TORONTO – The founder of Toronto-based advertising group MDC Partners Inc. has announced his resignation as CEO amid an ongoing investigation by the U.S. securities regulator into executive pay and the company’s accounting practices.
Miles Nadal has agreed to pay back $1.9 million in expenses and $10.6 million in salary and bonuses in connection with the investigation by the U.S. Securities and Exchange Commission, and will not receive any severance or compensation for stepping down.
Chief accounting officer Michael Sabatino is also resigning, and will repay $208,000 in bonuses.
All figures are in American dollars.
A spokesman for Miles Nadal would not say if there was any relationship between the CEO’s abrupt resignation and the ongoing investigation.
“He’s going to spend more time with his family and pursue his philanthropic endeavours and other business interests,” the spokesman said.
The announcement brings to more than $21 million the total Nadal has promised to pay back. The company announced in its first-quarter earnings call in April that Nadal would pay back $8.6 million in expenses he claimed for medical, travel and other bills from 2009 through 2014.
That marked the first time the company acknowledged it was under SEC investigation, although the American regulator served the company with a subpoena last October.
CFO David Doft told the conference call that the SEC requested documents “relating to CEO expenses, the company’s goodwill and certain other accounting practices, as well as trading in the company’s securities by third parties.”
Scott Kauffman, previously a presiding director on the company’s board, will take over the top spot as chairman and CEO.
MDC Partners has investments in more than 50 advertising and marketing-related agencies in Canada and abroad.
In June, MDC announced that company executives Stephen Pustil and Lori Senecal, as well as Falls Management Co. CEO Clare Copeland and Michael Kirby, a former Nova Scotia senator, would be resigning from its board, and that it was looking to add two to four new independent directors to replace them.
At the company’s most recent annual general meeting, nearly half of its shareholders rejected the pay package for executives, with only 53 per cent voting in favour. The board said the result was “clearly unsatisfactory” and that they would look to restructure their executive pay program for the second time following a 2014 revamp.
Nadal’s compensation has attracted criticism before.
In 2011, Nadal got a raise from $6 million to nearly $24 million, with more than $21.5 million in stock awards, despite the company losing $77 million during the year.
The company defended the raise by saying the stock-based compensation ensured Nadal’s interests would be aligned with those of the company.
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Note to readers: This is a corrected story. A previous version said Michael Kirby was a current senator; Moves Business and National, please guard against duplication