Western Union 2013 Annual Report Download - page 221

2013 FORM 10-K
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
111
The changes in WUFSI’s anti-money laundering program required by the Settlement Agreement, including the Amendment,
and the Monitor’s recommendations have had, and will continue to have, adverse effects on the Company’s business, including
additional costs. Additionally, if WUFSI is not able to implement a successful anti-money laundering compliance program along
the U.S. and Mexico border or timely implement a substantial portion of the Monitor’s primary recommendations, each as
determined by the Monitor, pursuit by the State of remedies under the Settlement Agreement, including the Amendment, could
have a material adverse effect on the Company’s business, financial condition or results of operations.
On March 20, 2012, the Company was served with a federal grand jury subpoena issued by the United States Attorney's Office
for the Central District of California ("USAO") seeking documents relating to Shen Zhou International ("US Shen Zhou"), a former
Western Union agent located in Monterey Park, California. The principal of US Shen Zhou was indicted in 2010 and in December
2013, pled guilty to one count of structuring international money transfers in violation of United States federal law in U.S. v. Zhi
He Wang (SA CR 10-196, C.D. Cal.). Concurrent with the government's service of the subpoena, the government notified the
Company that it is a target of an ongoing investigation into structuring and money laundering. Since March 20, 2012, the Company
has received additional subpoenas from the USAO seeking additional documents relating to US Shen Zhou, materials relating to
certain other former and current agents and other materials relating to the Company's anti-money laundering compliance policies
and procedures. The government has interviewed several current and former Western Union employees and has served grand jury
subpoenas seeking testimony from several current and former employees. The government's investigation is ongoing and the
Company may receive additional requests for information as part of the investigation. The Company continues to cooperate 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.
On December 10, 2013, the City of Taylor Police and Fire Retirement System filed a purported class action complaint in the
United States District Court for the District of Colorado against The Western Union Company, its President and Chief Executive
Officer, and a former executive officer of the Company, asserting claims under sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 (“Exchange Act”) and Securities and Exchange Commission Rule 10b-5 against all defendants, and under Section 20
(a) of the Exchange Act against the individual defendants. Plaintiff alleges that during the alleged class period, February 7, 2012
through October 30, 2012, defendants made false or misleading statements or failed to disclose adverse facts known to them,
including: (1) the Company was experiencing difficulties in complying with its increased duties required by the Southwest Border
Agreement and that the State of Arizona was dissatisfied with the Company’s efforts; (2) the Company was spending significantly
more than forecast on its efforts to satisfy the compliance and monitoring program; (3) the Company had downplayed the impact
that changes in its compliance and regulatory environment were having on its operations, including its operations in Mexico and
Latin America; (4) the scope of the Monitor’s review was being expanded to include Western Union Business Solutions, which
would increase compliance costs; and (5) the Company’s ability to charge a premium for its core money transfer product was under
competitive pressure, which would require drastic price reductions to stem market share losses. On January 30, 2014, another
shareholder, Norma A. Garavaglia, filed a second purported class action complaint in the United States District Court for the
District of Colorado that names the same defendants and contains allegations which are substantially similar to those made in the
City of Taylor Police and Fire Retirement System lawsuit. These actions 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.
In addition, in the normal course of business, the Company is subject to other 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.