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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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Walmart’s Recent Disclosures

Wal-Mart

Last week, Walmart made several disclosures that touched upon its Foreign Corrupt Practices Act scrutiny and compliance enhancements. The materials were released in advance of Walmart’s May 30th annual meeting.

This post highlights FCPA and related information in Walmart’s Annual Report, Proxy Statement, and Global Ethics and Compliance Report.

In its Annual Report Walmart stated as follows regarding its FCPA scrutiny which was voluntarily disclosed to the DOJ/SEC in November 2011:

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Walmart Six Years Later

Wal-Mart

Six years ago this week the New York Times published an article (here) titled “Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle.”

The conduct at issue in the Times article related to Wal-Mart’s largest foreign subsidiary, Wal-Mart de Mexico (“Wal-Mart Mexico), and suggested that Wal-Mart Mexico “orchestrated a campaign of bribery to win market dominance” and that the entity “paid bribes to obtain permits in virtually every corner” of Mexico.

The April 2012 NY Times article resulted in intense world-wide media scrutiny of Wal-Mart. However, it was known months before the NY Times article, that Wal-Mart was under FCPA scrutiny.  Like in many facets of modern life, the narrative that Wal-Mart’s FCPA scrutiny began with the NY Times article became more important than actual facts and uniformed commentators who frequently display little regard for actual facts carried forward the narrative.  (See here for the December 2011 FCPA Professor post highlighting Wal-Mart’s FCPA disclosure and here for the prior post titled “Wal-Mart’s FCPA Scrutiny DID NOT Begin with the April 2012 NY Times Article).

Thus, this week is a false six year anniversary of Wal-Mart’s FCPA scrutiny, but a meaningful anniversary nevertheless.

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