Walmart may be famous for meticulously forecasting inventory needs and consumer spending as if it had a crystal ball, but when it comes to guessing how much a worldwide corruption investigation will cost, the retailer greatly misses the mark.
In fact, the probe cost Walmart nearly twice what it budgeted for the first quarter.
When Walmart released its first quarter earnings today it also provided an update on the costs of its investigation into potential violations of the Foreign Corrupt Practices Act. The Bentonville, Ark. company said it spent $73 million on FCPA work in the first quarter, rather than the $40 million to $45 million it had originally forecast.
The investigation stems from allegations that executives at Walmart's Mexico unit bribed Mexican officials to smooth the way to open stores in prime locations. The scandal came to light in a Pulitzer Prize-winning report by the New York Times in 2012.
Most of the first-quarter expenses ($44 million) went to cover the ongoing investigation, including legal costs and ongoing inquiries and investigations, while the other $29 million was for a global compliance review, program enhancements and organizational changes, Walmart said.
Walmart expects cost to remain roughly the same during the second quarter. “Expenses related to FCPA matters are expected to range from $65 to $70 million for the second quarter," said Walmart CFO Charles Holley in a statement announcing the retailers first quarter earnings.
The cost of the investigation is piling up. Last year the company spent $157 million on the investigation, putting the total costs to date at $230 million, and a forecast of $300 million in total spending related to the investigation by mid-year. Walmart said it can not predict when its own investigation or government probe will come to an end.
Walmart increased the fees it pays to members of the board's audit committee by $60,000 and the audit committee chairman, Christopher Williams, by $85,000 to cover additional work they are completing as part of the inquiry.