Western Union 2013 Annual Report Download - page 160

2013 FORM 10-K
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On February 20, 2014, City of Cambridge Retirement System filed a Verified Shareholder Derivative Complaint and Jury
Demand in the United States District Court for the District of Colorado naming the Company’s President and Chief Executive
Officer, another current executive officer, two of its former executive officers, and all but one of its current directors as individual
defendants and the Company as a nominal defendant. The complaint asserts claims for breach of fiduciary duty against the individual
defendants, violation of Section 14(a) of the Exchange Act against the director defendants, violation of Exchange Commission
Rule 10b-5 against the Company’s President and Chief Executive Officer and a former executive officer and violation of Section
20(a) of the Exchange Act against the director defendants and a former executive officer. The claims are based on, among other
things, allegations that the director defendants affirmatively declined to stop and prevent the Company’s non-compliance with
state and federal anti-money laundering laws and regulations after receiving red flags indicating prolonged willful illegality,
reappointed the same directors to the Company’s Audit Committee between 2006 and 2014 and awarded excessive compensation
packages to Western Union’s senior executives despite the executives' responsibility for the Company’s non-compliance with state
and federal anti-money laundering laws. The complaint also alleges that between 2009 and 2013, the director defendants caused
the Company to issue proxy statements that contained materially incomplete and inaccurate disclosures, including that the
Company’s financial results depended on the non-compliance with anti-money laundering requirements; the Board was aware of
regulatory and criminal enforcement actions and that the directors were not curing violations; the extent to which the Board
considered increasing red flags in their determination to re-nominate certain directors to the Audit Committee; and the extent to
which the Board considered ongoing regulatory and criminal investigations in awarding compensation to senior executives. The
complaint further alleges that the officer defendants caused the Company to willfully ignore the mandatory recording and reporting
requirements of the Bank Secrecy Act and similar state laws and authorized and implemented policies and practices they knew or
should have known to be inadequate for monitoring and enforcing compliance with those requirements. In addition, the complaint
alleges that between April 27, 2010 and October 30, 2012, the Company’s President and Chief Executive Officer and one of its
former executive officers made or participated in the preparation and dissemination of materially false and misleading statements
or failed to make adequate disclosures regarding, among other things, the Company’s cooperation with the Southwest Border
Monitor and progress in improving its anti-money laundering monitoring program, and that they profited from those statements
through insider stock sales at artificially inflated stock prices and caused the Company to suffer damages via the repurchase of its
stock.
All of the actions described above are in a preliminary stage and the Company is unable to predict the outcome, or the possible
loss or range of loss, if any, which could be associated with these actions. The Company and the named individuals intend to
vigorously defend themselves in all of these matters.
On November 25, 2013, the Company was served with a federal grand jury subpoena issued by the United States Attorney’s
Office for the Middle District of Pennsylvania (“USAO-MDPA”) seeking documents relating to complaints made to the Company
by consumers anywhere in the world relating to fraud-induced money transfers since January 1, 2008. Concurrent with the
government's service of the subpoena, the government notified the Company that it is the subject of the investigation. Since
November 25, 2013, the Company has received additional subpoenas from the USAO-MDPA seeking documents relating to certain
Western Union agents and Western Union’s agent suspension and termination policies. The government's investigation is ongoing
and the Company may receive additional requests for information as part of the investigation. The Company is cooperating fully
with the government. The Company is unable to predict the outcome of the government's 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.