South Carolina-based consumer lender World Acceptance Corporation announced recently that it had earmarked $21.7 million to resolve a Securities and Exchange Commission (SEC) probe into its compliance with the Foreign Corrupt Practices Act (FCPA). World Acceptance, however, was clear that its discussions with the SEC to resolve the matter remain ongoing. Therefore, as the company noted in its press release, “there can be no assurance that the Company’s efforts to reach a final resolution with the SEC will be successful or, if they are, what the timing or terms of such resolution will be.” The company does not currently have an offer of settlement or resolution pending with the Department of Justice (DOJ).
World Acceptance first disclosed that it had retained outside counsel and forensic accountants in 2017 to conduct an internal investigation of the company’s operations in Mexico. Specifically, the investigation was aimed at evaluating the legality of certain payments related to loans and the maintenance of the company’s books and records with regard to these payments. Additionally, the investigation evaluated the treatment of certain employees’ compensation.
The company initiated the internal investigation after it received an anonymous letter “regarding compliance matters.” In its 2018 annual report, World Acceptance stated that the investigation addressed whether and to what extent improper payments were made from 2010 to 2017 by a Mexican subsidiary to government officials. These payments were related to loans made to unionized employees. No further explanation was provided relating to the possible unlawful conduct and how it may have implicated the FCPA. In June 2017, the company voluntarily disclosed to the SEC and DOJ that it was conducting the internal investigation. World Acceptance also indicated that it intended to comply with any investigations opened by the agencies.
While World Acceptance is the first known consumer lender subject to an FCPA enforcement action, consumer lenders with operations abroad should be aware of a potential uptick in FCPA enforcement actions. The FCPA is enforced by both the SEC and the DOJ. The FCPA’s “anti-bribery provision” prohibits companies from providing foreign officials – whether indirectly or directly – with anything of value for the purpose of influencing the official to obtain or retain business. The FCPA also requires, through its “books and records” provision, that covered companies maintain records that accurately reflect its transactions.
Criminal penalties for violating the Act are substantial. A violation of the anti-bribery provision may result in a fine of up to $2 million per violation. Officers, directors, employees or agents of a company may face up to five years imprisonment and $250,000 in fines. The books and records provision may result in a criminal penalty of up to $25 million for a company and up to 20 years imprisonment and a $5 million fine for individuals. Both the DOJ and the SEC can also bring civil actions against a company or any of its officers, directors, employees or agents for violations of the FCPA.
When resolving an enforcement action, however, both the DOJ and SEC will take into account whether the company voluntarily disclosed the misconduct and/or cooperated with the investigation. Therefore, consumer lenders operating abroad should ensure that they have both strong compliance programs and policies in place to prevent violations of the FCPA, but also internal reporting mechanisms to allow the company to take action should it receive a report of non-compliance. It is imperative that companies respond quickly and appropriately to reports of misconduct to limit potential criminal and civil exposure under the FCPA.
Attorneys in Ballard Spahr’s White Collar Defense/Internal Investigations routinely assist companies in creating FCPA compliance programs and in navigating FCPA investigations and enforcement actions.