NY Times Exposes Wal-Mart’s Bribes for Building Permits

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Systemic bribery program resulted in expedited permits and rapid market expansion in Mexico.

Wal-Mart Stores Inc, the world’s largest retailer, hushed up a vast bribery campaign that top executives of its Mexican subsidiary carried out to build stores across that country instead of broadening the probe, the New York Times reported on Saturday.

The newspaper reported that Wal-Mart failed to notify law enforcement officials even after its own investigators found evidence of millions of dollars in bribes. The newspaper said the company shut down its internal probe despite a report by its lead investigator that Mexican and U.S. laws likely were violated.

The bombshell allegations have been picked up by Reuters, Bloomberg, Associated Press, Huffington Post and other news outlets.

The Times said that in September 2005, a senior Wal-Mart lawyer received an e-mail from a former executive at the company’s largest foreign unit, Wal-Mart de Mexico, describing how the subsidiary had paid bribes to obtain permits to build stores in the country.

The newspaper detailed the company’s 2005 investigation by examining hundreds of internal company documents, as well as more than 15 hours of interviews with the former executive, whose e-mail sparked the investigation and who recounted years of payoffs to government officials.

The Times said it looked at thousands of government documents related to store permit requests throughout Mexico and found many instances of permits being granted within weeks or days of Wal-Mart de Mexico’s payments to two outside lawyers who gave cash to the officials.

Confronted with evidence of widespread corruption in Mexico, top Wal-Mart executives focused more on damage control than on rooting out wrongdoing, the Times said.

Wal-Mart sent investigators to Mexico City and found a paper trail of hundreds of suspect payments totaling more than $24 million, but the company’s leaders then shut down the investigation and notified neither U.S. nor Mexican law enforcement officials, the Times reported.

According to the Times, current Wal-Mart Chief Executive Mike Duke and former CEO Lee Scott, who now sits on the company’s board, were among senior executives allegedly aware of the situation.

Wal-Mart said in a statement on Saturday it was “deeply concerned” about the allegations in the Times report and began an investigation into its compliance with the U.S. Foreign Corrupt Practices Act (FCPA) last fall. The company also said it had disclosed the probe to the U.S. Department of Justice and the Securities and Exchange Commission. The Times said this disclosure came after Wal-Mart learned of the Times investigation.

“Many of the alleged activities in The New York Times article are more than six years old. If these allegations are true, it is not a reflection of who we are or what we stand for,” said David Tovar, vice president of corporate communications at Wal-Mart.

The company said it had taken steps in Mexico to boost internal controls for stronger FCPA compliance. It declined to make any executives available for comment, and said the investigation was continuing.

Reuters, reporting on the New York Times story, quoted Richard Cassin, a U.S. FCPA lawyer, as saying Wal-Mart faces an uphill battle to convince the Justice Department and SEC that its problems are confined to Mexico.

“A corporate attitude toward the corruption there that allowed a cover-up to happen could signal wider compliance problems,” said Cassin, who writes an industry blog, FCPA Blog.

The Times said Wal-Mart’s own lead investigator, a former F.B.I. special agent, said there was reasonable suspicion to believe Mexican and U.S. laws had been violated and had recommended an expanded investigation.

The Times said that in a meeting where the investigation was discussed, then Chief Executive Lee Scott rebuked internal investigators for being too aggressive.

Days later, the paper said its records showed Wal-Mart’s top lawyer arranged to ship the internal investigators’ files on the case to Mexico City.

Primary responsibility for the investigation was then given to the general counsel of Walmex, who was alleged to have authorized bribes, the Times said. The general counsel then exonerated his fellow Walmex executives, the report said.

Click here for the New York Times story: Vast Mexico Bribery Case Hushed Up by Wal-Mart after Top-Level Struggle

Click here for the Reuters account: Wal-Mart Silenced Mexican Bribe Inquiry – NY Times

Click here for the Slatest account: Wal-Mart Hid Wide-Scale Bribery in Mexico

Click here for Bloomberg account – Wal-Mart ‘Hushed’ Mexican Bribery Allegation, NYT Reports


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