In re MDC PARTNERS INC.

 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
SECURITIES ACT OF 1933 
Release No. 10283 / January 18, 2017 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 79823 / January 18, 2017 
ACCOUNTING AND AUDITING ENFORCEMENT 
Release No. 3849 / January 18, 2017 
ADMINISTRATIVE PROCEEDING 
File No. 3-17795 
In the Matter of 
MDC PARTNERS INC., 
Respondent. 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 8A OF THE SECURITIES ACT 
OF 1933 AND SECTION 21C OF THE 
SECURITIES EXCHANGE ACT OF 1934, 
MAKING FINDINGS, AND IMPOSING A 
CEASE-AND-DESIST ORDER 
I. 
The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 
of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 
Act”), against MDC Partners Inc. (“MDCA” or “Respondent”). 
II. 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings 
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of 
the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 
(“Order”), as set forth below.   

 
2 
III. 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
Summary 
1. This matter arises from two sets of federal securities laws violations involving 
MDC Partners Inc., a publicly-traded marketing firm.  First, for several years, MDCA failed to 
disclose significant amounts of compensation paid to its then Chairman and Chief Executive 
Officer, Miles S. Nadal, in the form of a wide range of perquisites and personal benefits.  After 
MDCA conducted an in-depth internal investigation in response to inquiries from the Commission 
staff, Nadal resigned and agreed to return $10.582 million in cash bonus awards and to pay back 
$11.285 million worth of perquisites, personal expense reimbursements and other items of value 
that he improperly received from 2009 through 2014. 
2. Second, MDCA violated the disclosure requirements concerning non-GAAP 
financial measures contained in Regulation G and Item 10(e) of Regulation S-K.
2
  Despite agreeing 
to comply with non-GAAP financial measure disclosure rules in December 2012 correspondence 
with the Commission’s Division of Corporation Finance, MDCA continued to violate those rules 
for six quarters by failing to afford equal or greater prominence to GAAP measures in earnings 
release presentations containing non-GAAP financial measures.  Furthermore, for seven quarters 
between mid-2012 and early-2014, MDCA did not reconcile “organic revenue growth,” which as 
calculated by MDCA was a non-GAAP financial measure, to GAAP revenue. 
Respondent and Relevant Individual 
 3. Respondent MDC Partners Inc. is a Canadian corporation headquartered in New 
York, New York, engaged in the advertising, marketing and communications businesses.  MDC 
Partners Inc.’s common stock is registered under Section 12(b) of the Exchange Act and trades on 
the NASDAQ National Market under the ticker symbol “MDCA.” 
4. Miles S. Nadal was the Chairman of the Board, Chief Executive Officer and 
President of MDCA from 1986 until July 2015. 
                                                 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding. 
 
2
 “GAAP” refers to U.S. generally accepted accounting principles. 

 
3 
Facts 
MDCA’s Failure to Disclose Compensation Paid to Nadal 
5. From 2009 through 2014, MDCA paid $11.285 million worth of perquisites and 
personal benefits to Miles S. Nadal, its then Chairman and CEO, without disclosing such items as 
compensation in its definitive proxy statements.  Items that MDCA paid for on Nadal’s behalf, but 
did not disclose, include, but are not limited to, private aircraft usage, cosmetic surgery, yacht-and-
sports-car-related expenses, jewelry, cash for tips and gratuities, medical expenses for Nadal, 
family members and others, charitable donations in Nadal’s name, pet care, vacation and personal 
travel expenses, and club memberships. 
6. In definitive proxy statements for 2009 through 2014, MDCA disclosed 
approximately $3.87 million worth of perquisites and personal benefits provided to Nadal.  MDCA 
disclosed an annual $500,000 perquisite allowance; interest benefits received on interest free loans 
in 2009, 2010, 2011 and 2012; disability, medical, life insurance benefits in 2009 and 2010; and 
legal fees and the use of company aircraft and apartment in 2014. 
7. However, MDCA’s definitive proxy statements for 2009 through 2014 failed to 
disclose an annual average of approximately $1.88 million worth of additional perquisites and 
personal benefits provided to Nadal, thereby understating the perquisites and personal benefits 
portion of Nadal’s compensation by an average of almost 300% each year. 
8. MDCA incorporated its definitive proxy statements into its annual reports by 
reference. 
9. From March 2013 through April 2014, MDCA sold $735 million in debt securities.  
MDCA’s offering documents concerning these debt issuances incorporated by reference the 
deficient executive compensation disclosures in MDCA’s April 2012 and April 2013 definitive 
proxy statements. 
10. From 2009 through 2014, MDCA incorrectly recorded payments for the benefit of, 
and reimbursements to, Nadal as business expenses, and not compensation.  As a result, its books, 
records, and accounts did not, in reasonable detail, accurately and fairly reflect its disposition of 
assets. 
11. In addition, MDCA failed to devise and maintain internal accounting controls 
relating to payments for the benefit of, and reimbursements to, Nadal that were sufficient to 
provide reasonable assurances that transactions were recorded as necessary to maintain the 
accountability of assets.  These failures included, for instance, MDCA’s practice of reimbursing 
Nadal several thousands of dollars a month for cash payments of “tips and gratuities,” based solely 
on a line item in Nadal’s monthly expense submissions.  By way of further example, MDCA paid 
more than $1.5 million for the benefit of Nadal outside of its monthly expense reimbursement 
process. 
12. After MDCA’s internal investigation, which was launched upon receipt of a 
subpoena from the Commission staff and continued after additional staff inquiries, Nadal resigned 

