CURRENT MONTH (January 2021)

Corporate Law

MoneyGram Ducks Caremark Claim Despite “Feckless Oversight” of Wire Transfer Operations

By Sara F. Kirkpatrick, K&L Gates

Recently, in Richardson v. Clark, the Delaware Court of Chancery dismissed fiduciary duty claims brought under a Caremark theory of liability, arising from MoneyGram International’s alleged failure to comply with federal anti-money-laundering (AML) requirements, resulting in MoneyGram paying total fines of $225 million. In 2012, MoneyGram entered into a deferred prosecution agreement with federal prosecutors (DPA), made a $100 million restitution payment and implemented measures to prevent future wire fraud and money laundering, including by: (i) creating an internal compliance and ethics committee responsible for ensuring DPA compliance, as well as hiring an independent compliance monitor, (ii) implementing worldwide policies designed to ensure compliance with AML standards, and (iii) dis-incentivizing executives from contributing to compliance failures. The DPA was extended to 2021 due to continued alleged violations of AML laws, and MoneyGram payed an additional $125 million in restitution.

In this action, the plaintiff alleged that the MoneyGram directors acted in bad faith by ignoring red flags and failing to exercise the oversight needed to comply with the DPA. The complaint pointed to several purported “red flags” that suggested MoneyGram’s failure to comply with AML requirements, including federal orders, the DPA and various independent audit reports and recommendations received throughout the term of the DPA. However, the complaint also raised the actions taken by MoneyGram’s board of directors over a course of five years, during which MoneyGram implemented multiple practices and programs designed to adhere to AML laws. The Court dismissed the complaint, finding that, although MoneyGram did not satisfy its obligations under the DPA, the plaintiff failed to state a Caremark claim.


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