Western Union 2009 Annual Report Download - page 108

5. Related Party Transactions
The Company has ownership interests in certain of its agents accounted for under the equity method of
accounting. The Company pays these agents, as it does its other agents, commissions for money transfer and
other services provided on the Company’s behalf. Commission expense recognized for these agents for the
years ended December 31, 2009, 2008 and 2007 totaled $203.2 million, $305.9 million and $256.6 million,
respectively. For those agents where an ownership interest was acquired during 2007, only amounts paid
subsequent to the investment date have been reflected as a related party transaction. Commission expense
recognized for FEXCO prior to February 24, 2009, the date of the acquisition (see Note 3), was considered a
related party transaction.
In July 2009, the Company appointed a director who is also a director for a company holding significant
investments in two of the Company’s existing agents. These agents had been agents of the Company prior to
the director being appointed to the board. The Company recognized commission expense of $54.2 million for
the year ended December 31, 2009 related to these agents.
6. Commitments and Contingencies
Letters of Credit and Bank Guarantees
The Company had $88.0 million in outstanding letters of credit and bank guarantees at December 31,
2009 with expiration dates through 2015, certain of which contain a one-year renewal option. The letters of
credit and bank guarantees are primarily held in connection with lease arrangements and certain agent
agreements. The Company expects to renew the letters of credit and bank guarantees prior to expiration in
most circumstances.
Litigation and Related Contingencies
During the year ended December 31, 2009, the Company recorded an accrual of $71.0 million for an
anticipated agreement and settlement with the State of Arizona. On February 11, 2010, the Company signed
this agreement and settlement, which resolved all outstanding legal issues and claims with the State and
requires the Company to fund a multi-state not-for-profit organization promoting safety and security along the
United States and Mexico border, in which California, Texas and New Mexico will participate with Arizona.
The accrual includes amounts for reimbursement to the State of Arizona for its costs associated with this
matter. In addition, as part of the agreement and settlement, the Company expects to make certain investments
in its compliance programs along the United States and Mexico border and to engage a monitor of that
program, which are expected to cost up to $23 million over the next two to four years. While the
$71.0 million in charges were identifiable to the Company’s consumer-to-consumer segment, they were not
included in the measurement of segment operating profit provided to the CODM for purposes of assessing
segment performance and decision making with respect to resource allocation.
The United States Department of Justice served one of our subsidiaries with a grand jury subpoena
requesting documents in connection with an investigation into money transfers from the United States to the
Dominican Republic during the last several years. The Company is cooperating fully with the DOJ
investigation. Due to the stage of the DOJ investigation, the Company is unable to predict the outcome of the
investigation or the possible loss or range of loss, if any, associated with the resolution of any charges that
may be brought against the Company.
In the normal course of business, Western Union is subject to claims and litigation. Management of
Western Union believes such matters involving a reasonably possible chance of loss will not, individually or in
the aggregate, result in a material adverse effect on Western Union’s financial position, results of operations
and cash flows. Western Union accrues for loss contingencies as they become probable and estimable.
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THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)