London-based WPP Plc, the world’s largest advertising group, has agreed to pay more than $19 million to resolve charges that it violated the anti-bribery, books and records, and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA).
The US Securities and Exchange Commission (SEC) on Friday made the disclosure, having earlier charged the firm of implementing an aggressive business growth strategy that included acquiring majority interests in many localized advertising agencies in high-risk markets.
The charge order found 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.
According to the SEC, the order also discovered that, because of structural deficiencies, WPP failed to promptly or adequately respond to repeated warning signs of corruption or control failures at certain subsidiaries.
For example, according to the order, a subsidiary in India continued to bribe Indian government officials in return for advertising contracts even though WPP had received seven anonymous complaints touching on the conduct.
The order also documented other schemes and internal accounting control deficiencies related to WPP’s subsidiaries in China, Brazil, and Peru.
Commenting on the commission’s findings, the SEC’s FCPA Unit Chief, Charles Cain, 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”, the expert added.
Without admitting or denying the SEC’s findings, WPP 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.
The SEC’s investigation was conducted by Samantha Martin and Laura Bennett and supervised by David Reece and Charles Cain.
The commission thanked the Securities and Exchange Board of India and Brazil’s Comissão de Valores Mobilários for the assistance provided by them that aided the successful completion of the investigations.
