had reached the official OzTam audience ratings numbers even if the campaigns had missed targets.
The misreporting went on in the post campaign reports on TV audiences submitted to three of Mediacom’s biggest clients – Foxtel, IAG and Yum! Brands, owners of KFC and Pizza Hut.
Once it learned of the problems, the agency employed auditors EY to investigate client accounts across all of its offices, which also spread to sister GroupM agencies Mindshare, Maxus and MEC.
Yum! Brands and IAG have said they are in talks with Mediacom about compensation for the effect this has had on their business. Foxtel has already moved its account to Mindshare.
Steedman
The audit found Mediacom sold free and heavily discounted ad spots it had been given by media owners in exchange for an agreed level of ad spend – commonly known as value banks – onto four clients at discounted rates, against GroupM policy. It has since refunded them.
Mediacom disclosed findings from the audit in a series of press briefings on Friday, embargoed until this morning. The briefings were given by GroupM chairman John Steedman and Mediacom CEO Mark Pejic.
Steedman admitted: “This incident has had a devastating impact on our business, on me personally, on Pej personally and on a number of other people in the organisation.”
The key revelations include:
- TV misreporting went on for at least two years, but was contained to just one buying group within Mediacom’s Sydney office covering clients Foxtel, Yum and IAG.
- Confirmation 12 staff had left the agency “as a result of this misreporting”.
- Three other unnamed Mediacom clients received inaccurate reports, although the agency says these could be explained as “rational or accidental” rather than deliberate misreporting.
- A confirmation by GroupM it holds ‘value banks’ – bonus advertising inventory given to agencies by media owners based on them delivering a certain level of ad spend.
- Last year Mediacom breached GroupM policy by selling this free or heavily discounted TV inventory to four unnamed clients, which have since been reimbursed.
- Issues around a lack of formal process from GroupM agencies on recording clients signing off changes to their campaigns.
- Details of a tightening up of GroupM’s systems and processes, with a new group compliance team headed by chief investment officer Danny Bass to perform spot checks across its agencies, along with new software to prevent staff forging post analysis reports in the future.
In depth:
- TV misreporting issues explained
- GroupM’s value banks admissions and what they mean
- Marketers seek compensation over misreporting as IAG mulls review
- How GroupM is tightening its practices
Opinion:
- The Mediacom furore: the questions facing the industry
- The overdue debate the media industry needs to have
GroupM is Australia’s largest media buying group, encompassing Mediacom, Maxus, Mindshare and MEC, and controls around $2.4bn in advertiser media spend. Mediacom is its biggest agency. 
Mediacom’s clients also include Mars-Wrigley, AFL, CUB, Carnival Australia, Dell, Fonterra, NRMA Motoring, NSW Government, P&G, Queensland Government, Specsavers, VW, Universal Pictures and Westpac.
Steedman added: “I have never seen anything of this magnitude happen to me personally and so it has been incredibly difficult and stressful to deal with, but we have managed our way through it.”
The problems were initially uncovered after Foxtel asked for an audit of its account by the agency.
Steedman claimed as a result of the new processes the business was now “the most scrutinised in our industry”.
He added: “We have taken this matter extremely seriously and are looking to change as a consequence.
“Importantly through this process we have been open, we have been ethical, we have been honest and transparent.”
The problem of staff being able to manipulate data has also been an embarrassment to auditing firm Ebiquity, which worked on both the Yum! Brands and IAG accounts, and now faces further questions about how robust its processes are.
Pejic
Mark Pejic told Mumbrella there was “no question” of Mediacom, GroupM or any individuals involved directly financially benefitting from the misreporting.
However both IAG and Yum! Brands have confirmed they are talking to the agency about compensation based on potential missed opportunities for the businesses.
Yum! Brands and Foxtel are also understood to be two of the companies sold free ‘value bank’ spots at heavily discounted rates, a practice Steedman admitted was against the “ethics” of GroupM but defended as “not illegal”.
