London-based WPP plc (WPP), the world’s largest advertising group, has agreed to pay $19 million to resolve charges that they violated anti-bribery and record keeping provisions of the Foreign Corrupt Practices Act (FCPA). According to a September 24 Securities and Exchange Commission (SEC) press release, WPP failed to enforce “internal accounting controls and compliance policies” at subsidiary companies that the group acquired. This allegedly allowed subsidiary companies to use bribery as a tool to get ahead in international marketplaces.
According to the SEC’s order, the major bribery scheme happened in India, where a majority-owned subsidiary company paid “as much as a million dollars in bribes” to Indian government officials. These bribes allegedly went towards acquiring and sustaining Indian government contracts and business. The SEC claims that this bribery scheme netted more than $5 million for the company between the years of 2015 and 2017.
The SEC also claims the existence of a number of other bribery schemes in their order, including:
“(1) A subsidiary in China making unjustified payments to a vendor in connection with a Chinese tax audit, resulting in significant tax savings to WPP’s subsidiary;
(2) a subsidiary in Brazil making improper payments to purported vendors in connection with government contracts in 2016-2018;
(3) in 2013, a Peruvian subsidiary funneling funds through other WPP entities to disguise the source of funding for a political campaign in Peru.”
The FCPA also has book and recordkeeping provisions to make sure that companies must keep careful records and have secure systems in place that will detect and alert management to bribes, or situations where there may be a high risk of bribes. Internal management provisions extend to majority-owned subsidiary companies, ensuring that multinational corporations must enact the same level of accountability and control when they buy a local company as they would with their own books. According to the order, “WPP failed to devise and maintain a sufficient system of internal accounting controls necessary to detect and prevent the bribe payments at this Indian subsidiary or properly account for the true nature of payments and income at all four subsidiaries.”
Charles Cain, the SEC’s FCPA Unit Chief said: “A company cannot allow a focus on profitability or market share to come at the expense of appropriate controls. Further, it is essential for companies to identify the root cause of problems when red flags emerge to prevent a pattern of corrupt behavior from taking hold.”
Although there is no whistleblower mentioned in the SEC’s press release, that does not mean a whistleblower was not involved. Whistleblowers often opt to remain nameless in their disclosures. If there was a whistleblower involved, they may be eligible for a large reward based on the size of the penalty that WPP has agreed to pay. By disclosing FCPA violations through the SEC Whistleblower Program, qualified whistleblowers are entitled to awards for 10-30% of the monetary sanctions collected by the government.
Read the SEC’s press release here.