 
4 
and agreed to return $10.582 million in cash bonus awards and to pay back $11.285 million worth 
of perquisites, personal expense reimbursements and other items of value that he improperly 
received from 2009 through 2014. 
MDCA’s Failure to Comply with Non-GAAP Financial Measure Disclosure Requirements 
13. Instruction 2 of Item 2.02 of Form 8-K requires an issuer to comply with Item 
10(e)(1)(i) of Regulation S-K when it makes a public earnings announcement or other disclosure of 
material non-public information regarding its results of operations or financial condition for a 
completed fiscal year or quarter.  Item 10(e)(1)(i)(A) of Regulation S-K provides that an issuer, 
when disclosing a non-GAAP financial measure subject to the item, must include a presentation, 
with equal or greater prominence, of the most directly comparable financial measure or measures 
calculated and presented in accordance with GAAP.  Item 10(e)(1)(i)(B) of Regulation S-K 
requires an issuer, when disclosing a non-GAAP financial measure subject to the item, to include a 
reconciliation (by schedule or other clearly understandable method) of the differences between the 
non-GAAP financial measure disclosed or released with the most comparable financial measure or 
measures calculated and presented in accordance with GAAP. 
14. Prior to July 2014, MDCA’s earnings releases failed to comply with the 
prominence requirement set forth in Item 10(e)(1)(i)(A) of Regulation S-K.  In a letter to MDCA 
dated November 27, 2012, staff in the Commission’s Division of Corporation Finance expressed 
concerns about MDCA’s compliance with the prominence requirement in its November 5, 2012 
earnings release, and directed MDCA’s attention to Item 10(e) of Regulation S-K.  MDCA 
responded in a letter dated December 10, 2012, indicating that it would comply with Item 10(e) of 
Regulation S-K in future earnings releases. 
15. Notwithstanding its representation to the Commission staff, MDCA, in its 
subsequent earnings release dated February 21, 2013, and in quarterly earnings releases thereafter 
through April 24, 2014, failed to comply with the prominence requirement.  For instance, MDCA 
repeatedly emphasized non-GAAP financial measures such as EBITDA, EBITDA margin, and free 
cash flow without giving equal or greater prominence to the comparable GAAP measures. 
16. In addition to its failure to comply with the prominence requirement, from July 30, 
2012 through March 10, 2014, MDCA also failed to comply with non-GAAP financial measure 
disclosure requirements when it made disclosures concerning “organic revenue growth,” a non-
GAAP financial measure that MDCA utilized in communications with market participants. 
17. According to its public statements, MDCA’s “organic revenue growth” represented 
growth in revenue, excluding the effects of two reconciling items: acquisitions and foreign 
exchange impacts.  However, with respect to its second quarter 2012 through year end 2013 
results, MDCA incorporated a third reconciling item into its calculation of “organic revenue 
growth.”  MDCA did not disclose in earnings releases or filings on Forms 10-Q and 10-K the 
existence of this third reconciling item. 
18. MDCA’s undisclosed reconciling item had an impact on the amount of “organic 
revenue growth” MDCA publicized in connection with its results for the second quarter of 2012 