That issue came to light during the work of EY, which was engaged by GroupM’s regional office in Singapore. The investigation lasted for eight weeks and saw a team of 12 people scrutinising 45 randomly chosen campaigns across 19 clients in the 2013 and 2014 calendar years.
This process included interviews with 30 current and former staff members from GroupM by the audit team.
Foxtel engaged its own firm of auditors with PWC to scrutinise its account, with GroupM also sending in its Regional Risk Management team and conducting more than 60 spot checks across random campaigns.
The revelations come as GroupM in the US has been forced to defend itself from allegations made by former Mediacom CEO Jon Mandel that media agency rebates and kickbacks are widespread in north America.
The claims by Mandel have since been strenuously rejected by GroupM in the US.
Jenner
Last week Toby Jenner was named as worldwide chief operating officer of Mediacom. He was CEO of Mediacom Australasia from 2008 to 2011 and remained chairman of Mediacom Australasia until April 2013. The audit covered 2013 and 2014 but Group M said it chose not to go back earlier than that although it was “possible” the misreporting could have gone back further.
Nic Christensen and Alex Hayes
Excellent reporting and investigation by mumbrella.
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The worst kept secret in media is finally out. perhaps the light will now shine across the other big buying groups?
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This whole debacle is beyond belief.
Not many people know this but I was the first Sydney GM of the original MediaCom when it split out of the Grey media department in 1997. Andrew Allen was the CEO and Karen Potter was the Melbourne GM.
We had a great management team – Raja Kanniappan (now Group M), Sue Johnston, Mark McCraith, Ron Bartlett, Lyndall Campher, and Melissa Hickford. Apologies if I have missed anyone.
I resigned in late 2000 because my TV Buying Manager at the time (who shall remain nameless) had forgotten to book a major launch campaign for our client Zurich insurance. I found this out two days before the campaign was due to start. We also had press ads booked in all the Sunday newspapers trumpeting the first spot which was a 90 second commercial created by Foster Nunn Loveder (FNL).
Somehow, thanks to the understanding and co-operation of the network sales directors and CEOs of the day – Vance at 9, Maureen & Fitzy at 7, Tree & Black Dog at 10, we managed to put together an OK schedule. We were probably fortunate that this coincided with a major product recall form our biggest client, SmithKline Beecham, who that weekend had to pull Panadol and Panadeine off shelf due to an extortion threat.
I fronted FNL, and the client immediately and somehow managed to find a solution.
When the dust settled I did the honorable thing and resigned.
Somehow I don’t expect Pej and Steady to do the same thing…….
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A very frank and honest debrief with mumbrella has obviously taken place and some highly questionable practices uncovered.
What is encouraging is the degree of openness shown and the admissions made.
The management teams at GroupM and Mediacom should be congratulated on this, it would have been tempting to play things down.
It’s been a tough time for them but they’ve faced up to the music and come out of this with a new found transparency and some very robust processes that should provide clients with a renewed confidence.
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Good on Mumbrella for not letting this go. With an out-dated model and a need to make money, this generation of agency heads has gone all out to commoditise the media industry in the name of ‘efficiency and fairness to the client’ using faux-science to screw publishers into the ground. At the same time, they saw an opportunity to make some margin by playing both sides. I hope that many more clients request independent audits of their agencies – this may be the first but will certainly not be the last case of media agency fraud to be unearthed. The sound of furious paper shredding will be heard all over Australia this morning.
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The issue is human risk, GroupM created a culture where to get ahead individuals would conduct themselves this way. It’s about the pressure individuals and teams are put under internally.
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For those not in the media buying game (just studied the theory at uni)… Couple of follow up questions.
If individuals weren’t going to profit from fudging the campaign result numbers (from say, bonuses, or target incentives), what was their motivation?
Did they set unrealistic targets with clients at outset to get their business and didn’t want to look incompetent or lose their job?
If that is the case, that is a poor practice and should also be remedied.
Can someone clarify the on selling of free media space… Should it have been passed on to clients for free rather than making sneaky extra profit on the side?
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Hi Nathan,
Good questions, most of which are covered in the follow up piece – https://mumbrella.com.au/mediacom-audit-audience-misreporting-may-have-been-because-staff-wanted-good-client-reviews-says-ceo-280014
In a nutshell no-one seems to know what the motivator was precisely, but ‘keeping the client happy’ seems to be a strong factor.
WE’ve also asked clients for their takes here: https://mumbrella.com.au/mediacom-audit-iag-and-yum-brands-seek-compensation-and-look-at-agency-payments-280006
Yum! Brands in particular are looking at targets and staffing on their account in the wake of all this.
Hope that helps – lots to read, but it’s all worth it I promise.
Cheers,
Alex – editor, Mumbrella
Given the culture that existed at GroupM agencies for many years – profits before Client needs – the outcome of the audit is hardly surprising.
Hopefully the culture will now change – however the change has to start at the top of the tree.
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“GroupM created a culture where to get ahead individuals would conduct themselves this way” – couldn’t agree with this more as a former employee of a GroupM agency. There’s bigger problems than reporting practices that need to be addressed.
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I wonder where the comms teams for Foxtel, IAG and Yum! Brands are in all this.
Who was checking the original campaign brief vs what was presented as results? Doesn’t anyone at these organisations check they received what they paid for?
It seems to me this story is much bigger than just Mediacom.
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To Nathan B,
I can tell you the driving factor is laziness. Correct & good TV reporting is a very tedious and meticulous job, its not a desirable task for all the cool, young agency people who just want to go to parties and get drunk on Friday night drinks.
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Did any of these companies have independent auditing, and if so, why did they not pick up these anomalies?
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Wow, someone actually exposed what we all knew… one of the overwhelming reasons to purchase media direct. Why give ‘some’ agencies a 2-3% commission to access their “discounts” yet amazingly you can save up to 20% for a savvy media direct buy. This is just he tip of the iceberg for some (not all) media agencies.
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It’s widely known that the pool of bonus or free inventory given by media owners to agencies is used to attract and sweeten the pot for new clients. I’m waiting for existing clients to wake up and realise they’re subsidising their agency’s new business development.
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To ‘ha!’, I can tell you that laziness was certainly not a factor. These people were working 14 hour days AND weekends. Lazy people don’t do that. They wouldn’t know a lunch or a media party if they were taken to one in a limo.
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Given its appalling position of silence and de facto admission of awareness of these frauds the Media Federation should be dissolved or share it position and declare that is expects its members not to be involved in these types of frauds including kick backs.
A review of the committee members reveals a who’s who of media. It is a disgrace that and very telling that this organisation nor its senior members have had the diligence or integrity to take a position on fraud in media.
Based on what we have seen the Media Federation is at best a dormant, passive, fluffy organisation run by senior media professionals to police themselves and mark their own homework or a force to block impartial regulation and facilitate fraudulent practices.
I would ask the following Executive Committee members to publicly share their views and state that they are not involved in perpetrating fraud against their clients:
I would also ask staff and ex-staff members to share their views:
Executive Committee Members
Mat Baxter, UM
James Sawyer, Ikon Communications
John Grono, Gap Research
Anya Collingwood, Match Media
Andrew Livingston & Annick Perrin (MFA Chair), Initiative
Peter Vogel, MEC
Nick Durrant, Mindshare
Stella Carnegie, Peter Horgan, OMD
Toby Hack, PHD
Andrew Lamb, TMS
Claire Taylor-Rowe, MAXUS
James Ledger & Fiona Johnston, MediaCom
Simon Rutherford, Slingshot Media
Caroline Doran, Paykel Media
Sue Kallas and Chris Nolan, Starcom
Ian Perrin & Andrew Sherman, ZenithOptimedia
Sophie Madden, MFA
Margaret Zabel, Communications Council
Megan Brownlow, PwC
Stephen VonMuenster, VonMuenster Solicitors
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Great post – dissolution of the church or state – one or the other!
