WPP Enforcement Action: Part 5 – The Lessons Learned

October 1, 2021

This week we have been exploring the recent Securities and Exchange Commission (SEC) Cease and Desist Order (Order) entered into last week with WPP plc, the world’s largest advertising group, for paying bribes to Indian government officials and participating in other “illicit schemes” in China, Brazil and Peru. WPP agreed to pay $11 million+ in disgorgement and interest and penalty of $8 million for a total amount of just over $19 million. Today we conclude with some lessons learned for the compliance professional.
Culture Matters
It seems about the most basic thing to say in the compliance realm, but the most important thing is your corporate culture. If your culture puts no value on doing business ethically and in compliance, your organization will surely have problems. As I have cited to multiple times in this exploration of WPP, the Order stated, “WPP had no compliance department during the relevant period”. If your company will not have a compliance function, it speaks about as highly as one can about the values and culture of your organization. It could not be put more simply, with no compliance program, your organization does not value having a culture of compliance. Throughout the Order are examples of this lack of value. From the perfunctory first investigation into allegations in India, to the paper compliance program in place, to the lack of preacquisition due diligence from the compliance perspective; it is clear WPP put no value into having a culture of compliance.
Investigations
The Order made clear that after the initial whistleblower report, “which identified CEO A by name as the architect of the scheme”; WPP then tasked part of the group involved in the actions to investigate the allegations. That group then hired “an Indian partner firm of an international accounting firm ostensibly to investigate the allegations and review India Subsidiary’s processes regarding government contracts and transactions involving government clients.” [emphasis supplied] Who did this investigator rely on for information? The very leaders of the corruption scheme, the WPP-India Chief Executive Officer (CEO) and Chief Financial Officer (CFO).
What were other key deficiencies in the investigation?

There was no contact with the identified recalcitrant 3^rd
The investigative firm relied on information from the parties identified in the whistleblower report.
There was no independent verification.
There were no conclusions related to the bribery allegations brought forward by the whistleblower.

The WPP matter is an excellent teaching tool for how NOT to perform an investigation.
Mergers and Acquisitions (M&A)
Here WPP apparently engage in none of the M&A components of even a minimum standard for compliance. There was no preacquisition due diligence into any of the entities acquired. Simply doing acquisitions in a high-risk environment is not verboten. But doing so with no compliance is. Moreover, there was apparently no integration of the acquired entities into the WPP compliance program, such as it was. Once again without a compliance function to drive this to the finish, there was no corporate group tasked to finish it out. Obviously, there was no forensic compliance audit of the acquired entities after acquisition as well. I cannot point to a shortcoming of WPP as there were no shortcomings in execution, as there was no effort.
Incentives
When do sales or remuneration incentives become perverse incentives? For Wells Fargo, it came when the corporate hierarchy determined that the proper number of Wells Fargo products was eight per customer and employees continued employment and compensation would depend on hitting that inane number. (Remember the CEO, John Stumpf, said “8 is great!”) WPP crossed that threshold when they made the earnouts for the founders of the organizations they acquired, who were kept on to run subsidiaries such as WPP-India, contingent on hitting sales numbers they could not reach without engaging in bribery and corruption. When you couple that with no effective controls, no culture of compliance and outright fraud, you see how WPP came to Foreign Corrupt Practices Act (FCPA) grief.
Whistleblower Reports
The bribery schemes were so blatant that in India there were seven internal whistleblower reports. As stated in the Order, “From July 7, 2015 through September 2, 2017, WPP received seven anonymous complaints alleging – with increasing specificity – two bribery schemes related to India Subsidiary’s work for DIPR.” That is seven, count them seven documented whistleblower reports which had details including names of the participants and the bribery schemes. This failure simply boggles the mind, yet is axiomatic of the culture of WPP.
It is still not clear how WPP came to the attention of the SEC. We do know if it was not through self-disclosure. It may well have been an internal whistleblower. For companies who decry whistleblowers who go public, WPP is Prime Example 1 of why. Moreover, how many whistleblowers would have the continued drive to continue to report illegal conduct after the first report which was dismissed through a sham investigation?
We are now at the end of the WPP sage from the perspective of the SEC enforcement action. I began this series with several questions which still remain open. They include: