Wal-Mart's Costs Connected To Mexican Bribery Case Reach $400M

by Mark Friedman  on Monday, Dec. 9, 2013 12:00 am  

Allegations that Wal-Mart’s Mexican division paid brides are at the center of lawsuits that are making their way through the courts.

Wal-Mart Stores Inc. has projected it will have spent more than $400 million by the end of its fiscal year in January for investigations and global compliance programs that stemmed from a Mexican bribery scandal.

By the time the lawsuits by angry shareholders and investigations by the Department of Justice and the Securities & Exchange Commission are over, the Bentonville retailer could have spent hundreds of millions more.

Currently, the lawsuits are slowly making their way through the courts.

The California State Teachers’ Retirement System and two other pension funds have been named as lead plaintiffs in a 2012 lawsuit against Wal-Mart and its directors for alleged violations of the Foreign Corrupt Practices Act.

A question about which documents could be released to shareholders is on appeal at the Delaware Supreme Court.

Attorney John Emerson of Houston is watching that case closely. Emerson is one of several attorneys who sued Wal-Mart and members of its board of directors in U.S. District Court in Texarkana in 2012. But that case was stayed pending the outcome of the Delaware case, which hasn’t seen much progress.

“Here we are more than a year later, and [the Delaware case] is no more advanced than we are,” Emerson told Arkansas Business last week.

He has appealed the motion to stay and a ruling isn’t expected from the U.S. Court of Appeals for the 8th Circuit until the spring.

Meanwhile, Wal-Mart is concerned about an investigation by the DOJ and SEC over alleged violations in connection with the FCPA. If the DOJ and SEC decide to bring charges, Wal-Mart could face criminal convictions or fines, according to the company’s SEC filings.

Since 2007, companies that have violated the FCPA have paid millions of dollars in fines.

In 2010, 23 companies paid a total of $1.8 billion in fines to the DOJ and SEC for FCPA violations, according to a 2012 report titled “Double Trouble: Collateral Shareholder Litigation Following Foreign Corrupt Practices Act Investigations,” by Amy Westbrook, a professor of law at Washburn University School of Law in Topeka, Kan. In 2011, 16 companies paid more than $508 million in fines, the report said. But in 2012, only eight companies agreed to pay more than $152 million in penalties, according to news releases from the DOJ.

Wal-Mart doesn’t have a timetable for when its investigation will end, company spokesman Randy Hargrove said last week.



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