In today’s 3Q FY2018 earnings call presentation and related transcript, Wal-Mart disclosed that “discussions with the government agencies in the FCPA matter have progressed to the point that the company recorded an accrual of $283 million, or $0.09 per share … regarding the possible resolution of the FCPA matter.”
Against the backdrop of certain commentators using the “b” word (as in billions), I predicted from the start, guided by FCPAnalytics, that Wal-Mart’s Foreign Corrupt Practices Act enforcement action was unlikely to be a top five FCPA settlement amount of all-time. If the $283 million amount holds, the Wal-Mart enforcement action will not even be in the top ten FCPA settlements of all-time.
Wal-Mart also disclosed $5 million in FCPA and compliance related expenses ($2 million for ongoing investigations and inquiries and $3 million for global compliance program and organizational enhancements). The Q3 expenses of $5 million compare to following recent quarterly expenses (Q2 FY2018 $12 million, Q1 FY2018 $16 million; Q4 FY2017 $17 million; Q3 FY2017 $29 million; Q2 FY 2017 $28 million, and Q1 FY2017 $25 million).
Doing the math, Wal-Mart’s 3Q FY2018 FCPA and compliance-related costs is approximately $81,000 per working day.
Over the past 5 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.
And with good reason because, as has been noted in prior posts and in the article “Foreign Corrupt Practices Act Ripples,” 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.
Over the past 17 quarters, Wal-Mart’s FCPA and compliance-related costs have been approximately $80,000, $195,000, $260,000, $275,000, $465,000, $445,000, $396,000, $520,000, $470,000, $470,000, $516,000, $563,000, $640,000, $662,000, $855,000, $1.1 million and $1.3 million per working day.
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 = $33 million (Q1, Q2, Q3)
TOTAL: $870 million
If the $283 million settlement amount holds, Wal-Mart’s pre-enforcement action professional fees and expenses will be approximately three times more than the enforcement action settlement amount which, as highlighted above, is fairly typical.
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