WPP launches investigation into alleged fraud at Italian arm

The advertising giant WPP is investigating an alleged complex fraud by the former head of its Italian business, Marco Benatti, who was fired three weeks ago.

WPP has hired three Italian law firms to conduct the investigation into its Italian media-buying operations, alongside Kroll, the corporate investigator, and Deloitte, WPP's auditor. The inquiry is looking at the ownership of several Italian businesses and overseas companies WPP traded with in places such as Scotland, Madeira and the Antilles.

Mr Benatti is alleged to have hidden the fact that he controlled and majority-owned Mediaclub, a media-buying firm, when he introduced it to WPP three years ago. He pocketed an introduction fee of £142,000, which would not have been paid out had WPP known the true ownership. The fee equated to 1 per cent of the £14m that WPP paid for Mediaclub. Depending on the performance of the business, further commission payments were due to be made to Mr Benatti.

Mr Benatti, who was employed by WPP on a consultancy basis, is also alleged to have manipulated performance figures for some of the operations under his control to secure himself higher payouts.

WPP became suspicious when Mr Benatti demanded €8.9m for his services on the Mediaclub acquisition while WPP believed he was only due €300,000. The advertising group then found evidence of financial irregularities at another business that is also thought to be majority-owned by Mr Benatti. That triggered the investigation, including a full audit of Mediaclub by Deloitte.

Martin Sorrell, WPP's chief executive, personally fired Mr Benatti on 9 January. The two men met in London on 22 January where Mr Sorrell outlined the reasons for his decision.

The advertising group is believed to have unearthed plenty of documentary evidence during its probe. Mr Benatti's brother Vittorio, a banker, is also believed to be under investigation.

WPP's annual revenues in Italy are about $250m, with about half coming from media-buying. That is only a small part of the group total of $10bn. However, the Italian operations are involved with media billings worth $2.5bn.

Mr Sorrell said at the World Economic Forum in Davos last week that he is still interested in buying part of the UK media buying company Aegis, despite being turned away last year.