(June 25): A former executive of WPP Plc, one of the world’s biggest advertising companies, has been sentenced to life in prison by a Chinese court for taking bribes totalling 1.2 billion yuan (US$176 million or $228.3 million) with his ex-colleagues, according to people familiar with the matter.
Di Fei, former chief investment officer at the Chinese operation of WPP’s GroupM media buying unit, was convicted in March of taking kickbacks from broker firms in exchange for giving them some of WPP’s ad-placing business, the people said, asking not to be identified discussing sensitive matters in a country where access to court documents and hearings is strictly controlled.
The court judgment for one of China’s biggest private sector bribery cases is not publicly available.
Di’s former colleagues Yao Lan and Hong Xin were sentenced to 14.5 years and four years in prison respectively, according to the people. Di is appealing the decision, with a result expected to come late this year or in early 2027, they added.
While WPP is not a party to the proceedings, it has cooperated fully with the authorities throughout the process and respects the court’s decision, a spokesperson for the group told Bloomberg News. The firm is aware of the sentencings, the spokesperson said.
Shanghai High People’s Court could not be reached for comment.
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WPP’s shares fell as much as 3.3% Thursday morning in London, contributing to an 8.7% decline this week.
Grey area
Rebate-driven deals have long been a grey area in the media industry, and are also the center of a separate legal dispute in the US involving WPP. The company and other major agencies were able to obtain discounts from ad-supported media platforms thanks to their unmatched access to global brands’ marketing budgets, US court documents show.
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The practice is controversial in the ad industry because it opens up possibilities for firms or individuals to pocket kickbacks, rather than fully passing the benefits back to clients.
The legal troubles have added to WPP’s woes as it struggles with plunging sales, a string of client losses and weakening confidence among investors. Once the world’s largest ad agency, the group has lost about half of its market value over the past year. It’s betting on a new chief executive officer and a sweeping restructure — including a brand overhaul and cost savings including job cuts — to turn things around.
WPP changed its leadership team in China after the 2023 arrests of the former employees. The group’s sales in the country have struggled in recent years amid a lingering impact from Covid and sluggish demand in the luxury sector.
The China case involves a practice where WPP outsourced media buying to brokers, which pooled different clients’ budgets to secure volume-based rebates from media outlets, according to accounts of the court hearings provided by the people familiar with the matter.
The Chinese court heard that the broker firms kept some of the rebates as their business income rather than returning all of them to WPP’s clients, the people said. The court also heard that WPP took a share of that revenue by requesting the subcontractors to buy its products, give extra discounts or provide free services, according to the people. While the requests eroded the brokers’ profits, they felt obliged to cooperate in exchange for getting more business from WPP, the people said.
The three defendants were in charge of handling matters related to subcontractors for WPP and some of the funds were transferred into bank accounts linked to them between 2019 and 2023, the court heard, according to the people.
Legal appeal
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In the appeal, Di’s legal team argued that the funds taken by the defendants were rebates they’d handled on behalf of WPP, so they should be seen as misappropriating money that belonged to the company rather than taking bribes, the people said.
The rebates kept by brokers, sometimes reaching about 20% of clients’ ad budgets, were in WPP’s de facto control due to the company’s power over its subcontractors’ businesses, the team argued, according to the people. They also disputed the size of the funds taken by the defendants.
In the US legal dispute, which is unrelated to the China case, former WPP executive Richard Foster is accusing the company of wrongfully terminating his employment after he raised concerns over the practice of rebate-driven deals.
Foster alleged that WPP improperly retained about half of up to US$4 billion in value generated from rebate-driven deals over a span of five years through complex deal structures, undisclosed side arrangements and opaque financial reporting.
WPP has denied any wrongdoing, arguing that its internal policies and codes of conduct required rebates to be passed through to clients where requested by law or contract.
Uploaded by Magessan Varatharaja
