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Wal-Mart’s Pre-Enforcement Action Professional Fees And Compliance Enhancements Top $900 Million

Wal-Mart

In yesterday’s 3Q FY2019 earnings call presentation, Wal-Mart disclosed $9 million in Foreign Corrupt Practices Act and compliance related expenses ($6 million for ongoing investigations and inquiries and $3 million for global compliance program and organizational enhancements). The 3Q figures are higher than 2Q figures and 1Q figures.

Doing the math, Wal-Mart’s 3Q FY2019 FCPA and compliance-related costs are approximately $145,000 per working day.

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Walmart’s $160 Million Ripple

Ripple

The article “Foreign Corrupt Practices Act Ripples” highlights how settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from FCPA scrutiny or enforcement.

Among other ripples are private shareholder suits.

In the aftermath of the New York Times April 2012 article (an article which did not lead to Wal-Mart’s FCPA scrutiny, but certainly magnified it to a whole new level) numerous shareholder suits rained down on the company.

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Checking In On Wal-Mart’s Pre-Enforcement Action Professional Fees And Compliance Enhancements

Wal-Mart

In yesterday’s 2Q FY2019 earnings call presentation WalMart disclosed $8 million in Foreign Corrupt Practices Act and compliance related expenses ($5 million for ongoing investigations and inquiries and $3 million for global compliance program and organizational enhancements).

Doing the math, Wal-Mart’s 2Q FY2019 FCPA and compliance-related costs is approximately $130,000 per working day.

Over the past approximate 6 years, I have tracked Wal-Mart’s quarterly disclosed pre-enforcement action professional fees and expenses. While some pundits ridiculed me for doing so, it quickly caught on as the popular thing to do.

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Fourth Circuit Agrees With Walmart On Privilege Issue Relevant To FCPA Inquiry

Judicial Decision

As highlighted in this recent post, Walmart and the government seem to be at an impasse regarding resolution of Walmart’s FCPA scrutiny first disclosed in late 2011. As highlighted by Bloomberg, one reason appears to be side litigation between the government and Walmart concerning certain privileged issues.

In late June 2018 the Fourth Circuit, in this decision, agreed with Walmart’s position. Although the opinion does not technically mention Walmart, Bloomberg reports that “two people familiar with the matter confirmed that the company was Walmart.” Moreover, this is fairly obvious to anyone closely following Walmart’s long-standing scrutiny.

As highlighted below, the Fourth Circuit’s opinion was based on “standard principles of contract interpretation” and is clearly not the most exciting decision to read. However, this is the second decision in the FCPA context in recent weeks in which a court disagreed with the government’s interpretation of a document relevant to an FCPA inquiry. (See here for the recent decision in SEC v. Cohen et al in which a court disagreed with the SEC’s position regarding a tolling agreement).

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Friday Roundup

Roundup

Impasse, quotable, scrutiny alerts, um excuse me but, and for the reading stack. It’s all here in the Friday roundup.

Impasse

Walmart’s FCPA scrutiny began in late 2011. Yet, nearly seven years later there still has not been an enforcement action.

Bloomberg reports: “Walmart Inc. set aside nearly $300 million last fall for a possible resolution with the U.S. government over international bribery allegations, a sign that an end to the years-long investigation was imminent. But eight months later, the sides are deadlocked, three people familiar with the matter said. It’s not about the money: One source of tension is prosecutors’ insistence that Walmart, the world’s largest retailer, admit to certain misconduct as part of any deal, one of the people said.”

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