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April 22, 2012

Report: Wal-Mart hushed up bribe network in Mexico

NEW YORK — Wal-Mart Stores Inc. hushed up a vast bribery campaign that top executives of its Mexican subsidiary carried out to build stores across that country, according to a published report.

The New York Times reported Saturday 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 bribery campaign was reported to have first come to the attention of senior executives at Wal-Mart in 2005, when a former executive of its largest foreign subsidiary, Wal-Mart de Mexico, provided extensive details of a bribery campaign it had orchestrated to win market dominance.

The Mexican executive, previously the lawyer in charge of obtaining construction permits, said in emails and follow-up conversations that Wal-Mart de Mexico paid bribes to obtain permits throughout the country in its rush to build stores nationwide, the Times reported.

Wal-Mart’s growth in Mexico has been so rapid that one of every five Wal-Mart stores now is in that country. It is Mexico’s largest private employer, with 209,000 employees there.

The newspaper said that only after learning of its investigation did Wal-Mart inform the U.S. Justice Department in December 2011 that it had begun an internal investigation into possible violations of the Foreign Corrupt Practices Act. Under that law, it is illegal for U.S. corporations and their subsidiaries to bribe foreign officials.

Wal-Mart, which is based in Bentonville, Ark., said Saturday that it takes compliance with that law very seriously. It also noted that many of the “alleged activities” in the Times article occurred more than six years ago.

“If these allegations are true, it is not a reflection of who we are or what we stand for,” spokesman David Tovar said. “We are deeply concerned by these allegations and are working aggressively to determine what happened.”

Wal-Mart said its latest, ongoing investigation is being handled by outside lawyers and accountants who are experts with the Foreign Corrupt Practices Act. The company also said it has tightened procedures and expanded training in Mexico to ensure compliance with the law.

The Times said its investigation uncovered a lengthy struggle at the highest levels of Wal-Mart, pitting the company’s commitment to high moral and ethical standards against its relentless pursuit of growth.

Wal-Mart had sent investigators to Mexico City, where the newspaper report said they quickly discovered evidence that included a paper trail of hundreds of suspect payments totaling more than $24 million.

But according to the Times, top Wal-Mart executives kept quiet about the campaign and were more focused on damage control than on exposing the corruption. Then-CEO H. Lee Scott Jr. reportedly rebuked internal investigators at one meeting for being overly aggressive. Shortly thereafter, the newspaper said, the investigation was turned over to the general counsel for Wal-Mart de Mexico, who himself was alleged to have authorized bribes. He swiftly exonerated his fellow executives.

 

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