August 6, 2020

Consumer loan company settles FCPA charges with SEC, receives declination from DOJ

On August 6, 2020, World Acceptance Corporation, a consumer loan company headquartered in South Carolina, agreed to pay $21.7 million to the US Securities and Exchange Commission to resolve allegations that it had violated the anti-bribery and accounting provisions of the US Foreign Corrupt Practices Act.

According to the SEC’s order, from December 2010 to June 2017 World Acceptance’s former Mexican subsidiary, WAC de Mexico S.A. de C.V., made $4.1 million in improper payments, both directly and through third parties, to Mexican government and union officials, in order to secure business for its Préstamos Viva loans to government employees, and to ensure the continuity and timeliness of loan repayments.  WAC de Mexico made these payments through (i) direct cash payments to the officials, (ii) transferring money to the officials’ bank accounts and to accounts held by friends and relatives of the officials, and (iii) hiring third parties to make some of the payments.  The bribes were recorded as “commission” expenses in World Acceptance’s books and records.

The SEC’s order further alleges that, although WAC had an FCPA policy in its corporate compliance manual beginning in 2013, it had no “effective formal monitoring, or internal controls in place, to ensure that WAC Mexico was adhering to that policy,” and neither World Acceptance nor WAC de Mexico “provided FCPA training to its personnel from at least December 2010 through October 2017.”  Finally, World Acceptance’s management “did not support robust internal audit and compliance functions, and undermined the effectiveness of those functions,” evidenced in part by the then-CEO’s (i) terminating the vice president of internal audit after the latter raised concerns about the lack of internal accounting controls at WAC de Mexico, (ii) combining World Acceptance’s internal audit and compliance functions, and pressuring the vice president of the combined department to become more “bare-bones,” and by removing the vice president’s reporting line to the company’s Board of Directors, and; (iii) subsequently terminating the vice president of the combined internal audit/compliance department when she expressed concerns that the company’s revised audit and compliance functions were not sound.

As a result of this conduct, the SEC charged that World Acceptance violated the FCPA’s anti-bribery and accounting provisions by bribing Mexican government officials, failing to properly record those payments in the Company’s books and records, and failing to devise and maintain a system of internal controls (including failing to maintain a proper tone at the top) sufficient to “provide reasonable assurances” that no improper payments would be made.  Without admitting or denying the charges, World Acceptance agreed to cease and desist from committing violations of the FCPA’s anti-bribery and accounting provisions, and to pay a $2 million penalty, as well as $17.8 million in disgorgement and $1.9 million in prejudgment interest.  The SEC noted in its order that World Acceptance had cooperated with the SEC and had undertaken remedial measures, which the SEC took into account when resolving this matter.  

Separately, on August 5, 2020, the US Department of Justice issued a declination letter to the company, stating that it had declined to prosecute World Acceptance “despite the bribery committed by employees of the company and its subsidiaries in Mexico,” based on the company’s voluntary self-disclosure of the misconduct, full and proactive cooperation, full remediation (including the termination of certain executives, the discontinuation of relationships with third parties involved in the misconduct, and the provision of additional FCPA training to the company’s executives and employees), and the company’s agreement to disgorge its ill-gotten gains to the SEC.

SEC press release | SEC order | DOJ  declination letter