WPP, the British multinational communications, advertising, public relations, technology, and commerce holding company, has agreed to pay $19 million in a settlement with the U.S. authorities relating to bribery allegations and accounting controls for its subsidiaries, including in India and China.
According to the SEC’s order, WPP implemented an aggressive business growth strategy that included acquiring majority interests in many localised advertising agencies in high-risk markets. The order finds that WPP failed to ensure that these subsidiaries implemented WPP’s internal accounting controls and compliance policies, instead of allowing the founders and CEOs of the acquired entities to exercise broad autonomy and outsized influence. The order also finds 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 documents other schemes and internal accounting control deficiencies related to WPP’s subsidiaries in China, Brazil, and Peru.
According to reports and sources, JWT Mindset is the Indian subsidiary which has landed WPP in trouble. In 2011 WPP’s JWT, the leading global advertising network and India’s largest integrated communications company, acquired a majority stake in Mindset Advertising Private Limited, Hyderabad’s highly awarded advertising agency. From 2015 to 2017, approximately half of the India subsidiary’s revenue was attributed to Telangana and Andhra Pradesh’s Departments of Information and Public Relations (DIPR), which were responsible for retaining media agencies to conduct advertising and PR campaigns for their respective state governments. Mindset Advertising was started by Santha K John along with Ram Gedela in 1998. She was the MD of the entity until December 2013 and then moved onto as an advisory role as chairman emeritus. She later issued statements on company audits. She resigned from her post as Chairman Emeritus, JWT Mindset in March 2019 and retained her stake in the company.
A company cannot allow a focus on profitability or market share to come at the expense of appropriate controls,” said Charles Cain, the SEC’s FCPA Unit Chief. “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.”
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.