Walmart sets aside US$283 million to potentially resolve FCPA allegations
Wal-Mart Stores Inc. announced in a November 16, 2017 filing with the U.S. Securities and Exchange Commission (“SEC”) that it has set aside US$283 million for a potential resolution of allegations pursuant to the U.S. Foreign Corrupt Practices Act (FCPA). Similar to Canada’s Corruption of Foreign Public Officials Act (CFPOA), the FCPA makes it unlawful to make payments to foreign government officials to assist in obtaining or retaining business. Walmart’s announcement comes six years after it first disclosed to U.S. officials that it was conducting a voluntary review of its internal compliance policies and controls relating to allegations of bribery in Mexico.
Details of Walmart’s potential unlawful conduct were first publicized in an April 2012 New York Times article alleging that bribes were paid in order to facilitate Walmart’s expansion in Mexico. The New York Times article further claimed that Walmart’s own internal investigation, which commenced in 2005 and uncovered suspect payments totalling more than US$24 million, was subsequently halted in 2006 by certain Walmart senior executives without taking any internal or external remedial action. Shortly after the New York Times article was published, Walmart confirmed that it was the subject of FCPA investigations by the U.S. Department of Justice and the SEC. The FCPA investigations have since expanded to include allegations of potential violations in other jurisdictions including but not limited to Brazil, China and India. In August 2017, Walmart’s SEC disclosure stated that it was cooperating with investigations in both the United States and Mexico, and was “strengthening its global anti-corruption compliance programs through appropriate remedial anti-corruption measures”.
In addition to the ongoing government investigations in both the United States and Mexico, Walmart has been the subject of numerous shareholder lawsuits. Walmart’s SEC disclosure indicates that it has spent more than US$850 million on legal fees and other expenses from 2012 to July 2017 in connection with conducting the internal investigation, cooperating with the U.S. and Mexican government investigations, managing the shareholder lawsuits and revising its compliance programs, policies and procedures.
The Walmart saga illustrates the importance of conducting a thorough, timely and independent internal investigation where there is a concern of potential misconduct. While an internal investigation may at first appear to be an unnecessary and substantial cost, it provides the most effective means of identifying, evaluating and if necessary addressing potential misconduct before others have the opportunity to do so.
Moreover, the ongoing investigations and lawsuits highlight the importance of a robust and effective anti-corruption program to enable firms to identify risks – whether it be risk to a particular business unit or risk in a particular geography – and responding promptly to address and mitigate them. An effective anti-corruption program endorsed and consistently enforced by management should be designed to address the unique circumstances of a company, and routinely reviewed to ensure it continues to adequately address the company’s specific risks. As demonstrated by the costs borne by Walmart to date, an effective compliance program if properly implemented can save a company from costly investigations, significant fines and penalties, and reputational damage.
For more information regarding the Walmart allegations, refer to The Cost of Conducting and Avoiding Internal Investigations.
For more information regarding recent CFPOA enforcement matters, refer to: