September 24, 2021

Multinational advertising agency settles FCPA investigation for $19.2 million

On September 24, 2021, WPP plc, a Jersey-registered multinational marketing group with dual headquarters in London and New York, entered into an administrative resolution with the US Securities and Exchange Commission in which it agreed to pay $19.2 million to the SEC to resolve allegations that it had violated the anti-bribery and accounting provisions of the US Foreign Corrupt Practices Act.

According to the SEC Order, between 2013 and 2018, WPP subsidiaries in India, China, Brazil, and Peru engaged in improper activities. 

In India, WPP allegedly obtained a majority interest in a local agency in July 2011, and retained that agency’s co-founder as CEO.  As alleged by the SEC, between 2015 and 2017 WPP received seven complaints about two separate bribery schemes involving the India subsidiary’s work for the public relations departments of two Indian states.  In the first scheme, the Indian subsidiary entered into an inflated contract with the public relations departments to place newspaper advertisement on their behalf, and used a vendor to funnel the excess funds from that inflated contract both to employees of the public relations departments and to the CEO of the Indian subsidiary.  In the second scheme, the public relations departments paid the Indian subsidiary $1.5 million to conduct a purported (but in fact non-existent) marketing campaign.  The Indian subsidiary used a vendor to route $1 million of those funds back to employees of the public relations departments, and used the remaining funds to enrich the Indian subsidiary CEO and to pay for unrelated expenses at the Indian subsidiary.  The SEC found that WPP initially failed to conduct a meaningful investigation of these allegations, and instead relied on information provided by the CEO of the Indian subsidiary.  Only after numerous complaints over the course of two years did WPP conduct an investigation, which identified the misconduct.

WPP subsidiaries allegedly engaged in similar corrupt schemes in China, Brazil, and Peru.  In China, WPP’s subsidiary is alleged to have avoided over $3 million in tax payments in 2018 by entering into sham contracts with a vendor tasked with transferring bribe payments to Chinese tax officials.  In Brazil, according to the SEC, WPP’s subsidiary paid vendors to secure government contracts “in circumstances in which there was a high probability that a portion of the payments may have been passed to the government officials with the authority to award the contracts,” despite the fact that this practice violated WPP internal policies.  In Peru, WPP’s subsidiary is alleged to have obtained $291,035 by acting as a conduit for a bribe payment made from a local Peruvian construction company to the political campaign of the mayor of Lima. 

The SEC found that WPP (i) violated the anti-bribery provisions of the FCPA as a result of its Indian subsidiary’s payments to government officials, and (ii) violated the internal controls and books and records provisions of the FCPA as a result of the conduct at each of the four subsidiaries. Without admitting or denying the findings, WPP agreed to cease and desist from future violations, and to pay $11,224,659.54 in disgorgement and prejudgment interest, and a civil money penalty of $8,000,000.  The SEC noted that, in determining to accept this resolution, it took into account WPP’s cooperation during the course of the investigation, as well as its remedial actions (including terminating senior executives and other employees, enhancing its global compliance and internal audit programs, improving employee anti-corruption training, conducting pro-active reviews of additional subsidiaries, and creating risk committees to prevent, detect and remediate corruption risks throughout WPP’s business). 

SEC press release | SEC order