Walmart 2015 Annual Report Download - page 57

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2015 Annual Report
On November 14, 2007, the trial judge entered a final judgment in the
approximate amount of $188 million, which included the jury’s back-pay
award plus statutory penalties, prejudgment interest and attorneys’ fees.
By operation of law, post-judgment interest accrues on the judgment
amount at the rate of six percent per annum from the date of entry of the
judgment, which was November 14, 2007, until the judgment is paid,
unless the judgment is set aside on appeal. On December 7, 2007, the
Company filed its Notice of Appeal. On June 10, 2011, the Pennsylvania
Superior Court of Appeals issued an opinion upholding the trial court’s
certification of the class, the jury’s back pay award, and the awards of
statutory penalties and prejudgment interest, but reversing the award of
attorneys’ fees. On September 9, 2011, the Company filed a Petition for
Allowance of Appeal with the Pennsylvania Supreme Court. On July 2,
2012, the Pennsylvania Supreme Court granted the Company’s Petition.
On December 15, 2014, the Pennsylvania Supreme Court issued its
opinion affirming the Superior Court of Appeals’ decision. At that time,
the Company recorded expenses of $249 million for the judgment amount
and post-judgment interest incurred to date. The Company will continue
to accrue for the post-judgment interest until final resolution. However, the
Company continues to believe it has substantial factual and legal defenses
to the claims at issue and, on March 13, 2015, the Company filed a petition
for writ of certiorari with the U.S. Supreme Court.
ASDA Equal Value Claims: ASDA Stores, Ltd. (“ASDA”), a wholly-owned
subsidiary of the Company, is a defendant in over 4,000 “equal value”
claims that are proceeding before an Employment Tribunal in
Manchester (the “Employment Tribunal”) in the United Kingdom (“UK”)
on behalf of current and former ASDA store employees, who allege that
the work performed by female employees in ASDA’s retail stores is of
equal value in terms of, among other things, the demands of their jobs to
that of male employees working in ASDA’s warehouse and distribution
facilities, and that the disparity in pay between these different job positions
is not objectively justified. Claimants are requesting differential back pay
based on higher wage rates in the warehouse and distribution facilities and
those higher wage rates on a prospective basis as part of these equal value
proceedings. ASDA believes that further claims may be asserted in the near
future. On March 23, 2015, ASDA asked the Employment Tribunal to stay all
proceedings, contending that the High Court, which is the superior first
instance civil court in the UK that is headquartered in the Royal Courts of
Justice in the City of London, is the more convenient and appropriate forum
to hear these claims. On March 23, 2015, ASDA also asked the Employment
Tribunal to “strike out” substantially all of the claims for failing to comply
with Employment Tribunal rules. At present, the Company cannot predict
the number of such claims that may be filed, and cannot reasonably esti-
mate any loss or range of loss that may arise from these proceedings. The
Company believes it has substantial factual and legal defenses to these
claims, and intends to defend the claims vigorously
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 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 program
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 program, the Audit
Committee and the Company have identified or been made aware of
additional allegations regarding potential violations of the FCPA. When
such allegations are reported or identified, 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 filed 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 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 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. 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
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 has incurred and expects to continue 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. For the fiscal years ended January 31, 2015, 2014 and 2013,
the Company incurred the following third-party expenses in connection
with the FCPA investigation and related matters:
Fiscal Years Ended January 31,
(Amounts in millions) 2015 2014 2013
Ongoing inquiries and investigations $121 $173 $100
Global compliance program and
organizational enhancements 52 109 57
Total $173 $282 $157
Notes to Consolidated Financial Statements