Western Union 2015 Annual Report Download - page 153

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In 2014, Stanley Lieblein, R. Andre Klein, City of Cambridge Retirement System, Mayar Fund Ltd, Louisiana Municipal
Police Employees' Retirement System, and MARTA/ATU Local 732 Employees Retirement Plan filed shareholder derivative
complaints in the United States District Court for the District of Colorado naming the Company’s President and Chief Executive
Officer and certain current and former directors and a former executive officer as individual defendants and the Company as a
nominal defendant. On January 5, 2015, the court entered an order consolidating the actions and appointing City of Cambridge
Retirement System and MARTA/ATU Local 732 Employees Retirement Plan as co-lead plaintiffs. On February 4, 2015, co-lead
plaintiffs filed a verified consolidated shareholder derivative complaint naming the Company’s President and Chief Executive
Officer, two of its former executive officers and all but two of its current directors as individual defendants, and the Company as
a nominal defendant. The consolidated complaint asserts separate claims for breach of fiduciary duty against the director defendants
and the officer defendants, claims against all of the individual defendants for violations of section 14(a) of the Exchange Act,
corporate waste and unjust enrichment, and a claim against the former executive officer for breach of fiduciary duties for insider
selling and misappropriation of information. The breach of fiduciary duty claim against the director defendants includes allegations
that they declined to implement an effective anti-money laundering compliance system after receiving numerous red flags indicating
prolonged willful illegality, obstructed the Southwest Border Monitor's efforts to impose effective compliance systems on the
Company, failed to take action in response to alleged Western Union management efforts to undermine the Monitor, reappointed
the same directors to the Audit Committee and Corporate Governance and Public Policy Committees constituting a majority of
those committees between 2006 and 2014, appointed a majority of directors to the Compliance Committee who were directly
involved in overseeing the alleged misconduct as members of the Audit Committee and the Corporate Governance and Public
Policy Committee, caused the Company to materially breach the Southwest Border Agreement, caused the Company to repurchase
its stock at artificially inflated prices, awarded the Company’s senior executives excessive compensation despite their responsibility
for the Company’s alleged willful non-compliance with state and federal anti-money laundering laws, and failed to prevent the
former executive officer from misappropriating and profiting from nonpublic information when making allegedly unlawful stock
sales. The breach of fiduciary duty claim against the officer defendants includes allegations that they caused the Company and
allowed its agents to ignore the recording and reporting requirements of the Bank Secrecy Act and parallel anti-money laundering
laws and regulations for a prolonged period of time, authorized and implemented anti-money laundering policies and practices
that they knew or should have known to be inadequate, caused the Company to fail to comply with the Southwest Border Agreement
and refused to implement and maintain adequate internal controls. The claim for violations of section 14(a) of the Securities
Exchange Act includes allegations that the individual defendants caused the Company to issue proxy statements in 2012, 2013
and 2014 containing materially incomplete and inaccurate disclosures - in particular, by failing to disclose the extent to which the
Company’s financial results depended on the non-compliance with AML requirements, the Board’s awareness of the regulatory
and criminal enforcement actions in real time pursuant to the 2003 Consent Agreement with the California Department of Financial
Institutions and that the directors were not curing violations and preventing misconduct, the extent to which the Board considered
the flood of increasingly severe red flags in their determination to re-nominate certain directors to the Audit Committee between
2006 and 2010, and the extent to which the Board considered ongoing regulatory and criminal investigations in awarding multi-
million dollar compensation packages to senior executives. The corporate waste claim includes allegations that the individual
defendants paid or approved the payment of undeserved executive and director compensation based on the illegal conduct alleged
in the consolidated complaint, which exposed the Company to civil liabilities and fines. The corporate waste claim also includes
allegations that the individual defendants made improper statements and omissions, which forced the Company to expend resources
in defending itself in the City of Taylor Police and Fire Retirement System action described above, authorized the repurchase of
over $1.565 billion of the Company’s stock at prices they knew or recklessly were aware, were artificially inflated, failed to
maintain sufficient internal controls over the Company’s marketing and sales process, failed to consider the interests of the Company
and its shareholders, and failed to conduct the proper supervision. The claim for unjust enrichment includes allegations that the
individual defendants derived compensation, fees and other benefits from the Company and were otherwise unjustly enriched by
their wrongful acts and omissions in managing the Company. The claim for breach of fiduciary duties for insider selling and
misappropriation of information includes allegations that the former executive sold Company stock while knowing material,
nonpublic information that would have significantly reduced the market price of the stock. On March 16, 2015, the defendants
filed a motion to dismiss the consolidated complaint.
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