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


In its recent 1Q FY2018 earnings call presentation Wal-Mart disclosed $16 million in Foreign Corrupt Practices Act and compliance related expenses ($13 million for ongoing investigations and inquiries and $3 million for global compliance program and organizational enhancements). The Q1 expenses of $16 million compare to the following quarterly expenses in FY2017 (Q4 $17 million, Q3 $29 million, Q2 $ 28 million, Q1 $25 million).

Doing the math, Wal-Mart’s 1Q FY2018 FCPA and compliance-related costs is approximately $260,000 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 fifteen quarters, Wal-Mart’s FCPA and compliance-related costs have been approximately $258,000, $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 = $16 million (Q1)

TOTAL: $853 million

As highlighted in this recent post, media report suggest that the Wal-Mart FCPA enforcement action will be approximately $300 million.

If true, 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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