WPP Enforcement Action: Part 4 – Corruption Programs | Thomas Renard


This week we explore the recent Securities and Exchange Commission (SEC) Cease and desist Order last week with WPP plc, the world’s largest advertising group, for bribing Indian government officials and participating in other “illicit schemes” in China, Brazil and Peru. WPP has agreed to pay over $ 11 million in restitution and interest and a penalty of $ 8 million for a total amount of just over $ 19 million. Today, we take a look at corruption patterns and the lessons they present for the compliance professional.

Due diligence

Before I get to the corruption schemes, a word (again) on due diligence. It is clear that WPP did not perform the most rudimentary level of due diligence. This is true whether or not they are a potential business partner acquired through acquisition or a vendor hired to help with WPP’s sales efforts. Due diligence is one of the most basic functions of any compliance program. Obviously, one of the functions of due diligence is to determine whether you are going into business with bad actors who have already engaged in bribery and corruption. But the next level of investigation is perhaps even more important. Do you do business with people who want and will do business ethically and in accordance with anti-corruption programs? It requires more than just level 1 research on social media and relevant villain lists. It requires understanding the person or entity you will be doing business with in the future. This means that you have to sit down (or Zoom) and talk to people and get a feel for their values ​​and ethics. A simple computer research will not give you such information.

Corruption systems


As stated in the order, Supplier A’s bribery program worked with client DIPR by awarding WPP India a contract under which WPP India developed advertisements and then purchased space in newspapers to display the advertising. The client sets the costs to the media agencies for the purchase of advertising space. The CEO of WPP-India A negotiated rates with the newspapers that were significantly lower than the fees and used the difference between the approved fees and the actual price paid to the newspapers to create a pot of money to pay bribes. wine to government officials. WPP-India concealed this arrangement by agreeing to pay Seller A to purchase the ad space. Seller A paid for the papers, took a share, and passed the difference in bribe to government officials.

The following pattern involved Seller B, which once again involved WPP-India bribing government officials through an intermediary. Here the client paid $ 1.5 million to subsidiary WPP-India to create and run a media campaign to celebrate the formation of the Indian state of Telangana in June 2015. But there has never been such a campaign. There were fake records created at the request of WPP-India’s CFO, by Seller B falsifying that the campaign took place. Supplier B then paid over $ 1 million to 3 othersrd party that paid the bribes. All the recalcitrant parties shared the rest of the money.


Here, WPP-China avoided paying $ 3.2 million in taxes to a tax authority by making corrupt payments to a supplier selected by corrupt tax officials. WPP-China paid the corrupt seller around $ 107,000 in the two months before a tax audit was finalized. The seller kept a share of the bribe and distributed most of the money in the form of bribes. But it didn’t end there, as WPP-China’s books and records were tampered with to show that the seller has rendered services to a customer. There were also $ 2,000 in gifts and entertainment for tax officials during the same period. Finally, WPP discovered a non-accounting account maintained by the Chinese subsidiary reflecting payments to the seller recommended by the tax authorities.


WPP acquired a majority stake in a public relations agency in São Paulo, Brazil, with the minority owner of the acquired entity now serving as CEO of WPP-Brazil. WPP-Brazil made improper payments to suppliers in connection with government procurement. As Mike Volkov noted: “These payments were made under circumstances where there was a high probability that part of the payments could have been passed on to government officials with the authority to award contracts. To cover up the fact that the Brazilian subsidiary’s payments to suppliers were related to obtaining or maintaining government contracts, the Brazilian subsidiary falsified its books and records to indicate that the suppliers were providing services in good faith, such as marketing or IT services.


It was perhaps the most sophisticated corruption system for its complexity. Once again, it all started with WPP obtaining a majority stake in an entity headquartered in Lima, Peru, with the founder of the acquired entity remaining the CDO of WPP-Peru. The corruption scheme involved a construction company financing the political campaigns of the mayor of Lima in exchange for contract awards. WPP-Peru was a channel for the construction company’s bribe to the mayor of Lima. However, WPP-Peru disguised the corrupt source of funds by channeling the construction company’s payments through WPP’s subsidiaries in Colombia and Chile. WPP-Chile and WPP-Colombia then falsely recorded that they had received money in exchange for services rendered to the construction company, and WPP-Peru did not keep any record indicating that the construction company had paid part of the political campaigns of the mayor of Lima.

There are many lessons for every compliance professional in a multinational organization on selecting, using, and managing third parties in high-risk environments. You need to know the people you are dealing with. Equally important is the quality of their character and their commitment to doing business ethically. CEOs and / or CFOs who are ready to create ad campaigns from scratch haven’t woken up one morning with this idea. They were determined to do business anyway they could. In addition, all procedures should be properly supervised or a second pair of eyes. Finally, when reports of misconduct arise, they should be thoroughly investigated.

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