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Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

Elizabeth K. Spahn Editor Emeritus 

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

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Wednesday
Aug142019

WeWork: Overseas growth and agents create special FCPA compliance risks

WeWork’s parent company said in an SEC filing Wednesday for a possible IPO that its potential exposure to liability under laws such as the FCPA is likely to increase because of the way it does business.

The We Company, based in New York, was founded nine years ago. It rents office space on long-term leases and divides the offices for short-term leasing to other companies.

Last year We had revenue of $1.82 billion. Revenues quadrupled from 2016 to 2018.

It could bring its IPO to market in September.

In a prospectus filed Wednesday, We said,

Under the Foreign Corrupt Practices Act (the “FCPA”) and similar anti-corruption laws and local laws prohibiting certain corrupt payments to government officials or agents, we may become liable for the actions of our directors, officers, employees, agents or other strategic or local partners or representatives over whom we may have little actual control.

We are continuously engaged in sourcing and negotiating new locations around the world, and certain of the landlords, real estate agents or other parties with whom we interact may be government officials or agents, even without our knowledge.

Dealing with various intermediaries overseas is a highlighted compliance concern:

Additionally, as we pursue our growth strategy of entering into joint ventures, revenue-sharing arrangements and other partnerships with local partners in non-U.S. jurisdictions, our use of intermediaries, and therefore our potential exposure to liability under laws such as the FCPA, are likely to increase.

The We Company didn't say what exchange it plans to list its shares on but said they would trade under the symbol WE.

It is "currently the country’s most valuable startup," according to the Wall Street Journal, with a private valuation of around $47 billion.

WeWork operates in 528 locations in 111 cities around the world, with 527,000 memberships able to work in those offices, Wednesday's filing said. The company lost $689.7 million in the first half of 2019 on revenue of $1.54 billion.

We said in addition to the FCPA it has exposure to OFAC sanctions and export regulations through its international sales and business operations.

"Failure to comply with these laws and regulations could result in substantial fines, sanctions, civil or criminal penalties, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations and our financial condition," the company said.

(Disclosure: The company that owns the FCPA Blog is a WeWork tenant in Austin, Texas.)

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Here's the full FCPA disclosure from The We Company's Form S-1 (Registration Statement) filed with the Securities and Exchange Commission on August 14, 2019:

Risks Relating to Laws and Regulations Affecting Our Business

Our extensive foreign operations and contacts with landlords and other parties in a variety of countries subject us to risks under U.S. and other anti-corruption laws, as well as applicable export controls and economic sanctions.

Under the Foreign Corrupt Practices Act (the “FCPA”) and similar anti-corruption laws and local laws prohibiting certain corrupt payments to government officials or agents, we may become liable for the actions of our directors, officers, employees, agents or other strategic or local partners or representatives over whom we may have little actual control. We are continuously engaged in sourcing and negotiating new locations around the world, and certain of the landlords, real estate agents or other parties with whom we interact may be government officials or agents, even without our knowledge. As we increase our international sales and business operations, our contacts with foreign public officials, and therefore our potential exposure to liability under laws such as the FCPA, are likely to increase.

Additionally, as we pursue our growth strategy of entering into joint ventures, revenue-sharing arrangements and other partnerships with local partners in non-U.S. jurisdictions, our use of intermediaries, and therefore our potential exposure to liability under laws such as the FCPA, are likely to increase.

Similarly, our international sales and business operations expose us to potential liability under a wide variety of U.S. and international laws and regulations relating to economic sanctions and export control, such as those administered by the U.S. Office of Foreign Assets Control. Failure to comply with these laws and regulations could result in substantial fines, sanctions, civil or criminal penalties, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations and our financial condition.

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Richard L. Cassin is editor at large of the FCPA Blog.