 
5 
through the end of 2013.  Had MDCA calculated “organic revenue growth” consistent with its 
filings with the Commission, i.e. by comparing period over period growth in MDCA’s recorded 
GAAP revenue, and excluding the effects of acquisitions and foreign exchange impacts, MDCA’s 
“organic revenue growth” would have been lower. 
19. MDCA’s undisclosed reconciling item arose out of the Company’s change, during 
the second quarter of 2012, to its presentation of revenue derived from a shift to net revenue from 
gross revenue accounting for two partner-firm subsidiaries.  In its “organic revenue growth” 
calculations for the second quarter 2012 through the first quarter of 2013, MDCA made 
adjustments to revenue for the corresponding prior periods (the second quarter of 2011 through the 
first quarter of 2012) in order to derive revenue figures that MDCA would have obtained had it 
presented revenue the same way it began presenting it for two partner-firm subsidiaries in the 
second quarter of 2012.  MDCA’s adjustments also affected its “organic revenue growth” 
calculations for the six months ended June 30, 2013, the nine months ended September 30, 2013, 
and the year ended December 31, 2013.   
20. During the time period in which MDCA included the undisclosed reconciling item 
in its “organic revenue growth” calculations, MDCA’s earnings releases and filings on Forms 10-Q 
and 10-K did not include tabular reconciliations to GAAP revenue. 
Violations 
21. Section 14(a) of the Exchange Act makes it unlawful to solicit any proxy in respect 
of any security (other than an exempted security) registered pursuant to Section 12 of the Exchange 
in contravention of such rules and regulations as the Commission may prescribe.  Rule 14a-3 
prohibits issuers with securities registered pursuant to Section 12 of the Exchange Act from 
soliciting proxies without furnishing proxy statements containing the information specified in 
Schedule 14A, including executive compensation disclosures pursuant to Item 402 of Regulation 
S-K.  Item 402 of Regulation S-K requires disclosure of the total value of all perquisites and other 
personal benefits provided to named executive officers (including CEOs) who receive at least 
$10,000 worth of such items in a given year.  Item 402 of Regulation S-K also requires disclosure 
of all perquisites and personal benefits by type, and specific identification of any perquisite or 
personal benefit that exceeds the greater of $25,000 or 10% of the total perquisites.  Rule 14a-9 
prohibits the use of proxy statements containing materially false or misleading statements or 
materially misleading omissions.  As a result of the conduct described above, MDCA violated 
Section 14(a) of the Exchange Act and Rules 14a-3 and 14a-9 thereunder. 
22. Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11 and 13a-13 thereunder 
require every issuer of a security registered pursuant to Section 12 of the Exchange Act to file with 
the Commission, among other things, annual, quarterly and current reports as the Commission may 
require.  As a result of its failure to comply with the non-GAAP financial measure disclosure 
requirements under Item 10(e) of Regulation S-K and the incorporation of deficient proxy 
statements by reference in its annual reports, MDCA violated Section 13(a) of the Exchange Act 
and Rules 13a-1, 13a-11 and 13a-13 thereunder. 

 
6 
23. As a result of the conduct described above, MDCA violated Rule 12b-20 under the 
Exchange Act, which requires that, in addition to the information expressly required to be included 
in a statement or report filed with the Commission, there shall be added such further material 
information, if any, as may be necessary to make the required statements, in light of the 
circumstances under which they are made, not misleading. 
24. As a result of the conduct described above, MDCA violated Section 13(b)(2)(A) of 
the Exchange Act, which requires reporting companies to make and keep books, records and 
accounts which, in reasonable detail, accurately and fairly reflect their transactions and dispositions 
of their assets. 
25. As a result of the conduct described above, MDCA violated Section 13(b)(2)(B) of 
the Exchange Act, which requires reporting companies to devise and maintain a system of internal 
accounting controls sufficient to provide reasonable assurances that, among other things, 
transactions are recorded as necessary to maintain accountability for assets. 
26. As a result of the conduct described above, MDCA violated Section 17(a)(2) of the 
Securities Act, which prohibits any person from obtaining money or property in the offer or sale of 
securities by means of an untrue statement of a material fact or any omission to state a material fact 
necessary in order to make the statements made, in light of the circumstances under which they 
were made, not misleading. 
27. As a result of the conduct described above, MDCA violated Rule 100(a)(2) of 
Regulation G, which requires an issuer of a class of securities registered pursuant to Section 12 of 
the Exchange Act, when publicly disclosing material information that includes a non-GAAP 
financial measure, to accompany that non-GAAP financial measure with a reconciliation (by 
schedule or other clearly understandable method) of the differences between the non-GAAP 
financial measure disclosed or released with the most comparable financial measure or measures 
calculated and presented in accordance with GAAP. 
Undertakings 
28. Respondent undertakes to cooperate fully with the Commission in any and all 
investigations, litigations or other proceedings relating to or arising from the matters described in 
the Order.  In connection with such cooperation, Respondent undertakes: 
a. To produce, without service or notice of subpoena, any and all documents 
and other information reasonably requested by the Commission’s staff, with a custodian 
declaration as to their authenticity, if requested; 
b. To use its best efforts to cause Respondent’s current and former employees, 
officers and directors to be interviewed by the Commission’s staff at such times and places as the 
staff reasonably may direct; 
c. To use its best efforts to cause Respondent’s current and former employees, 
officers and directors to appear and testify truthfully and completely without service of a notice or 

