Last Friday, the SEC announced that London-based WPP (the world’s largest advertising agency and a company with depositary shares traded on the New York Stock Exchange) agreed to resolve a $19.2 million Foreign Corrupt Practices Act enforcement action.
The enforcement action focused on WPP subsidiary conduct in India, China, Brazil and Peru.
In summary fashion, the SEC’s order finds:
There have been several Foreign Corrupt Practices Act enforcement actions regarding conduct in India (see here for some of the actions). Certain of those enforcement actions involved the conduct of Indian subsidiaries of U.S. issuers.
However, it is believed that there has never been an FCPA enforcement action against an Indian issuer.
That may change.
As highlighted in this prior post, in November 2020 Dr. Reddy’s Laboratories Ltd., (an India-based pharmaceutical company with ADRs listed on the New York Stock Exchange) disclosed that it “has commenced a detailed investigation into an anonymous complaint” alleging that “healthcare professionals in Ukraine and potentially in other countries were provided with improper benefits in violation of U.S. laws.”
DOJ and SEC Foreign Corrupt Practices Act enforcement actions against issuers based on the same core conduct are relatively common. However, such actions are nearly always coordinated and announced on the same day.
In a highly unusual (although not unprecedented) development, the DOJ announced yesterday a $19.6 million FCPA enforcement action against Beam Suntory Inc. based on the same core conduct in India at issue in the SEC’s July 2018 FCPA enforcement action against the company (see here).
Another unusual aspect of the Beam DOJ action was the DOJ’s position that the company did not voluntarily disclose. In contrast, in the 2018 SEC enforcement action the SEC said that the company voluntarily disclosed.
Why do Foreign Corrupt Practices Act enforcement actions happen?
Often times – as highlighted numerous times on these pages – the root cause of an FCPA enforcement action is a foreign law or regulation that results in a real point of contact between a real company’s employees or agents and a real “foreign official.”
Regulatory burdens (ranging from customs procedures, licensing and certification requirements, foreign government procurement policies, etc.) create bureaucracy, bureaucracy creates interactions with foreign officials, and the more interactions with foreign officials, the greater the FCPA risk will be. It really is not that complex of a formula.
Approximately 90% of SEC corporate FCPA enforcement actions in recent years have lacked any related charges against company employees.
A bit unusual then that the February 2019 enforcement action against Cognizant Technology Solutions (see here) has resulted in not one, not two, but three individual enforcement actions as last Friday the SEC announced an administrative action against Sridhar Thiruvengadam (pictured – an Indian national and resident who previously served as Cognizant’s Chief Operating Officer).
Unlike the two prior individuals charged by the SEC and DOJ (Gordon Coburn and Steven Schwartz) who appear to be putting the government to its burden of proof, Thiruvengadam, without admitting or denying the SEC’s findings, agreed to pay a $50,000 civil penalty in an enforcement action that lacked any U.S. jurisdictional allegation other than that Thiruvengadam participated in a video conference from India with certain executives who participated in the video conference from the U.S.
