It got overshadowed in the press coverage of the company’s disappointing same-store sales figures, weak traffic, and downward revision of guidance for the rest of the year, but Walmart reported yesterday that it spent about $82 million in the second quarter on FCPA and compliance matters—12 percent more than it spent in the first quarter and well above its projection of $65-70 million. Add that to the $230 million the company spent in Fiscal Year 2013 and the first quarter of Fiscal Year 2014, and the total reported spending to date on FCPA-related matters is $312 million.
This is the fourth quarter in a row Walmart has seriously underestimated FCPA expenses. What are shareholders supposed to make of guidance if it always misses the mark by so much?
For whatever it’s worth, company Chief Financial Officer Charles Holley said that Walmart expects FCPA expenses to be “higher than originally anticipated for the rest of the year,” between $75-80 million in each of the two remaining quarters. So that means actual expenses will end up being…what? $90-95 million?
Remarkably, despite the hundreds of millions of dollars spent so far on investigations and compliance, nobody has yet been held publicly accountable for their role in either the initial alleged bribery or the subsequent cover-up. According to the New York Times, Rob Walton, Mike Duke, and Lee Scott were all personally made aware of the bribery allegations in Mexico.
And in their roles as chairman of the company, head of Walmart International, and CEO of Walmart, they were in charge as senior management allegedly stymied an internal investigation into the allegations. Scott has retired, but Walton remains on as chairman and Duke was promoted to company CEO in 2009.
Duke and Walton talked up business ethics and integrity at the company’s 2012 and 2013 shareholder meetings. Seems like Walmart could have avoided a whole lot of trouble (not to mention mounting investigation and compliance costs) if company leaders like Duke and Walton had actually taken ethics and integrity seriously when allegations of bribery first surfaced.