London-based WPP plc, the world’s largest advertising group, has agreed to settle bribery charges with the Securities and Exchange Commission. The company will pay more than $19 million to resolve allegations that it violated the anti-bribery, books and records, and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA).
According to the SEC’s order, WPP implemented an aggressive business growth strategy that included acquiring majority interests in several local advertising agencies in high-risk markets. The order finds that WPP failed to ensure that these subsidiaries implemented WPP’s internal accounting controls and compliance policies, instead allowing the founders and CEOs of the acquired entities to exercise wide autonomy and outsized influence.
The order also finds that, because of structural deficiencies, WPP failed to promptly or adequately respond to repeated warning signs of corruption or control failures at certain subsidiaries. The SEC cited one example where a subsidiary in India continued to bribe Indian government officials in return for advertising contracts even after WPP had received seven anonymous complaints regarding inappropriate conduct. The order also documents other bribery charges and internal accounting control deficiencies related to WPP’s subsidiaries in China, Brazil, and Peru.
“A company cannot allow a focus on profitability or market share to come at the expense of appropriate controls,” said Charles Cain, the SEC’s head of the FCPA Unit. “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.”
WPP Cooperation and Remediation Efforts
While WPP was permitted to settle the charges without admitting or denying guilt, the company agreed to cease and desist from committing violations of the anti-bribery, books and records, and internal accounting controls provisions of the FCPA and to pay $10.1 million in disgorgement, $1.1 million in prejudgment interest, and an $8 million penalty.
In deciding to settle the charges, the SEC considered remedial actions
undertaken by WPP and cooperation that it gave to Commission staff while investigating the charges. WPP’s cooperation included sharing facts developed in the course of its own internal investigations and forensic accounting reviews, translating key documents, and making current and former employees located abroad available for interviews at the Commission’s Regional Office in Fort Worth, according to the order.
WPP also undertook several remediation actions, including strengthening and expanding its global compliance, internal investigations, risk, and controls functions. It also created 36 new positions globally in the compliance and risk management areas; enhanced its internal audit function; and created network risk committees to prevent, detect, and remediate corruption risk. 