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WPP Plc (LON: WPP) ADR (NYSE: WPP) agreed to pay $19.2 million to settle the charges of the U.S. Securities Exchange Commission (SEC) alleging that it violated anti-bribery laws. 

On Friday, the SEC announced that WPP settled without admitting or denying the allegations against it. 

As part of the settlement, WPP consented to the entry of the SEC Order requiring it to stop violating the anti-bribery, books and records, and internal accounting controls provisions of the Foreign Corrupt Practices Act (FCPA). 

The SEC Order also required the world’s largest advertising group to pay $10.1 million in disgorgement, $1.1 million in prejudgment interest, and $8 million in penalties. 

WPP internal accounting controls were insufficient

In its investigation, the SEC found that WPP implemented an aggressive growth strategy that included acquiring controlling interests in many localized ad agencies in high-risk markets such as China, India, and South America. 

WPP agreed that the founder of the acquired ad agencies would continue as CEO and mandated them to follow its global policies and internal accounting control requirements. 

However, the Commission found that WPP does not have enough internal accounting controls despite the fact that its founder-controlled acquisitions have inherent corruption and fraud risks.

Due to its structural deficiencies, the world's largest advertising group failed to address the repeated warning signs of corruption or control failures at some of its subsidiaries.

WPP subsidiaries in India, China, Brazil, and Peru involved in bribery schemes

The SEC alleged that the world's largest advertising group's subsidiary in India paid bribes to Indian officials to obtain and retain government business. The bribery scheme resulted in more than $5 million in profit from 2015 to 2017.

Additionally, the Commission alleged that WPP's subsidiary in Brazil made improper payments to purported vendors in connection with government contracts from 2016 to 2016.

Furthermore, the SEC alleged that the advertising group's subsidiary in China made unjustified payments of around $107,000 to a vendor in connection with a tax audit in November 2018.  Chinese tax officials allegedly identified that vendor, which kept a small percentage of that money, and transferred the rest to an unknown recipient. Chinese tax officials chose that vendor. The scheme allowed the subsidiary to avoid paying $3,261,437 in taxes to a Chinese tax authority. An employee of the subsidiary falsified documents to justify the transaction.