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Is this the media industry equivalent of what happened on Wall Street after the collapse of Barings and Lehman Brothers following the actions of a few rogue traders?
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My views on this subject haven’t changed since I first raised the alarm almost 3 years ago.
http://www.adnews.com.au/adnew.....laundering
Call me Nostradamus.
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I want to know what Ebiquity have to say in all this. Their product is worth nothing if they didn’t pick this up, and yet it’s radio silence from them…
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Hey Nostra, how are you doing?
This is escalating quickly don’t you think?
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Hang on Ruthers. Aren’t you on the MFA committee?
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What has been missed in this otherwise excellent reporting is the fact that many local agency CEO’s are absolutely powerless to get off this treadmill of buying client business, neglecting medium-sized advertisers, rebates, astronomical adserving mark-ups, value banks, arbitrage and the like. They are merely the ‘meat in the sandwich’ between rapacious client procurement departments and bottom line -driven global head office.
Media agency conglomerates actually set local offices targets for what are disingenuously labelled ‘Other Media Incomes’. These companies have people sitting around in offices in NY, London, Paris and Tokyo thinking up ways to get around Sarbanes Oxley.
All that has happened is that the most aggressive and practised agency group has been caught out. Maybe agencies will back off for a while, but the practise is now so endemic and ‘the pressure from global’ so intense that it will pick up again before long. The argument will go, ‘Well, we do it in China, so why don’t we do it in Australia?’
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Hi Ex Ex,
We have interviewed Ebiquity. Their response will be up later today.
Cheers
Nic – Mumbrella
Hey Paddy,
Slingshot is not a financial member of the MFA, therefore I’m not on the MFA committee.
Cheers Ruthers
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Hey Ruthers,
Suggest you check out the list below – see comment 19 above. Something is amiss somewhere….
Executive Committee Members
Mat Baxter, UM
James Sawyer, Ikon Communications
John Grono, Gap Research
Anya Collingwood, Match Media
Andrew Livingston & Annick Perrin (MFA Chair), Initiative
Peter Vogel, MEC
Nick Durrant, Mindshare
Stella Carnegie, Peter Horgan, OMD
Toby Hack, PHD
Andrew Lamb, TMS
Claire Taylor-Rowe, MAXUS
James Ledger & Fiona Johnston, MediaCom
Simon Rutherford, Slingshot Media
Caroline Doran, Paykel Media
Sue Kallas and Chris Nolan, Starcom
Ian Perrin & Andrew Sherman, ZenithOptimedia
Sophie Madden, MFA
Margaret Zabel, Communications Council
Megan Brownlow, PwC
Stephen VonMuenster, VonMuenster Solicitors
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Paddy is on a mission.
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What a load of old Tosh, Tosh 🙂
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Is it just me or is all of this taking away from the real people to blame here?
Sure a couple of people have fudged the ratings and reporting however it should be senior management taking responsibility for these sorts of things.
If your running a business… you know everything that’s going on… for these guys to be acting dumb like it’s news to them is a little weak.
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Simple answer. Re-regulate the industry with statutory laws, with proper penalties for breaking the law as part of Trade Practices legislation. It was clear what was going to happen years ago when the agency accreditation system got de-regulated. The top of the lolly jar was loosened at that time, and guess what……..?
Don’t fuss me either, with “Play fair”, “Do the right thing” motherhood statements. Totally and utterly ineffective, as you’d expect.
Mr. “Toothpaste out of Jar” was also correct. Enough pressure to crush a diamond. Mediacom are not the first and they most likely won’t be the last.
John Steedman has acted entirely in the correct way. A man of principle and integrity.
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IMHO the auditors should have audited GroupM’s books over the past 5 years, looking at transaction flows between it, the opco’s and the vendors.
