Since 2012, Wal-Mart spent nearly $500,000 a day on federal corruption probe

by Kim Souza (ksouza@talkbusiness.net) 798 views 

The probe into alleged violations of the Federal Corruption Practices Act (FCPA) in several of Wal-Mart Stores’ international markets has cost the retailer $837 million since 2012 according to a Feb. 21 earnings report.

In the fourth quarter earnings material, Wal-Mart noted it spent $99 million on FCPA matters last year. It was the lowest level of spending on this matter since the investigation began in late 2011. The retailer spent $80 million last year on the investigations underway in Mexico, India, China, Brazil and other markets. Additionally, $19 million was doled out on Wal-Mart’s internal compliance program.

The FCPA spending has come down dramatically given the probe is now into its sixth year.

  • 2012: $157 million
  • 2013: $282 million
  • 2014: $173 million
  • 2015: $126 million
  • 2016: $99 million
  • TOTAL: $837 million

The spending overall equates to more than $458,000 per day since 2012. While that may seem like a burdening expense, it pales in comparison to the nearly $37.4 million in daily profits Wal-Mart made last year alone.

Looking specifically at the FCPA spending in the fourth quarter of fiscal 2017, FCPA matters cost Wal-Mart $17 million, $12 of which was regarding the investigations and $5 million spent on internal compliance enhancements. The retailer also forecast its FCPA spending to range from $65 to $85 million, the lowest annual spending to date for Wal-Mart concerning the federal probes.

Mike Koehler, a law professor at Southern Illinois University and a leading expert on the FCPA and related laws, told Talk Business & Politics last week he expects the FCPA investigation into Wal-Mart Stores will wrap up this year. He said it’s on the long end of what is usually two to four years but the Wal-Mart case is large as the retailer operates in at least 10 areas of high risk. Regardless, he said six years should likely be enough to settle.

The reduced spending on the pre-enforcement action is perhaps an indication the matter is winding down. He said settlement negotiations can last up to a year once all the cases are completed.

Koehler tracks FCPA spending ahead of settlements by quarter. He noted recently the pre-enforcement spending in many cases is typically the largest financial hit to a company under FCPA scrutiny, perhaps as much as 10 times higher than the eventual settlement amounts.

“Over the past fourteen quarters, Wal-Mart’s FCPA and compliance-related costs have been approximately $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 day,” Koehler said.

Wal-Mart does not officially comment on the investigations, beyond saying the company is complying fully. Koehler credits Wal-Mart with being proactive in self-reporting the alleged violations in late 2011 and then immediately committing to beef up its own compliance protocol in early 2012 to try and prevent future investigations.

Koehler, who tracks the FCPA investigation of dozens of other companies at any given time, said two-thirds of the public companies he tracks provide less transparency than Wal-Mart regarding the FCPA expenditures. Wal-Mart was told by the Securities and Exchange Commission in 2012 to disclose FCPA-related spending to investors each quarter. The company has complied with that request.

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