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In Filing, Wal-Mart Says Investigation Could Expand

4 min read

Wal-Mart Stores Inc. of Bentonville noted in an 8K filing with regulators on Thursday that an investigation into its business practices in Mexico could expand to other areas of the company.

In the filing, the retailer said its board of directors’ audit committee is investigating “alleged violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other alleged crimes or misconduct in connection with foreign subsidiaries including Wal-Mart de México …”

The filing formally discloses to shareholders the investigations launched by the U.S. Department of Justice and the Securities & Exchange Commission into its business practices in light of an alleged bribery scheme by its Mexico operation.

The New York Times reported the allegations in April. It said high-level Wal-Mart executives had been aware of the alleged bribery and conducted an internal investigation, but ultimately shut down the investigation.

The retailer, which also reported Thursday a 10 percent increase in first-quarter earnings, has since said it is conducting its own investigation into the matter. The U.S. House Committee on Energy and Commerce, led by Democrats Henry Waxman of California and Elijah Cummings of Maryland, has also launched a probe.

In its regulatory filing, Wal-Mart said it is cooperating with the investigations and warned that it “could be exposed to a variety of negative consequences as a result of the matters …”

Some shareholders have already filed lawsuits against the company and its executives. And on Thursday, Waxman and Cummings accused the retailer of stonewalling in their investigation, which seeks “hundreds” of internal documents and testimony by key executives.

Wal-Mart’s Full 8K Statement on Investigation

The Audit Committee of the Company’s Board of Directors (the “Audit Committee”), which is composed solely of independent directors, is conducting an internal investigation into, among other things, alleged violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) and other alleged crimes or misconduct in connection with foreign subsidiaries including Wal-Mart de México, S.A.B. de C.V. (“Walmex”) and whether prior allegations of such violations and/or misconduct were appropriately handled by the Company. The Audit Committee and the Company have engaged outside counsel from a number of law firms and other advisors who are assisting in the on-going investigation of these matters. The Company is also conducting a voluntary global review of its policies, practices and internal controls for FCPA compliance. The Company is engaged in strengthening its global anti-corruption compliance programs through appropriate remedial anti-corruption measures. In November 2011, the Company voluntarily disclosed that investigative activity to the U.S. Department of Justice (the “DOJ”) and the SEC.

The Company has been informed by the DOJ and the SEC that it is also the subject of their respective investigations into possible violations of the FCPA. The Company is cooperating with the investigations by the DOJ and the SEC. A number of federal and local government agencies in Mexico have also recently initiated investigations of these matters. Walmex is cooperating with the Mexican governmental agencies conducting these investigations. Furthermore, lawsuits relating to the matters under investigation have recently been filed by several of the Company’s shareholders against it, its current directors, certain of its former directors, certain of its current and former officers and certain of Walmex’s current and former officers.

The Company could be exposed to a variety of negative consequences as a result of the matters noted above. There could be one or more enforcement actions in respect of the matters that are the subject of some or all of the ongoing government investigations, and such actions, if brought, may result in judgments, settlements, fines, penalties, injunctions, cease and desist orders or other relief, criminal convictions and/or penalties. The shareholder lawsuits may result in judgments against the Company and its current and former directors and officers named in those proceedings. The Company cannot predict accurately at this time the outcome or impact of the government investigations, the shareholder lawsuits, or its own internal investigation and review. In addition, the Company expects to incur costs in responding to requests for information or subpoenas seeking documents, testimony and other information in connection with the government investigations, in defending the shareholder lawsuits, and in conducting its internal investigation and review, and it cannot predict at this time the ultimate amount of all such costs. These matters may require the involvement of certain members of the Company’s senior management that could impinge on the time they have available to devote to other matters relating to the business. The Company may also see ongoing media and governmental interest in these matters that could impact the perception among certain audiences of its role as a corporate citizen.

The Company is in the early stages of assessing and responding to the governmental investigations, the shareholder lawsuits, and its internal investigation and review are on-going. Although the Company does not presently believe that these matters will have a material adverse effect on its business, given the inherent uncertainties in such situations, the Company can provide no assurance that these matters will not be material to its business in the future.

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