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

In yesterday’s 3Q FY2019 earnings call presentation [1], 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 [2] and 1Q figures [3].

Doing the math, Wal-Mart’s 3Q FY2019 FCPA and compliance-related costs are approximately $145,000 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 [4] for doing so, it quickly caught on as the popular thing to do.

And with good reason because, as has been noted in prior posts and in the article “Foreign Corrupt Practices Act Ripples [5],” settlement amounts in an actual FCPA enforcement action are often only a relatively minor component of the overall financial consequences that can result from corporate FCPA scrutiny. Pre-enforcement action professional fees and expenses are typically the largest (in many cases to a degree of 3, 5, 10 or higher than settlement amounts) financial hit to a company under FCPA scrutiny.

Indeed, in Wal-Mart’s case the company has previously disclosed an anticipated FCPA settlement amount of $283 million. Moreover, as highlighted in this recent post [6], Wal-Mart settled FCPA-related civil litigation for $160 million.

[7]

In the aggregate, Wal-Mart’s disclosed FCPA and compliance-related costs are as follows.

FY 2013 = $157 million

FY 2014 = $282 million

FY 2015  = $173 million

FY 2016 = $126 million

FY 2017  = $99 million

FY 2018 = $40 million

FY 2019 = $24 million (Q1, Q2, Q3)

TOTAL: $901 million

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