 
7 
subpoena in such investigations, depositions, hearings or trials as may be reasonably requested by 
the Commission’s staff; and 
d. In connection with any interviews of Respondent’s current and former 
employees, officers and directors to be conducted pursuant to this undertaking, requests for such 
interviews may be provided by the Commission’s staff by regular or electronic mail to Paul C. 
Curnin, Esq., Simpson Thacher & Bartlett LLP, 425 Lexington Ave., New York, NY 10017, 
[email protected], or such other counsel that may be substituted by Respondent. 
29. In determining whether to accept the Offer, the Commission has considered these 
undertakings. 
MDCA’s Remedial Efforts 
30. In determining to accept the Offer, the Commission considered remedial acts 
promptly undertaken by Respondent and cooperation afforded the Commission staff.  
Specifically, MDCA undertook remedial efforts, including (i) the formation of an independent 
Special Committee of MDCA’s Board of Directors, who engaged outside counsel and an 
independent forensic accounting firm to conduct an in-depth investigation; (ii) replacing its Chief 
Executive Officer and Chief Accounting Officer; (iii) collecting more than $21.7 million in 
repayments from the former Chief Executive Officer; (iv) adding three new independent 
directors to the Board of Directors, as well as a new Senior Vice President of Internal Controls 
and Compliance; and (v) implementing new internal control and compliance policies and 
procedures, and executive training programs, concerning expense reimbursement, accounts 
payable processing, and travel and entertainment. 
IV. 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent’s Offer. 
 Accordingly, it is hereby ORDERED that: 
 A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, 
Respondent MDC Partners Inc. shall cease and desist from committing or causing any violations 
and any future violations of Section 17(a)(2) of the Securities Act; Sections 13(a), 13(b)(2)(A), 
13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, 14a-3 and 
14a-9 thereunder; and Rule 100(a)(2) of Regulation G. 
 B. Respondent shall,  within  10 days  of  the  entry  of  this  Order,  pay  a  civil  money 
penalty in the amount of $1.5  million to the Securities and Exchange Commission for transfer to 
the  general  fund  of the United  States  Treasury,  subject  to Exchange  Act  Section  21F(g)(3). If 
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717. 

 
8 
Payment must be made in one of the following ways: 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
Payments by check or money order must be accompanied by a cover letter identifying MDC 
Partners Inc. as a Respondent in these proceedings, and the file number of these proceedings; a 
copy of the cover letter and check or money order must be sent to Brendan P. McGlynn, Assistant 
Regional Director, Philadelphia Regional Office, Division of Enforcement, Securities and 
Exchange Commission, 1617 JFK Blvd., Suite 520, Philadelphia, PA 19103. 
 C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 
treated as penalties paid to the government for all purposes, including all tax purposes.  To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a 
Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 
the Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the 
Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 
an additional civil penalty and shall not be deemed to change the amount of the civil penalty 
imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 
private damages action brought against Respondent by or on behalf of one or more investors based 
on substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding. 
 D. Respondent acknowledges that the Commission is not imposing a civil penalty in 
excess of $1.5 million based upon its cooperation in a Commission investigation and related 
enforcement action.  If at any time following the entry of the Order, the Division of Enforcement 
(“Division”) obtains information indicating that Respondent knowingly provided materially false 
or misleading information or materials to the Commission, or in a related proceeding, the Division 
may, at its sole discretion and with prior notice to the Respondent, petition the Commission to 
reopen this matter and seek an order directing that the Respondent pay an additional civil penalty.  

 
9 
Respondent may contest by way of defense in any resulting administrative proceeding whether it 
knowingly provided materially false or misleading information, but may not:  (1) contest the 
findings in the Order; or (2) assert any defense to liability or remedy, including, but not limited to, 
any statute of limitations defense. 
By the Commission. 
 
