Cost for retailer's bribery case falls

Wal-Mart-probe end seen nearer

Wal-Mart Stores Inc. is spending less this year than it did last year on legal and personnel costs related to a federal bribery investigation that began in Mexico and later spread to the company's operations in China, India, Brazil and other countries.

An expert in the field said Tuesday that the decreased spending likely means the probe is drawing to a close.

The scrutiny is in its fourth year, and there's a five-year statute of limitation on cases where companies are accused of violating the Foreign Corrupt Practices Act, or FCPA.

The world's largest retailer said in a recent Securities and Exchange Commission filing that matters related to the act and compliance-related costs for the first six months of its fiscal year fell to $96 million from $155 million in fiscal 2014. The company has added more people and moved others around to put up safeguards against violations of the law in the future; those costs are included in the expense figures.

The Department of Justice and the SEC are investigating allegations that Wal-Mart officials working in Mexico bribed locals to obtain building permits and speed up the development in that country. The retailer self-reported an internal investigation of the allegations in 2011.

In the recent filing, Wal-Mart reported that it allocated $31 million for "ongoing inquiries and investigations" in the three months ending July 31, compared with $48 million for the same quarter last year.

The figures were released well after the company's second-quarter earnings release Aug. 14 because Wal-Mart U.S. and the company's international segment operate on different calendars. Wal-Mart has spent $439 million in attorney fees and other costs related to the Foreign Corrupt Practices Act, according to its 2014 Global Compliance Program Report released in April. Officials have estimated that they will shell out between $200 million and $240 million in fiscal 2015, which runs through Jan. 31.

"The company could be exposed to a variety of negative consequences as a result of the matters. ... There could be one or more enforcement actions 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," Wal-Mart said in its filing Friday.

"We gave projections for the full year that we were lower than last year," Wal-Mart spokesman Randy Hargrove said Tuesday.

Richard Cassin, publisher and editor of a blog on the Foreign Corrupt Practices Act, said that by this point in the investigation, the company "should have a gotten a handle on it."

"That's just a guess, trying to read the tea leaves, but they're definitely getting closer," he said.

Cassin noted that the retailer also spent $12 million for "global compliance program and organizational enhancements," compared with $34 million for the quarter a year ago.

"I think it means that their systems are now pretty well in place," he said. "They've hired and moved around people they think they need in the key positions, the compliance-related positions."

In cases where companies self-report potential violations, the statute of limits could be lifted.

"It's often to the company's benefit," he said. "If the Justice Department felt like the five-year statute of limitations was getting close, it would be compelled to bring enforcement action, to go to court. And the company does not want that."

"The investigation is ongoing, and it would be inappropriate to comment further on specific allegations or for us or others to come to specific conclusions until the investigation is finished," Hargrove said.

Mike Koehler, assistant professor at Southern Illinois University School of Law (also known as the "FCPA professor"), said for many companies, the gray cloud of Foreign Corrupt Practices Act scrutiny simply lasts too long, creating a legal gray cloud that hangs over a business organization.

"If you dig into the details of most corporate FCPA enforcement actions, you quickly discover that the alleged conduct at issue occurred five to seven years, seven to 10 years, and in some instances, 10-15 years prior to the enforcement action," he said.

Statute of limitations are ordinarily the remedy the law provides for legal gray clouds, Koehler said.

Business on 09/10/2014

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