John Davis and James Tillen Comment on the WPP Foreign Corrupt Practices Act Enforcement Action on FCPA Compliance Report Podcast
"John Davis and James Tillen on WPP"
FCPA Compliance Report
In this episode of the FCPA Compliance Report, John Davis and James Tillen take a deep dive into the Foreign Corrupt Practices Act (FCPA) enforcement action involving WPP. Per the case documents issued by the Securities and Exchange Commission (SEC), WPP is a large worldwide advertising agency that underwent a rapid expansion buying out interests of local advertising firms in jurisdictions considered to be at high risk for corruption, including China, India, and Brazil. The SEC determined that WPP did not have a sufficient compliance program in place to manage these corruption risks, including processes to identify issues through due diligence and to manage post-acquisition risks created by their business model. "It really is a key part of acquisition to think about anti-corruption due diligence, [and] anti-corruption compliance integration, and it doesn't need to prevent rapid growth. It just needs to work in parallel with rapid growth…to help mitigate risks," Tillen told the FCPA Compliance Report. When asked about how to prevent an appropriate compensation strategy for executives retained after an acquisition from becoming a perverse incentive in compliance, Davis said "reading the papers in this case shows that what [WPP] didn't do is any kind of risk analysis upfront in terms of what risk they were taking on when buying these companies, which meant they didn't look at what the local founders were doing in terms of their business practices." He added "WPP gave the founders a lot of latitude. The incentives offered under these earnout provisions drove [fraudulent behavior] and what needs to be done is to offset the provisions with training, with related compliance-related incentives, and to put an accountability structure on top of the founders in order to make sure they are doing what they should be."