This story was updated on August 11, 2020.
The Greenville-based World Acceptance Corp. agreed last week to pay $21.7 million to the U.S. Securities and Exchange Commission, neither admitting nor denying that the company's former subsidiary violated the Foreign Corrupt Practices Act by paying more than $4 million in bribes to Mexican government and union officials.
The alleged bribes, paid directly or through intermediaries who flew with “large bags of cash” to various Mexican municipalities, were used to ensure that government employees repaid loans in a timely manner, according to an SEC report.
The SEC alleges that, through the subsidiary’s bribery scheme, lasting from at least December 2010 through June 2017, $1.5 million was paid to officials, $580,000 to union officials and $480,000 to third-party intermediaries. Payments were recorded by the World Acceptance Corp. as “commission expenses” in company books and records, according to the settlement order.
A spreadsheet of expenses was sent monthly by the Mexican subsidiary to the Greenville-based accounting office without invoices or backup support, according to the SEC order.
“As a result of the bribery scheme, WAC was unjustly enriched by approximately $18 million,” the report said, faulting both WAC and its Mexican subsidiary for lacking the adequate internal accounting controls necessary to detect or prevent the payments.
WAC addressed the lack of oversight in a financial performance report to the SEC after the SEC began to investigate in March 2017. According to the order, the company noted that it had material weaknesses in its internal control over financial reporting, including “control design gaps in accounts payable environment related to vendor management and payment processes in Mexico and in entity level control environment related to adherence to U.S. and foreign laws and regulations, including the FCPA and corporate governance of the Mexico operations.”
"We are pleased to reach these resolutions which reflect the company’s full and robust cooperation in this matter,” Luke Umstetter, general counsel and chief compliance officer, said in a news release from the company. “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”
World Acceptance Corp., parent company of World Finance, sold World Acceptance Corp. Mexico on July 1, 2018, after former CEO Janet Lewis Matricciani was terminated by the company on January 2018, according to a press release. In cooperation with SEC’s remedial requirements for the company, WAC had also terminated the senior vice president of WAC Mexico, according to the report.
The report also highlighted how Matricciani had terminated two internal audit vice presidents after they had expressed concerns about internal audit compliance in 2015 and 2016, according to the report.
“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,” Chad Prashad, president and CEO, said in the release. “We are pleased to put this matter behind us and believe we are well positioned for the future.”
Matricciani argues that she was not consulted for the SEC order and denies any allegations in the order relating to her mismanagement of the company. Matricciani served as COO of the company in 2014 and stepped up to the position as CEO following the retirement of Alexander "Sandy" McLean in 2015, according to a press release.
"Ms. Matricciani had no knowledge of the alleged misconduct which reportedly began years before she joined WAC, and which was not identified by the legal, compliance, audit or financial functions of the company. Once the alleged conduct was discovered, the company promptly reportd it to the authorities," according to a statement issued by Matricciani and her legal counsel. The statement was sent to GSA Business Report in response to the original article.
The U.S. Justice Department also made public a letter declining to prosecute the company and closing its investigation, citing as the basis for this decision, World Acceptance Co.’s “prompt, voluntary self-disclosure of the misconduct; World’s full and proactive cooperation in this matter (including its provision of all known relevant facts about the misconduct); and World’s full remediation, including the additional FCPA training added to World’s compliance program, separation from executives under whom the misconduct took place, and discontinuing relationships with third parties in Mexico involved in the misconduct,” the release said.
“This long-running bribe scheme did not happen in a vacuum,” Charles Cain, chief of the SEC Enforcement Division, said in the Aug. 6 news release. “Through a lack of adequate internal accounting controls and a culture that undermined its internal audit and compliance functions, World Acceptance Corp. created the perfect environment for illicit activity to occur for nearly a decade.”
World Acceptance Corp’s payments to resolve the SEC’s cease-and-desist order include a $17,826,000 disgorgement payment, $1.9 million in prejudgment interest and a $2 million penalty, according to the release.
Mount Pleasant plaintiff litigation firm Motley Rice issued a press release on the transaction on Aug. 7 with a request for any information relevant to an ongoing investigation into the matter.
“FCPA compliance starts with the board of directors and senior executives setting the proper ‘tone at the top’ and culture for the rest of the company,” William Norton, attorney with Motley Rice, said in a written statement. “When a company terminates its internal audit executives for voicing compliance concerns — particularly when that company was allegedly engaged in a longstanding bribery scheme — it suggests a failure in corporate governance that should trouble shareholders.”