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With all due respect Robbo, what were you doing when “the lid came off the lolly jar” as you put it?
I know John Steedman too. Probably not as well as you do.
I also believe him to be a man of principle and integrity.
But so was the captain of the Titanic…..
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Finally – a little bit of justice. Perhaps the small start ups trying to really innovate and present great and innovative solutions can maybe be given a chance rather than be told by a junior media exec with all the budget – ah, sorry – you are not one of our “preferred” suppliers – Lol
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Go Paddy.
& as we seem to be having a mea culpa moment, I wonder if they will open the pandoras box of digital.
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Can someone please explain why a car rego plate salesman is posting on this topic like a frenzied chimpanzee? @Paddy Douneen, you got an axe to grind with MediaCom, maybe? Google tells me that you worked there briefly. You demand disclosure, I think the readers of Mumbrella deserve it from you.
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Dear Busta,
Thank you for your inane comment.
If you had bothered to do your research you will have discovered that I have worked at many media companies around the world during the past 29 or so years. I actually was GM of MediaCom when it first launched out of Grey Advertising’s media department.
I have worked as both a seller and buyer of commercial airttime both on London and here in Sydney.
I was on the inaugural MFA committee pioneered by Haydn Bray, Simon Bellamy, John Sintras, Peter Cornelius, Tracie Michael, to name but a few.
I’m now a client spending millions of dollars on TV each year.
I may be going off like a crazed chimpanzee (I like that phrase – may I borrow it for a while) but I happen to believe that this is a very serious issue for our industry.
I hope that I have demonstrated that I am relatively well qualified to have more than one point of view on this topic
Who are you Busta? And what have you done in this industry?
Thank you for listening.
Paddy “The Crazed Chimpanzee” Douneen
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I bought a set of plates from Paddy’s company recently. Not bad at all.
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I believe this has everything to do with high management over promising and under delivering. Poor people at the bottom having to clean up the mess with little to no support is what it sounds like
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Wow I am calling shenanigans, who would have ever thought there would be kick backs and back door dealings in the media industry and frankly who cares. Who needs these guys anyway, if you don’t like it do it yourself.
@Busta I am with you, this Paddy (don’t you know who I am) Douneen seems to have not just an axe to grind but a chainsaw for some reason with MediaCom. Although I am enjoying his constant name dropping and self promotion, obviously a quiet day at the number plate shop.
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I repeat that the practice uncovered here has been going on since the 70’s. If I named names I would be tied to a anchor in the Parramatta river in about 20 foot of water.
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Maybe this was all a big misunderstanding?
First day on the job, etc
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Paddy ,
Doing yourself no favours here dude !
Yep , its a huge and important issue this news Paddy , just not sure what you having worked at Mediacom like a lifetime ago has got to do with anything , you resigning because of some stuff up when you were running the show { so they accepted the resignation yeah ? } , dropping names and using nick names we have never heard of before .
I just want to see an intelligent debate on this feed, you have opened yourself up for a massive bollocking here …… lets just get back to the issue which is a massive one and not use it to self promote or whatever it is you are trying to do .
Thanks
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IP Daily
Happy to put my real name to my comments as opposed to hide behind a clever pseudonym.
No axe to grind.
I happen to know all these people reasonably well – it’s good to build relationships in this business (although I suspect I may have burnt a few bridges in the past day or two).
No need for self promotion – I have an awesome job that keeps me out of trouble thanks.
Could easily do it myself in-house, but I happen to have a very good boutique media agency that we enjoy working with and who produces great media plans and buying results without having to resort to value banks.
I have nothing further to say on this topic so that’s goodbye from The Crazed Monkey for today.
Have fun everyone 🙂
Paddy
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And one more thing Paddy, to insult Alan Roberston with the ” what were you doing when the lid came off the cookie jar ” comment is out of line . I know what he was doing , running a great media business with clients, nurturing staff , treating media owners with respect and making his clients lots of money .
