MoneyGram 2013 Annual Report Download - page 115

Table of Contents
the Company had $1.7 million and $38.7 million of liability recorded in the “Accounts payable and other liabilities”
line in the Consolidated
Balance Sheets as of December 31, 2013 and 2012 , respectively. A charge of $0.2 million , $108.8 million and $1.9 million
, net of insurance
recoveries, were recorded in the “Transaction and operations support” line in the Consolidated Statements of Operations during 2013 , 2012
and
2011 , respectively, for legal proceedings.
Litigation Commenced Against the Company:
The Company is involved in various claims and litigation that arise from time to time in ordinary course of the Company's business.
Management does not believe that after final disposition any of these matters is likely to have a material adverse impact on the Company's
financial condition, results of operations and cash flows.
Government Investigations
State Civil Investigative Demands — MoneyGram has received Civil Investigative Demands from a working group of nine
state attorneys
general who have initiated an investigation into whether the Company took adequate steps to prevent consumer fraud during the period from
2007 to 2011. The Civil Investigative Demands seek information and documents relating to the Company’
s procedures to prevent fraudulent
transfers and consumer complaint information. MoneyGram continues to cooperate fully with the states in this matter. MoneyGram has
submitted the information and documents requested by the states. No claims have been filed against MoneyGram in connection with this
investigation. Accordingly, we are unable to estimate the potential dollar amount of any loss in connection with this investigation or whether any
loss in connection with this investigation could have a material adverse effect on our results of operations, cash flows or financial position. The
Company does not believe there is a basis for any claim or recovery with respect to this matter and intends to vigorously defend itself if any
claim is asserted.
Other Matters —
The Company is involved in various other government inquiries and other matters that arise from time to time. Management
does not believe that after final disposition any of these other matters is likely to have a material adverse impact on the Company’
s financial
condition, results of operations and cash flows.
Actions Commenced by the Company
CDO Litigation —
In March 2012, the Company initiated an arbitration proceeding before the Financial Industry Regulatory Authority against
Goldman Sachs & Co., or Goldman Sachs. The arbitration relates to MoneyGram’
s purchase of Residential Mortgage Backed Securities and
Collateral Debt Obligations that Goldman Sachs sold to MoneyGram during the 2005 through 2007 timeframe. The Company alleges, among
other things, that Goldman Sachs made material misrepresentations and omissions in connection with the sale of these products, ultimately
causing significant losses to the Company for which the Company is currently seeking damages. Goldman Sachs owns, together with certain of
its affiliates, approximately 19 percent of the shares of the Company’
s common stock on a diluted basis, assuming conversion of the D Stock
currently owned by Goldman Sachs and its affiliates.
Tax Litigation — On May 14, 2012 and December 17, 2012, the Company filed petitions in the U.S. Tax Court challenging the 2005-
2007 and
2009 Notices of Deficiency, respectively, pursuant to which the IRS determined that the Company owes additional corporate income taxes
because certain deductions relating to securities losses were capital in nature, rather than ordinary losses. The Company asserts that it properly
deducted its securities losses and that, consequently, no additional corporate income taxes are owed. The IRS filed its responses to the
Company’s petitions in July 2012 and February 2013 reasserting its original position relating to the years 2005-
2007 and 2009. The cases have
been consolidated before the U.S. Tax Court. In December 2013, the IRS filed a motion with the court for partial summary judgment in the case,
and in February 2014 the Company filed its response to that motion which included the Company's request for partial summary judgment.
Note 15 — Segment Information
The Company’
s reporting segments are primarily organized based on the nature of products and services offered and the type of consumer
served. The Company has two
reporting segments: Global Funds Transfer and Financial Paper Products. The Global Funds Transfer segment
provides global money transfers and, in the U.S., Canada, Puerto Rico, bill payment services to consumers through a network of agents and, in
select markets, company-
operated locations. The Financial Paper Products segment provides money orders to consumers through retail and
financial institution locations in the U.S. and Puerto Rico, and provides official check services to financial institutions in the U.S. One
of the
Company's agents of both the Global Funds Transfer segment and the Financial Paper Products segment accounted for 27 percent ,
28 percent
and 29 percent of total revenue in 2013 , 2012 and 2011
, respectively. Businesses that are not operated within these segments are categorized as
“Other,” and primarily relate to discontinued products and businesses. "Other" also contains corporate items. Segment pre-
tax operating income
and segment operating margin are used to review segment performance and to allocate resources.
Segment accounting policies are the same as those described in Note 2 — Summary of Significant Accounting Policies
. The Company manages
its investment portfolio on a consolidated level, with no specific investment security assigned to a particular
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