Investigation shows scale of improper digital transactions at Dentsu

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Dentsu Tokyo
Dentsu Tokyo

Internal scrutiny has found nearly 1,000 cases of improper practice in the handling of digital advertising.

Dentsu has uncovered 40 cases of overcharging and further instances of improper transactions amounting to 114.8 million yen (just over US$1 million), based on an internal investigation.

The investigation was led by Shoichi Nakamoto, Dentsu’s CFO and senior executive vice-president. It covered transactions for digital advertising services by Dentsu and group companies between 1 November 2012 and 31 July 2016. The team included external attorneys and consulted third-party advisors to identify issues, causes and future prevention methods, according to a Dentsu statement issued yesterday.

Investigators reviewed 214,000 contracts with 2,263 companies, searching for evidence of unsuitable business practice across four categories including incorrect reporting of digital postings, non-timely reporting and invoicing inaccuracies.

The investigation unearthed 997 cases of impropriety concerning 96 clients. Of those, 10 were found to have been overcharged in a total of 40 cases by 3.38 million yen ($29,919), with Dentsu placing fewer online ads than ordered. In the remaining cases, Dentsu failed to file reports or presented falsified results. The total amount of improper transactions came to 114.82 million yen ($1,016,357). On 23 September 2016, Dentsu initially stated there had been 633 suspicious transactions involving 111 advertisers, amounting to 230 million yen ($2 million).

In a statement, Dentsu blamed the matter on a number of factors. They include the absence of a structure for standardization of work; not providing clients with clear definitions of services; lack of risk management; poor training and assignment of human resources; and inadequate coordination between group digital companies.

To prevent similar malpractice in the future, Dentsu has launched an independent unit to monitor digital advertising orders, placements and invoicing. It also said it will introduce a system to clarify scope of work and application details by April, and provide training to 1,000 staff to upgrade processes and improve collaboration. It plans to increase the number of managers in programmatic advertising-related departments and raise headcount elsewhere, where appropriate, through internal transfers and external mid-career hires. Traditionally, Dentsu staff begin their careers at the company as graduates.

Dentsu said it will "clarify responsibility for [the malpractice] by taking disciplinary actions against executive officers and have taken appropriate disciplinary actions against other employees in line with in-house rules". The punishments are understood to affect 17 executives and involve pay cuts of up to 20 percent for a finite period.

At the end of December, Dentsu’s president and CEO Tadashi Ishii announced his resignation in acknowledgement of the company’s improper transactions and the suicide of an employee due to overwork. A new president and CEO is expected to be appointed in this month.