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.
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.
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.
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.
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