Western Union 2011 Annual Report Download - page 115

THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
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 condition and results of operations.
The Company and one of its subsidiaries are defendants 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 original complaints asserted 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 the motion to dismiss as to
the plaintiffs’ unjust enrichment and conversion claims. On February 4, 2011, the Court dismissed plaintiffs’
consumer protection claims. On March 11, 2011, the plaintiffs filed an amended complaint that adds a claim for
breach of fiduciary duty, various elements to its declaratory relief claim and Western Union Financial Services,
Inc. as a defendant. On April 25, 2011, the Company and Western Union Financial Services, Inc. filed a motion
to dismiss the breach of fiduciary duty and declaratory relief claims. Western Union Financial Services, Inc. also
moved to compel arbitration of the plaintiffs’ claims and to stay the action pending arbitration. On November 21,
2011, the Court denied the motion to compel arbitration and the stay request. Both companies appealed the
decision. On January 24, 2012, the United States Court of Appeals for the Tenth Circuit granted the companies’
request to stay the District Court proceedings pending their appeal. The plaintiffs have not sought and the Court
has not granted class certification. The Company and Western Union Financial Services, Inc. intend to
vigorously defend themselves 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 potential outcome cannot be determined.
During 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 of Arizona and
required 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 included 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 a monitor has been
engaged for those programs. The costs of the investments in the Company’s programs and for the monitor are
expected to reach 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 in a material adverse effect on the Company’s financial condition, results of operations and cash
flows. The Company accrues for loss contingencies as they become probable and estimable.
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