Brent J. Fields 
Secretary 
 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

SECURITIES ACT OF 1933 

Release No. 10283 / January 18, 2017 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 79823 / January 18, 2017 

ACCOUNTING AND AUDITING ENFORCEMENT 

Release No. 3849 / January 18, 2017 

ADMINISTRATIVE PROCEEDING 

File No. 3-17795 

In the Matter of 

MDC PARTNERS INC., 

Respondent. 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 8A OF THE SECURITIES ACT 

OF 1933 AND SECTION 21C OF THE 

SECURITIES EXCHANGE ACT OF 1934, 

MAKING FINDINGS, AND IMPOSING A 

CEASE-AND-DESIST ORDER 

I. 

The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act 

of 1933 (“Securities Act”) and Section 21C of the Securities Exchange Act of 1934 (“Exchange 

Act”), against MDC Partners Inc. (“MDCA” or “Respondent”). 

II. 

In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings 

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-

and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of 

the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order 

(“Order”), as set forth below.   



 2 

III. 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

Summary 

1. This matter arises from two sets of federal securities laws violations involving 

MDC Partners Inc., a publicly-traded marketing firm.  First, for several years, MDCA failed to 

disclose significant amounts of compensation paid to its then Chairman and Chief Executive 

Officer, Miles S. Nadal, in the form of a wide range of perquisites and personal benefits.  After 

MDCA conducted an in-depth internal investigation in response to inquiries from the Commission 

staff, Nadal resigned and agreed to return $10.582 million in cash bonus awards and to pay back 

$11.285 million worth of perquisites, personal expense reimbursements and other items of value 

that he improperly received from 2009 through 2014. 

2. Second, MDCA violated the disclosure requirements concerning non-GAAP 

financial measures contained in Regulation G and Item 10(e) of Regulation S-K.2  Despite agreeing 

to comply with non-GAAP financial measure disclosure rules in December 2012 correspondence 

with the Commission’s Division of Corporation Finance, MDCA continued to violate those rules 

for six quarters by failing to afford equal or greater prominence to GAAP measures in earnings 

release presentations containing non-GAAP financial measures.  Furthermore, for seven quarters 

between mid-2012 and early-2014, MDCA did not reconcile “organic revenue growth,” which as 

calculated by MDCA was a non-GAAP financial measure, to GAAP revenue. 

Respondent and Relevant Individual 

 3. Respondent MDC Partners Inc. is a Canadian corporation headquartered in New 

York, New York, engaged in the advertising, marketing and communications businesses.  MDC 

Partners Inc.’s common stock is registered under Section 12(b) of the Exchange Act and trades on 

the NASDAQ National Market under the ticker symbol “MDCA.” 

4. Miles S. Nadal was the Chairman of the Board, Chief Executive Officer and 

President of MDCA from 1986 until July 2015. 

                                                 
1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding. 

 
2 “GAAP” refers to U.S. generally accepted accounting principles. 



 3 

Facts 

MDCA’s Failure to Disclose Compensation Paid to Nadal 

5. From 2009 through 2014, MDCA paid $11.285 million worth of perquisites and 

personal benefits to Miles S. Nadal, its then Chairman and CEO, without disclosing such items as 

compensation in its definitive proxy statements.  Items that MDCA paid for on Nadal’s behalf, but 

did not disclose, include, but are not limited to, private aircraft usage, cosmetic surgery, yacht-and-

sports-car-related expenses, jewelry, cash for tips and gratuities, medical expenses for Nadal, 

family members and others, charitable donations in Nadal’s name, pet care, vacation and personal 

travel expenses, and club memberships. 

6. In definitive proxy statements for 2009 through 2014, MDCA disclosed 

approximately $3.87 million worth of perquisites and personal benefits provided to Nadal.  MDCA 

disclosed an annual $500,000 perquisite allowance; interest benefits received on interest free loans 

in 2009, 2010, 2011 and 2012; disability, medical, life insurance benefits in 2009 and 2010; and 

legal fees and the use of company aircraft and apartment in 2014. 

7. However, MDCA’s definitive proxy statements for 2009 through 2014 failed to 

disclose an annual average of approximately $1.88 million worth of additional perquisites and 

personal benefits provided to Nadal, thereby understating the perquisites and personal benefits 

portion of Nadal’s compensation by an average of almost 300% each year. 

8. MDCA incorporated its definitive proxy statements into its annual reports by 

reference. 

9. From March 2013 through April 2014, MDCA sold $735 million in debt securities.  

MDCA’s offering documents concerning these debt issuances incorporated by reference the 

deficient executive compensation disclosures in MDCA’s April 2012 and April 2013 definitive 

proxy statements. 

