US loan company settles FCPA allegations

Aug 14, 2020
World Acceptance Corporation to pay $21.7 million to settle the SEC action

Greenville, South Carolina-based consumer loan company World Acceptance Corporation (WAC) has agreed to pay $21.7 million to settle SEC allegations that it violated the FCPA.

According to the SEC, the bribery scheme took place at WAC’s former wholly-owned subsidiary in Mexico, WAC de Mexico, which the agency alleges paid roughly $4.1 million in bribes, directly or through intermediaries, to Mexican government officials and union officials from at least December 2010 through June 2017 to obtain and retain business. 

In a regulatory filing, the SEC says WAC failed to make and keep accurate books and records and did not create a sufficient system of internal accounting controls necessary to detect and prevent the alleged bribe payments. Those payments were inaccurately recorded as legitimate ‘commission’ expenses in WAC’s books and records, the SEC alleges.

In addition, the agency says WAC failed to implement sufficient internal accounting controls over vendor management and accounts payable at WAC Mexico; did not provide reasonable assurances that WAC de Mexico had implemented an FCPA policy and was complying with it; did not provide FCPA training at WAC and WAC de Mexico; and lacked sufficient entity-level controls over WAC de Mexico.

The SEC also says WAC’s management lacked the appropriate ‘tone at the top regarding internal audit and compliance, thereby undermining the effectiveness of those functions.’

‘This long-running bribe scheme did not happen in a vacuum. Through a lack of adequate internal accounting controls and a culture that undermined its internal audit and compliance functions, [WAC] created the perfect environment for illicit activity to occur for nearly a decade,’ Charles Cain, chief of the SEC enforcement division’s FCPA unit, says in a statement.

The alleged bribery scheme led to WAC being unjustly enriched by roughly $18 million, according to the SEC. The settlement payments comprise $17,826,000 in disgorgement, $1.9 million in prejudgment interest and a $2 million civil penalty.

In reaching the settlement, the SEC says it took into account WAC’s prompt remedial actions and its co-operation with SEC officials, including facilitating witnesses traveling from Mexico to the US for interviews. The company’s remedial acts included personnel changes and the divestiture of WAC de Mexico

The US Department of Justice has issued a letter in which it declined to bring a prosecution based on factors including: the company’s ‘prompt, voluntary self-disclosure of the misconduct’; its full and proactive co-operation; its full remediation, including the additional FCPA training added to the company’s compliance program; and its agreement to disgorge to the SEC.

WAC settled the SEC action without admitting or denying wrongdoing. ‘We are pleased to reach these resolutions which reflect the company’s full and robust co-operation in this matter,’ WAC general counsel Luke Umstetter says in a statement. ‘Having undertaken an extensive independent investigation led by our board and addressing these past issues, we emerge with a renewed focus on operating our business with integrity and in compliance with applicable laws and regulations.’

President and CEO Chad Prashad adds: ‘Since selling our foreign businesses over two years ago, our team has been focused on designing and offering affordable credit solutions that help people realize their financial goals. We are pleased to put this matter behind us and believe we are well positioned for the future.’

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