Western Union 2010 Annual Report Download - page 97

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 $52.9 million and
$54.2 million for the years ended December 31, 2010 and 2009 related to these agents.
6. Commitments and Contingencies
Letters of Credit and Bank Guarantees
The Company had approximately $85 million in outstanding letters of credit and bank guarantees at
December 31, 2010 with expiration dates through 2015, the majority 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
In the second quarter of 2009, the Antitrust Division of the United States Department of Justice (“DOJ”) served
one of the Company’s subsidiaries with a grand jury subpoena requesting documents in connection with an
investigation into money transfers, including related foreign exchange rates, from the United States to the
Dominican Republic from 2004 through the date of subpoena. The Company is cooperating fully with the DOJ
investigation. Due to the stage of the investigation, the Company is unable to predict the outcome of the
investigation, or the possible loss or range of loss, if any, which could be associated with the resolution of any
possible criminal charges or civil claims that may be brought against the Company. Should such charges or claims
be brought, the Company could face significant fines, damage awards or regulatory consequences which could have
a material adverse effect on the Company’s business, financial position and results of operations.
The Company is a defendant in two purported class action lawsuits: James P. Tennille v. The Western Union
Company, and Robert P. Smet v. The Western Union Company, both of which are pending in the United States
District Court for the District of Colorado. The complaints assert claims for violation of various consumer
protection laws, unjust enrichment, conversion and declaratory relief, based on allegations that the Company waits
too long to inform consumers if their money transfers are not redeemed by the recipients and that the Company uses
the unredeemed funds to generate income until the funds are escheated to state governments. The Tennille
complaint was served on the Company on April 27, 2009. The Smet complaint was served on the Company on
April 6, 2010. On September 21, 2009, the Court granted the Company’s motion to dismiss the Tennille complaint
and gave the plaintiff leave to file an amended complaint. On October 21, 2009, Tennille filed an amended
complaint. The Company moved to dismiss the Tennille amended complaint and the Smet complaint. On
November 8, 2010, the Court denied Western Union’s motion to dismiss as to the plaintiffs’ unjust enrichment
and conversion claims. On February 4, 2011, the Court dismissed plaintiffs’ consumer protection claims. The
plaintiffs have not sought and the Court has not granted class certification. The Company intends to vigorously
defend itself against both lawsuits. However, due to the preliminary stages of these lawsuits, the fact the plaintiffs
have not quantified their damage demands, and the uncertainty as to whether they will ever be certified as class
actions, the Company is unable to determine the potential outcome.
During the third quarter of 2009, the Company recorded an accrual of $71.0 million for an agreement and
settlement with the State of Arizona and other states, which was paid in 2010. 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 are participating 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 has made and expects to make certain investments in
its compliance programs along the United States and Mexico border and has engaged a monitor for those programs,
which are expected to cost up to $23 million over the period from signing to 2013.
In the normal course of business, the Company is subject to claims and litigation. Management of the Company
believes such matters involving a reasonably possible chance of loss will not, individually or in the aggregate, result
95