World’s Largest Advertising Group Settles with SEC for $19.2 Million After Ignoring Red Flags

Porter Hedges LLP

Porter Hedges LLP

On September 24, 2021, the Securities and Exchange Commission (“SEC”) announced a settlement with WPP plc, the world’s largest advertising group with dual headquarters in New York City and London. According to the SEC’s internal administrative order, WPP’s Indian subsidiary paid up to $1 million to Indian officials through third parties. In China, WPP’s improper payments resulted in tax savings to WPP’s subsidiary. In Brazil, improper payments to vendors were made in connection with government contracts, and in Peru, WPP funneled funds through other WPP entities to disguise payments for a political campaign in Peru. WPP’s conduct spanned from 2013-2018.

In addition to violating the anti-bribery provisions of the Foreign Corrupt Practices Act (“FCPA”), WPP also violated the books and records and internal controls provisions. WPP’s internal controls were found to be insufficient regarding vendor management, accounts payable and to detect and prevent the payment of bribes. WPP also failed to provide reasonable assurances that its subsidiaries worldwide were adhering to its anti-corruption policy. As a result of its internal controls violations, its books and records were not accurate.

Importantly, WPP also failed to timely and properly manage the risks and red flags that it faced. For instance, in India, WPP received seven anonymous complaints beginning in 2015 about two bribery schemes taking place. The complaints raised concerns about the CEO and CFO of the Indian subsidiary and two vendors. Despite several warning signs and inquiries into the relationship between the CEO, CFO, and the vendors, WPP failed to conduct an independent investigation or third party due diligence into any of them until August of 2017.

As a global company, WPP had both an anti-corruption policy and internal controls in place to detect improper payments. However, when faced with red flags, WPP failed to act and remediate control deficiencies. It is important that organizations not only identify potential risks, but then take action when presented with red flags that indicate potential FCPA violations.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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