You also seem to have it in for Steady for some reason ! Does that have anything to do with Mumbrella 360 a few years ago when you got shut down by him and Tajer for asking a question during a Q and A session with the TV network bosses that was designed to insight controversy and was not relevant to the debate being had ?.
I concur with Robbo , John Steadman is a man of great integrity and his longevity in this industry and reputation speaks for itself !
Paddy , suggest you take a break from this feed today !!
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Were was I Paddy? I was in the bloody witness box being cross-examined by Bob Ellicott, Q.C., defending the commission system and T.P. legislation in the de-regulation case, just as I was during the Super League war. It was fairly torrid.
Where were you? On the sidelines barking or still at school? Nobody at Merchant and Partners ever, ever put their hand on a single solitary cent of benefit that was due back to our clients. It all went back. Before de-regulation and after.
Please desist from making not-so-subtle remarks about me, my former business partner Dennis Merchant nor any of our employees. It’s a bad look.
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Good Afternoon Paddy,
It appears you are indeed on a mission and are twisting this conversation to suit your own umbrella agenda. The number plate game seems far less lecherous than the media one.
– Jeremy ‘Old Codger’ Same
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Robbo,
Please accept my sincere apologies.
I meant no offence to either you or Dennis.
Even though I have met you both on only a few occasions I have nothing but the utmost respect professionally for both of you. I wouldn’t have enjoyed my career anywhere near as much but for the hard work of pioneers like yourselves.
I hope that this doesn’t appear too sychophantic?
I wasn’t at school – I’m 50. And I wasn’t involved because I had only just arrived here.
I should rephrase my question – if as you say the lolly jar was opened with de-regulation, could not people like you and Dennis done more to prevent something like this happening?
Again, my sincere apologies if i caused any offence.
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Hi Jeremy,
No agenda.
I’m just a concerned client who has enjoyed a length career in the media prior to this.
No more posts from me on this topic.
Thank you.
Paddy
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Wait, so…. the advertising industry isnt being completely honest, well, thats a surprise!
Next youll be telling me that the newspaper “readership” figures arent completely accurate, or that the digital “hits” might not be quite what they seem.
Face it folks we are working in an industry that is based on misleading, overhyping and deceiving, that applies inside and out.
AND WE ALL KNOW WE ARE LYIING
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@paddy you said at 8am this morning you were going to stop posting. Please let it be true this time.
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Gee IP Daily, that’s a mature comment.
Why don’t you come out from behind your pseudonym and say that to my face?
No one is pointing a gun to your head and forcing you to read my or anyone else’s posts on this very serious and worrying topic.
If it makes you feel any better about yourself I ‘ll keep to my promise as of now.
Thanks for playing 🙂
Paddy
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Powerful words by offal! Couldn’t agree more!
…And I feel for Paddy…. you articulated your point loudly on the town hall steps and all they could do to respond was send a lynch mob!
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@Paddy Douneen, LOL!
Maybe you should stick to selling car rego plates!
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Let’s hope clients wake up, smell the hazelnut soy latte and conduct an independent audit of their agencies digital buying and reselling practices. You’d be fascinated to understand how digital has gone from a margin / resource nightmare 5-10 years ago to become the most profitable department for media agents today.
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@CanOfWorms
Digital is now so pervasive, so embedded in everything we do that of course its become the most profitable dept for agencies today.
I hear they also make digital rego plates these days! *wink*
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What say you…Pitch doctors?…One in particular keeps posting on Twitter re the US position, but strangely quiet regarding the role they played in some of these media pitches for these clients . For that matter so is Mumbrella.
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Hey Mumbrella – Anyone care to interview CEOs of Carat, Mitchells, OMD, UM and PHD – and ask then to put on public record if they ever have, or currently do:
(a) sell value bank to clients manking profit on the side; or
(b) misreport audience delivery to clients
Be good to get an industry view, not just whats happening at Mediacom
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