Transactions Involving Former Owner of Productions Graphics

12 Months Ended

Dec. 31, 2015

Loss Contingency [Abstract]

Transactions Involving Former Owner of Production Graphics

Transactions Involving Former Owner of Productions Graphics

The Company removed the former owner of Productions Graphics from his role as President of the Company’s French subsidiary in October 2013 for performance-related reasons, and he is no longer an employee of the Company. This individual had served in such role since the Company’s acquisition in 2011 of Productions Graphics, a European business then owned by this individual and an organization affiliated with him (collectively, the “Seller”). As of December 31, 2015, the Company had paid to the Seller €5.8 million (approximately $8.0 million) in fixed consideration and €7.1 million (approximately $9.4 million) in contingent earn-out consideration.

There are certain potential disputes between the former owner of Productions Graphics and the Company relating to, among other things, the termination of his employment and the Productions Graphics acquisition agreement. In connection with such disputes, the Company initiated a review of this individual’s conduct in connection with certain transactions impacting the earn-out payments made to the Seller (collectively, the “Transactions”). As a result of the review, the Company concluded it was the victim of a fraud perpetrated by the former owner of Productions Graphics. Specifically, the Company concluded that the former owner of Productions Graphics artificially inflated the financial results of Productions Graphics in order to induce the Company to make earn-out payments of €1.2 and €5.9 million (approximately $1.6 million and $7.8 million, respectively) for the 2011 and 2012 earn-out measurement periods, respectively. He inflated the results by directing the issuance of fraudulent invoices to purported third-party customers and then, indirectly or directly, funded or reimbursed the third parties’ payments in respect of such invoices. The Company estimates that he issued approximately €6.9 million (approximately $9.0 million) of fraudulent invoices in 2011 and 2012, collectively, of which €5.7 million (approximately $7.5 million) was subsequently received by the Company. The Company has accounted for these aggregate payments as a partial refund of the earn-out consideration unduly paid to the Seller.

The Company intends to seek to redress the harm caused by conduct of the former owner of Productions Graphics through appropriate legal proceedings. See Note 10 for further discussion of the legal matters relating to the former owner of Productions Graphics.