10. From 2009 through 2014, MDCA incorrectly recorded payments for the benefit of, 

and reimbursements to, Nadal as business expenses, and not compensation.  As a result, its books, 

records, and accounts did not, in reasonable detail, accurately and fairly reflect its disposition of 

assets. 

11. In addition, MDCA failed to devise and maintain internal accounting controls 

relating to payments for the benefit of, and reimbursements to, Nadal that were sufficient to 

provide reasonable assurances that transactions were recorded as necessary to maintain the 

accountability of assets.  These failures included, for instance, MDCA’s practice of reimbursing 

Nadal several thousands of dollars a month for cash payments of “tips and gratuities,” based solely 

on a line item in Nadal’s monthly expense submissions.  By way of further example, MDCA paid 

more than $1.5 million for the benefit of Nadal outside of its monthly expense reimbursement 

process. 

12. After MDCA’s internal investigation, which was launched upon receipt of a 

subpoena from the Commission staff and continued after additional staff inquiries, Nadal resigned 



 4 

and agreed to return $10.582 million in cash bonus awards and to pay back $11.285 million worth 

of perquisites, personal expense reimbursements and other items of value that he improperly 

received from 2009 through 2014. 

MDCA’s Failure to Comply with Non-GAAP Financial Measure Disclosure Requirements 

13. Instruction 2 of Item 2.02 of Form 8-K requires an issuer to comply with Item 

10(e)(1)(i) of Regulation S-K when it makes a public earnings announcement or other disclosure of 

material non-public information regarding its results of operations or financial condition for a 

completed fiscal year or quarter.  Item 10(e)(1)(i)(A) of Regulation S-K provides that an issuer, 

when disclosing a non-GAAP financial measure subject to the item, must include a presentation, 

with equal or greater prominence, of the most directly comparable financial measure or measures 

calculated and presented in accordance with GAAP.  Item 10(e)(1)(i)(B) of Regulation S-K 

requires an issuer, when disclosing a non-GAAP financial measure subject to the item, to include a 

reconciliation (by schedule or other clearly understandable method) of the differences between the 

non-GAAP financial measure disclosed or released with the most comparable financial measure or 

measures calculated and presented in accordance with GAAP. 

14. Prior to July 2014, MDCA’s earnings releases failed to comply with the 

prominence requirement set forth in Item 10(e)(1)(i)(A) of Regulation S-K.  In a letter to MDCA 

dated November 27, 2012, staff in the Commission’s Division of Corporation Finance expressed 

concerns about MDCA’s compliance with the prominence requirement in its November 5, 2012 

earnings release, and directed MDCA’s attention to Item 10(e) of Regulation S-K.  MDCA 

responded in a letter dated December 10, 2012, indicating that it would comply with Item 10(e) of 

Regulation S-K in future earnings releases. 

15. Notwithstanding its representation to the Commission staff, MDCA, in its 

subsequent earnings release dated February 21, 2013, and in quarterly earnings releases thereafter 

through April 24, 2014, failed to comply with the prominence requirement.  For instance, MDCA 

repeatedly emphasized non-GAAP financial measures such as EBITDA, EBITDA margin, and free 

cash flow without giving equal or greater prominence to the comparable GAAP measures. 

16. In addition to its failure to comply with the prominence requirement, from July 30, 

2012 through March 10, 2014, MDCA also failed to comply with non-GAAP financial measure 

disclosure requirements when it made disclosures concerning “organic revenue growth,” a non-

GAAP financial measure that MDCA utilized in communications with market participants. 

17. According to its public statements, MDCA’s “organic revenue growth” represented 

growth in revenue, excluding the effects of two reconciling items: acquisitions and foreign 

exchange impacts.  However, with respect to its second quarter 2012 through year end 2013 

results, MDCA incorporated a third reconciling item into its calculation of “organic revenue 

growth.”  MDCA did not disclose in earnings releases or filings on Forms 10-Q and 10-K the 

existence of this third reconciling item. 

18. MDCA’s undisclosed reconciling item had an impact on the amount of “organic 

revenue growth” MDCA publicized in connection with its results for the second quarter of 2012 



 5 

through the end of 2013.  Had MDCA calculated “organic revenue growth” consistent with its 

filings with the Commission, i.e. by comparing period over period growth in MDCA’s recorded 

GAAP revenue, and excluding the effects of acquisitions and foreign exchange impacts, MDCA’s 

“organic revenue growth” would have been lower. 

