Walmart 2013 Annual Report Download - page 53

Walmart 2013 Annual Report || 51
Hazardous Materials Investigations: On November 8, 2005, the
Company received a grand jury subpoena from the United States
Attorney’s O ce for the Central District of California, seeking documents
and information relating to the Company’s receipt, transportation,
handling, identi cation, recycling, treatment, storage and disposal of
certain merchandise that constitutes hazardous materials or hazardous
waste. The Company has been informed by the U.S. Attorney’s O ce for
the Central District of California that it is a target of a criminal investigation
into potential violations of the Resource Conservation and Recovery
Act (the “RCRA”), the Clean Water Act and the Hazardous Materials
Transportation Statute. This U.S. Attorney’s O ce contends, among other
things, that the use of Company trucks to transport certain returned
merchandise from the Company’s stores to its return centers is prohibited
by RCRA because those materials may be considered hazardous waste.
The government alleges that, to comply with RCRA, the Company must
ship from the store certain materials as “hazardous waste” directly to a
certi ed disposal facility using a certi ed hazardous waste carrier. The
U.S. Attorney’s O ce in the Northern District of California and the U.S.
Environmental Protection Agency subsequently joined in this investiga-
tion. The Company contends that the practice of transporting returned
merchandise to its return centers for subsequent disposition, including
disposal by certi ed facilities, is compliant with applicable laws and
regulations. Management does not believe any possible loss or the
range of any possible loss that may be incurred in connection with these
matters will be material to the Company’s  nancial condition or results
of operations.
FCPA Investigation and Related Matters
The Audit Committee (the “Audit Committee”) of the Board of Directors
of the Company, 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 (“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 appropri-
ately handled by the Company. The Audit Committee and the Company
have engaged outside counsel from a number of law  rms 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 Securities
and Exchange Commission (the “SEC”). Since the implementation of the
global review and the enhanced anti-corruption compliance programs,
the Audit Committee and the Company have identi ed or been made
aware of additional allegations regarding potential violations of the
FCPA. When such allegations are reported or identi ed, the Audit
Committee and the Company, together with their third party advisors,
conduct inquiries and when warranted based on those inquiries, open
investigations. Inquiries or investigations regarding allegations of
potential FCPA violations have been commenced in a number of foreign
markets where the Company operates, including, but not limited to,
Brazil, China and India.
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 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 been  led by several of the Company’s shareholders
against it, certain of its current directors, certain of its former directors,
certain of its current and former o cers and certain of Walmex’s current
and former o cers.
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 on-going government investigations, and such actions, if
brought, may result in judgments, settlements,  nes, penalties, injunctions,
cease and desist orders, debarment 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 o cers
named in those proceedings. The Company cannot predict at this time the
outcome or impact of the government investigations, the shareholder
lawsuits, or its own internal investigations 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 the review and investigations.
These costs will be expensed as incurred. The Company incurred
expenses of approximately $157 million during  scal 2013 related to
these matters. 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 expects that there will be on-going media and
governmental interest, including additional news articles from media
publications on these matters, which could impact the perception
among certain audiences of the Company’s role as a corporate citizen.
The Company’s process of assessing and responding to the governmental
investigations and the shareholder lawsuits continues. While the Company
believes that it is probable that it will incur a loss from these matters,
given the on-going nature and complexity of the review, inquiries and
investigations, the Company cannot reasonably estimate any loss or
range of loss that may arise from these matters. Although the Company
does not presently believe that these matters will have a material
adverse e ect 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.
Notes to Consolidated Financial Statements