Wal-Mart’s hints in the filings

Two weeks ago, Wal-Mart Stores (WMT) filed its 10-Q. While much of the filing was pretty similar to their prior 10-Q, there were a few seemingly minor new disclosures that we picked up on and included in our weekly Red Flag Alert that we sent out to footnotedPro subscribers.

As with most of what we find, we’ll often flag something, and wait for events to unfold. Sometimes, this happens relatively quickly and sometimes it can take six months or longer. At Wal-Mart, it took exactly two weeks. Here’s the new disclosure that caught our attention two weeks ago:

“The Company expects that there will be ongoing 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 additional news article that Wal-Mart seemed to be referring to was this sharply researched piece in today’s New York Times, which talked about a shocking pattern of corruption. Here’s a key paragraph from the Times’ piece:

“Rather, Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance — public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.”

Shortly after the story first posted yesterday on the Times’ site, Wal-Mart put out this statement, which included a video taped by Wal-Mart Vice President for Corporate Communications David Tovar. The statement includes  numbers that we haven’t seen in Wal-Mart’s SEC disclosures on the scope of its ongoing efforts related to the Foreign Corrupt Practices Act investigation, including hiring more than 300 third-party legal and accounting experts. (In the Q, the company notes that it spent $48 million on this during the third quarter and $99 million during the first three quarters).

As Wal-Mart predicted, many other media outlets have picked up on the Times’ story. Shares of Wal-Mart de Mexico are down about 2% today. Shares of the parent company are essentially unchanged on the news.

Of course, this isn’t the first time that Wal-Mart handled disclosure this way. As Theo footnoted back in April, Wal-Mart’s disclosure on FCPA issues has been muted at best.

For us, this serves as a potent reminder of something we say often: there are no accidents in SEC filings. Everything is there for a reason, even if you don’t always know what that reason is.


It’s that time of year again: time to help us select the worst footnote of 2012. Just to remind you, last year’s “winner” was Hewlett-Packard (HPQ), which rewarded its disastrous former CEO  Léo Apotheker with lavish going-away gifts. The stock has fallen 43% since HPQ won the top prize last year. We’re busy assembling our entries for 2012 and have some good candidates so far. But there’s always a chance we’re forgetting one or two, so if you have a good candidate for our worst footnote list, please post it in the comments or send us a note.