By now you’ve probably read that WPP was slapped with a $19 million fine by the Securities & Exchange Commission last week related to anti-bribery charges and for failing to have proper financial controls in place for some of its acquired foreign subsidiaries. The fine was imposed for missteps that occurred prior to 2018.
The SEC’s order reveals some of the shenanigans that were going on in detail, including the case of an Indian agency subsidiary that JWT (now part of Wunderman Thompson) took majority control of in July 2011.
The full-service agency was Hyderabad-based Mindset. According to the SEC, the CEO of the agency was the mastermind of a scheme that involved a fake ad campaign and off-the-book media buys, the fees for which (over $1.5 million) were funneled through third-party vendors via falsified documents.
The government client paid rate-card media fees, while vendors negotiated lower rates. In addition to paying off government officials to retain contracts, the vendor got a cut as did the agency CEO — a little bonus to himself for being so cleverly devious.
Except that he wasn’t.
Numerous people were aware of the bad behavior — between 2015 and 2017, WPP received seven anonymous complaints about the misconduct in specific detail, including identifying the CEO as the architect of the scheme. The SEC doesn’t identify him by name, but a quick Google search identifies management at the agency during that time.
An initial investigation in 2015 was overseen by WPP’s financial director for the Indian Region, who in turn, hired a local accounting firm to investigate the allegations and review Mindset’s processes regarding government contracts. Even though the agency CEO had been identified as the alleged head schemer by tipsters, the accounting firm relied on info from that CEO and the agency’s CFO, also identified as being in on the scheme. No conclusions about the bribery allegations were submitted in its final report.
To which I ask: WTF?
After additional anonymous tips were received in 2016, a second investigation was launched, using the same accounting firm. To which I ask, again: WTF?
At least during investigation No. 2, the accountants demanded media invoices from a participating vendor, which refused, resulting in the termination of its relationship with Mindset and the regional WPP network the agency was part of. But again, as the order notes, WPP “did nothing” with respect to the multiple allegations it received about the agency CEO who orchestrated the scheme.
In 2017, after receiving additional and more detailed tips, WPP did a third investigation looking into the activities of the agency CEO, CFO and a certain government official/client. The probe tracked several years of email communications among them and the illicit scheme was fully and finally uncovered.
While WPP seems to have dismissed the bad actors involved in the wrongdoing, there is no indication any of them faced criminal charges.
I wonder why? And isn’t it surprising that WPP didn’t get its house in order earlier, especially after the messy scandal IPG went through a decade earlier, also involving kickbacks and lack of financial controls on foreign subsidiaries?
The SEC order details other fraud schemes involving WPP agencies in China and Latin America.
And it does point out the holding company cooperated with the Commission’s probe and made significant changes to its internal accounting procedures and strengthened internal compliance investigation processes, making it more difficult for fraud schemes to be enacted in the future.