Wal-Mart said in its annual report filed with the SEC Tuesday that because of uncertain outcomes of U.S. and foreign government bribery investigations and civil suits filed by shareholders, it ‘can provide no assurance that these matters will not be material’ to its business in the future.
The world’s biggest retailer said the investigations by the DOJ and SEC into possible bribery in Mexico, China, Brazil, and other countries are ongoing.
It said Tuesday ‘a number of federal and local government agencies in Mexico have also initiated investigations of these matters.’
In November 2012, Wal-Mart’s India joint venture suspended its chief financial officer and others as part of a bribery investigation.
Wal-Mart, based in Bentonville, Arkansas, said it spent $157 million during the past fiscal year on FCPA investigations, including defense costs in civil suits filed by shareholders.
‘While we believe that it is probable that we will incur a loss from these matters,’ Wal-Mart said, ‘given the on-going nature and complexity of the review, inquiries and investigations, we cannot reasonably estimate any loss or range of loss that may arise from these matters.’
In April 2012, the New York Times first reported allegations of $24 million in bribes paid by Walmart’s Mexican subsidiary for licenses to expand throughout the country, and a massive cover up after the bribes were discovered as early as 2005.
The Times said Wal-Mart’s investigators dispatched to Mexico ‘found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark.’
Wal-Mart later said it had disclosed ‘internal investigative activity’ to the DOJ and SEC in November 2011. Those agencies subsequently told Wal-Mart they were investigating possible FCPA violations, the company said.
All FCPA-related disclosures by issuers are available from ethiXbase, the world’s biggest anti-corruption enforcement database.
Wal-Mart Stores Inc.’s Form 10-K (annual report) filed with the SEC on March 26 included the following FCPA disclosure:
The Audit Committee of our Board of Directors, which is composed solely of independent directors, is conducting an internal investigation into, among other things, alleged violations of the Foreign Corrupt Practices Act (“FCPA”) and other alleged crimes or misconduct in connection with certain of our foreign subsidiaries, including Wal-Mart de México, S.A.B. de C.V., or Walmex, and whether we appropriately handled prior allegations of such violations and/or misconduct. We are also conducting a voluntary global review of our policies, practices and internal controls for FCPA compliance and strengthening our global anti-corruption compliance programs. Since the implementation of the global review and enhanced anti-corruption compliance programs, the Audit Committee and we have identified or been made aware of additional allegations regarding potential violations of the FCPA. Inquiries or investigations regarding allegations of potential FCPA violations have been commenced in a number of foreign markets in which we operate, including, but not limited to, Brazil, China and India. In November 2011, we voluntarily disclosed our investigative activity to the U.S. Department of Justice (the “DOJ”) and the SEC, and we have been informed by the DOJ and the SEC that we are the subject of their respective investigations into possible violations of the FCPA. A number of federal and local government agencies in Mexico have also initiated investigations of these matters. Furthermore, lawsuits relating to the matters under investigation have been filed by several of our shareholders against us, certain of our current and former directors and officers and certain of Walmex’s current and former officers.
We could be exposed to a variety of negative consequences as a result of these matters. One or more enforcement actions could be instituted in respect of the matters that are the subject of some or all of the on-going government investigations, and such actions, if brought, may result in judgments, settlements, fines, penalties, injunctions, cease and desist orders, debarment or other relief, criminal convictions and/or penalties. The existing and any additional shareholder lawsuits may result in judgments against us and our current and former directors and officers named in those proceedings. We cannot predict at this time the outcome or impact of the government investigations, the shareholder lawsuits, or our own internal investigations and review. Moreover, we expect to continue to incur costs (in addition to the $157 million of costs incurred in fiscal 2013) in conducting our on-going review and investigations and in responding to requests for information or subpoenas seeking documents, testimony and other information in connection with the government investigations and in defending the existing and any additional shareholder lawsuits and any governmental proceedings that are instituted against us or any of our current or former officers. These matters may require the involvement of certain members of our senior management that could impinge on the time they have available to devote to other matters relating to our business. We also expect that there will be ongoing media and governmental interest, including additional news articles from media publications on these matters that could impact the perception of our role as a corporate citizen among certain audiences. Our process of assessing and responding to the governmental investigations and the shareholder lawsuits continues. While we believe that it is probable that we will incur a loss from these matters, given the on-going nature and complexity of the review, inquiries and investigations, we cannot reasonably estimate any loss or range of loss that may arise from these matters. Although we do not presently believe that these matters will have a material adverse effect on our business, given the inherent uncertainties in such situations, we can provide no assurance that these matters will not be material to our business in the future.