19. MDCA’s undisclosed reconciling item arose out of the Company’s change, during 

the second quarter of 2012, to its presentation of revenue derived from a shift to net revenue from 

gross revenue accounting for two partner-firm subsidiaries.  In its “organic revenue growth” 

calculations for the second quarter 2012 through the first quarter of 2013, MDCA made 

adjustments to revenue for the corresponding prior periods (the second quarter of 2011 through the 

first quarter of 2012) in order to derive revenue figures that MDCA would have obtained had it 

presented revenue the same way it began presenting it for two partner-firm subsidiaries in the 

second quarter of 2012.  MDCA’s adjustments also affected its “organic revenue growth” 

calculations for the six months ended June 30, 2013, the nine months ended September 30, 2013, 

and the year ended December 31, 2013.   

20. During the time period in which MDCA included the undisclosed reconciling item 

in its “organic revenue growth” calculations, MDCA’s earnings releases and filings on Forms 10-Q 

and 10-K did not include tabular reconciliations to GAAP revenue. 

Violations 

21. Section 14(a) of the Exchange Act makes it unlawful to solicit any proxy in respect 

of any security (other than an exempted security) registered pursuant to Section 12 of the Exchange 

in contravention of such rules and regulations as the Commission may prescribe.  Rule 14a-3 

prohibits issuers with securities registered pursuant to Section 12 of the Exchange Act from 

soliciting proxies without furnishing proxy statements containing the information specified in 

Schedule 14A, including executive compensation disclosures pursuant to Item 402 of Regulation 

S-K.  Item 402 of Regulation S-K requires disclosure of the total value of all perquisites and other 

personal benefits provided to named executive officers (including CEOs) who receive at least 

$10,000 worth of such items in a given year.  Item 402 of Regulation S-K also requires disclosure 

of all perquisites and personal benefits by type, and specific identification of any perquisite or 

personal benefit that exceeds the greater of $25,000 or 10% of the total perquisites.  Rule 14a-9 

prohibits the use of proxy statements containing materially false or misleading statements or 

materially misleading omissions.  As a result of the conduct described above, MDCA violated 

Section 14(a) of the Exchange Act and Rules 14a-3 and 14a-9 thereunder. 

22. Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11 and 13a-13 thereunder 

require every issuer of a security registered pursuant to Section 12 of the Exchange Act to file with 

the Commission, among other things, annual, quarterly and current reports as the Commission may 

require.  As a result of its failure to comply with the non-GAAP financial measure disclosure 

requirements under Item 10(e) of Regulation S-K and the incorporation of deficient proxy 

statements by reference in its annual reports, MDCA violated Section 13(a) of the Exchange Act 

and Rules 13a-1, 13a-11 and 13a-13 thereunder. 



 6 

23. As a result of the conduct described above, MDCA violated Rule 12b-20 under the 

Exchange Act, which requires that, in addition to the information expressly required to be included 

in a statement or report filed with the Commission, there shall be added such further material 

information, if any, as may be necessary to make the required statements, in light of the 

circumstances under which they are made, not misleading. 

24. As a result of the conduct described above, MDCA violated Section 13(b)(2)(A) of 

the Exchange Act, which requires reporting companies to make and keep books, records and 

accounts which, in reasonable detail, accurately and fairly reflect their transactions and dispositions 

of their assets. 

25. As a result of the conduct described above, MDCA violated Section 13(b)(2)(B) of 

the Exchange Act, which requires reporting companies to devise and maintain a system of internal 

accounting controls sufficient to provide reasonable assurances that, among other things, 

transactions are recorded as necessary to maintain accountability for assets. 

26. As a result of the conduct described above, MDCA violated Section 17(a)(2) of the 

Securities Act, which prohibits any person from obtaining money or property in the offer or sale of 

securities by means of an untrue statement of a material fact or any omission to state a material fact 

necessary in order to make the statements made, in light of the circumstances under which they 

were made, not misleading. 

27. As a result of the conduct described above, MDCA violated Rule 100(a)(2) of 

Regulation G, which requires an issuer of a class of securities registered pursuant to Section 12 of 

the Exchange Act, when publicly disclosing material information that includes a non-GAAP 

financial measure, to accompany that non-GAAP financial measure with a reconciliation (by 

schedule or other clearly understandable method) of the differences between the non-GAAP 

financial measure disclosed or released with the most comparable financial measure or measures 

calculated and presented in accordance with GAAP. 

