Web-based TV creative ad agency Spot Runner is being sued by WPP Group for securities fraud and breach of contract, AdAge reports. WPP, which helped lead a $40 million funding in the Los Angeles company about three years ago, is accusing the Spot Runner of failing to disclose a stock sale to other shareholders. The UK ad holding company is particularly incensed that Spot Runner allegedly boasted of WPP’s stake in it to attract buyers. WPP holds a 3 percent stake in the company, sources told paidContent.
WPP’s suit names Spot Runner CEO Nick Grouf and co-founder David Waxman, as well as investors like Pilot Group’s Bob Pittman, Index Ventures’ Danny Rimer and Battery Ventures’ Roger Lee. Peter Huie, Spot Runner’s general counsel, was also targeted too.
In a complaint (pdf embedded after the jump) filed April 9 in federal court in California, WPP said it is seeking about $13 million in damages. It also wants Spot Runner to cover legal fees. In its filing, WPP says that rather than try to improve and build up the company, Spot Runner “perpetuated a ‘pump-and-dump’ scheme in which they aggressively promoted the company to new investors (often by promoting that WPP was an investor in and supporter of the company) and then sold new investors large quantities of their own secondary shares at ever-increasing valuations.” WPP alleges the fraudulent activity took place between Feb. 2006 and March 2008. More after the jump
For its part, a Spot Runner rep told paidContent that it will fight the suit, which was filed in U.S. District Court in the Central District of California. The company declined to offer more than a statement: “This situation is unfortunate; we had hoped that we would have had a long relationship with WPP. We believe the claims are without merit and we will vigorously defend against them, including taking all necessary legal action to protect Spot Runner