Wal-Mart FCPA Costs Trending Down

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By Michael Greene

Aug. 20 — Wal-Mart Stores Inc's. expenses related to Foreign Corrupt Practices Act matters continue to trend downward, according to the company's Aug. 18 second-quarter earnings call.

According to a transcript of the call, Wal-Mart reported that its FCPA and compliance-related costs were approximately $30 million in the quarter, consisting of about $23 million for ongoing inquiries and investigations, and about $7 million for its global compliance program and organizational enhancements.

The retailer's FCPA and compliance-related costs appear to be gradually decreasing—in the second quarter of last year they were $43 million, and in the last two quarters they were $36 million and $33 million respectively.

Additionally, the company is expecting its FCPA expenses for the full year to be between $130 million and $150 million. During the last fiscal year, the company reported that it incurred $173 million for such costs, considerably lower than the $282 million the company spent the prior year.

Logical Progression

Since 2012, Wal-Mart has been subjected to government investigations regarding allegations that bribes were made in order to accelerate new store openings in Mexico.

Thomas Fox, founder of Houston law firm tomfoxlaw.com and creator of the “FCPA Compliance and Ethics Blog,” told Bloomberg BNA that it's logical that Wal-Mart's FCPA-related expenses would be decreasing given that investigations related to the alleged bribery scandal are winding down.

Fox also noted that even though the raw numbers look large and may show that Wal-Mart’s compliance program was originally deficient, companies are often rewarded by government agencies at the penalty stage by initiating remedial measures up front. However, he declined to speculate as to how much Wal-Mart’s actions will pay off down the road.

When asked whether Wal-Mart's FCPA- and compliance-related expenses seemed relatively high or low, Fox said there is no real rule for how much companies should spend to either investigate or remediate such problems. He said the “bellwether” for how much companies spend in response to FCPA investigations was Avon Products Inc., but added that Wal-Mart is a significantly large company and its situation is much different.

Investigations & Litigation

In addition to government investigations, Wal-Mart has been engulfed in several shareholder lawsuits related to allegations that officials violated U.S. and international laws.

In March, a federal judge dismissed a derivative lawsuit alleging that Wal-Mart executives breached their fiduciary duties by misleading investors and covering up possible FCPA violations at a subsidiary in Mexico. That case is on appeal to the U.S. Court of Appeals for the Eighth Circuit.

More recently, the Delaware Chancery Court May 7 closed a hotly contested books and records action after denying a contempt motion filed against the megastore. In doing so, Chancellor Andre G. Bouchard concluded that the retailer had fully complied with a 2014 Delaware Supreme Court order requiring the company to release internal documents related to what directors may have known about alleged bribes made at the company's Mexico subsidiary.

To contact the reporter on this story: Michael Greene in Washington at mgreene@bna.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com

The transcript of the earnings call is available at http://stock.walmart.com/files/doc_financials/2016/Q2/Management-earnings-call-transcript.pdf.


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