Undertakings 

28. Respondent undertakes to cooperate fully with the Commission in any and all 

investigations, litigations or other proceedings relating to or arising from the matters described in 

the Order.  In connection with such cooperation, Respondent undertakes: 

a. To produce, without service or notice of subpoena, any and all documents 

and other information reasonably requested by the Commission’s staff, with a custodian 

declaration as to their authenticity, if requested; 

b. To use its best efforts to cause Respondent’s current and former employees, 

officers and directors to be interviewed by the Commission’s staff at such times and places as the 

staff reasonably may direct; 

c. To use its best efforts to cause Respondent’s current and former employees, 

officers and directors to appear and testify truthfully and completely without service of a notice or 



 7 

subpoena in such investigations, depositions, hearings or trials as may be reasonably requested by 

the Commission’s staff; and 

d. In connection with any interviews of Respondent’s current and former 

employees, officers and directors to be conducted pursuant to this undertaking, requests for such 

interviews may be provided by the Commission’s staff by regular or electronic mail to Paul C. 

Curnin, Esq., Simpson Thacher & Bartlett LLP, 425 Lexington Ave., New York, NY 10017, 

[email protected], or such other counsel that may be substituted by Respondent. 

29. In determining whether to accept the Offer, the Commission has considered these 

undertakings. 

MDCA’s Remedial Efforts 

30. In determining to accept the Offer, the Commission considered remedial acts 

promptly undertaken by Respondent and cooperation afforded the Commission staff.  

Specifically, MDCA undertook remedial efforts, including (i) the formation of an independent 

Special Committee of MDCA’s Board of Directors, who engaged outside counsel and an 

independent forensic accounting firm to conduct an in-depth investigation; (ii) replacing its Chief 

Executive Officer and Chief Accounting Officer; (iii) collecting more than $21.7 million in 

repayments from the former Chief Executive Officer; (iv) adding three new independent 

directors to the Board of Directors, as well as a new Senior Vice President of Internal Controls 

and Compliance; and (v) implementing new internal control and compliance policies and 

procedures, and executive training programs, concerning expense reimbursement, accounts 

payable processing, and travel and entertainment. 

IV. 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent’s Offer. 

 Accordingly, it is hereby ORDERED that: 

 A. Pursuant to Section 8A of the Securities Act and Section 21C of the Exchange Act, 

Respondent MDC Partners Inc. shall cease and desist from committing or causing any violations 

and any future violations of Section 17(a)(2) of the Securities Act; Sections 13(a), 13(b)(2)(A), 

13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, 14a-3 and 

14a-9 thereunder; and Rule 100(a)(2) of Regulation G. 

 B. Respondent shall, within 10 days of the entry of this Order, pay a civil money 

penalty in the amount of $1.5 million to the Securities and Exchange Commission for transfer to 

the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If 

timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717. 



 8 

Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

Payments by check or money order must be accompanied by a cover letter identifying MDC 

Partners Inc. as a Respondent in these proceedings, and the file number of these proceedings; a 

copy of the cover letter and check or money order must be sent to Brendan P. McGlynn, Assistant 

Regional Director, Philadelphia Regional Office, Division of Enforcement, Securities and 

Exchange Commission, 1617 JFK Blvd., Suite 520, Philadelphia, PA 19103. 

 C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be 

treated as penalties paid to the government for all purposes, including all tax purposes.  To 

preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 

Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 

award of compensatory damages by the amount of any part of Respondent’s payment of a civil 

penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such a 

Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting 

the Penalty Offset, notify the Commission’s counsel in this action and pay the amount of the 

Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be deemed 

an additional civil penalty and shall not be deemed to change the amount of the civil penalty 

imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” means a 

private damages action brought against Respondent by or on behalf of one or more investors based 

on substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding. 

 D. Respondent acknowledges that the Commission is not imposing a civil penalty in 

excess of $1.5 million based upon its cooperation in a Commission investigation and related 

enforcement action.  If at any time following the entry of the Order, the Division of Enforcement 

(“Division”) obtains information indicating that Respondent knowingly provided materially false 

or misleading information or materials to the Commission, or in a related proceeding, the Division 

may, at its sole discretion and with prior notice to the Respondent, petition the Commission to 

reopen this matter and seek an order directing that the Respondent pay an additional civil penalty.  



 9 

Respondent may contest by way of defense in any resulting administrative proceeding whether it 

knowingly provided materially false or misleading information, but may not:  (1) contest the 

findings in the Order; or (2) assert any defense to liability or remedy, including, but not limited to, 

any statute of limitations defense. 

By the Commission. 

 

Brent J. Fields 

Secretary