Laureate Education, a for-profit higher education institution, said that it is conducting an internal investigation into possible violations of the U.S. Foreign Corrupt Practices Act concerning an $18 million donation that one of its network institutions made in Turkey to a charitable foundation.
“We believed the donation was encouraged by the Turkish government to further a public project supported by the government and expected that it would enhance the position and ongoing operations of our institution in Turkey,” Laureate Education stated in a filing with the Securities and Exchange Commission.
Laureate Education said it has learned that the charitable foundation that received the donation disbursed the funds at the direction of a former senior executive at one of its network institutions in Turkey and other external individuals to a third party without Laureate Education’s knowledge or approval.
In June 2016, the audit committee initiated an internal investigation into this matter with the assistance of external counsel. The investigation concerns the facts surrounding the donation, violations of the company’s policies, and possible violations of the FCPA and other applicable laws “in what appears to be a fraud perpetrated by the former senior executive at our network institution in Turkey and other external individuals,” the filing stated.
“This includes an investigation to determine if the diversion was part of a scheme to misappropriate the funds and whether any portion of the funds was paid to government officials,” Laureate Education said. “As of the date of this prospectus, we have not identified that any other officers or employees outside of Turkey were involved in the diversion of the intended donation. Although we are pursuing efforts to recover the diverted funds, there is no assurance that we will be successful.”
Under Turkish law, a Foundation University may not make payments that cause a decrease in the university’s wealth or do not otherwise benefit the university. Given the uncertainty of recovery of the diverted donation and to mitigate any potential regulatory issues in Turkey relating to the donation, certain Laureate-owned entities that are members of the foundation that controls our network institution in Turkey have contributed an amount of approximately US$13 million (40 million Turkish Liras) on Nov. 4, 2016, the date of contribution, to our network institution in Turkey to reimburse it for the donation.
As a result of the ongoing investigation, Laureate Education said it has taken steps to remove the former senior executive at its network institution in Turkey.
Furthermore, in September 2016, it voluntarily disclosed the investigation to the U.S. Department of Justice and the SEC, adding that it “intends to fully cooperate with these agencies and any other applicable authorities in any investigation that may be conducted in this matter by them.”
Laureate Education further noted that it has internal controls and compliance policies and procedures that are designed to prevent misconduct of this nature and support compliance with laws and best practices throughout its global operations, and that it’s “taking steps to enhance these internal controls and compliance policies and procedures.”