Wal-Mart de Mexico bribery scandal revealed

Unlike other previous scandals faced by the world’s largest retailer, allegations that widespread bribery was conducted by a senior level Wal-Mart executive could reach the retailer’s board room.

The New York Times is reporting a “campaign of bribery” that was allegedly managed by former Wal-Mart de Mexico CEO Eduardo Castro Wright. The bribery schemes allowed Wal-Mart to obtain construction and other permits quicker than its competitors.

According to the New York Times report, a former Wal-Mart lawyer who obtained the permits through the bribery system has provided documents to prove his case.

The NYT article notes: Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark. In a confidential report to his superiors, Wal-Mart’s lead investigator, a former F.B.I. special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated.”

The lead investigator recommended that Wal-Mart expand the investigation.

Instead, an examination by The New York Times found, Wal-Mart’s leaders shut it down.

Wal-Mart has in previous filings admitted to internal investigations related to the U.S. Foreign Corrupt Practices Act, but the revelations from the NYT story provides details on how the high the investigation may reach.

Some Wal-Mart watchers and legal experts say the bribery activity could result in the removal or early retirement of Lee Scott, a Wal-Mart board member and the Wal-Mart CEO during the alleged bribery action. Wal-Mart CEO Mike Duke may not be immune from the results of further investigation by U.S. officials.

Wal-Mart released on Saturday (April 21) a lengthy response to the NYT article. The response included a rare video from David Tovar, vice president of corporate communications at Wal-Mart.

“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. We are deeply concerned by these allegations and are working aggressively to determine what happened,” noted the statement from Tovar.

Wal-Mart is working with the U.S. Department of Justice and the Securities and Exchange Commission “to self-disclose the ongoing investigation on this matter.”

“We are committed to getting to the bottom of this matter. The audit committee and the outside advisors have at their disposal all the resources they may need to pursue a comprehensive and thorough investigation,” Tovar noted.

Following the complete statement from Wal-Mart.
“We take compliance with the U.S. Foreign Corrupt Practices Act (FCPA) very seriously and are committed to having a strong and effective global anti-corruption program in every country in which we operate.

“We will not tolerate noncompliance with FCPA anywhere or at any level of the company.

“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. We are deeply concerned by these allegations and are working aggressively to determine what happened.

“In the fall of last year, the Company, through the Audit Committee of the Board of Directors, began an extensive investigation related to compliance with the FCPA. That investigation is being conducted by outside legal counsel and forensic accountants, who are experts in FCPA compliance, and they are reporting regularly to the Audit Committee.

“We have met voluntarily with the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to self-disclose the ongoing investigation on this matter. We also filed a 10-Q in December to inform our shareholders of the investigation. The Company’s outside advisors have and will continue to meet with the DOJ and SEC to report on the progress of the investigation.

“We are committed to getting to the bottom of this matter. The audit committee and the outside advisors have at their disposal all the resources they may need to pursue a comprehensive and thorough investigation.

“We have taken a number of actions in Mexico to establish stronger FCPA compliance. We have implemented enhanced FCPA compliance measures including:
• robust policies and procedures;
• internal controls;
• training;
• enhanced auditing procedures; and
• issue escalation and remediation protocols.

“In addition, we have established a dedicated FCPA compliance director in Mexico that reports directly to our Home Office in Bentonville.

“The investigation is ongoing and we don’t have a full explanation of what happened. It would be inappropriate for us to comment further on the specific allegations until we have finished the investigation.

"We are working hard to understand what occurred in Bentonville more than six years ago and are committed to conducting a complete investigation before forming conclusions. We don't want to speculate or weave stories from incomplete inquiries and limited recollections, as others might do.

“Unfortunately, we realize that, at this point, there are some unanswered questions. We wish we could say more but we will not jeopardize the integrity of the investigation.

“We are confident we are conducting a comprehensive investigation and if violations of our policies occurred here, we will take appropriate action.

“Over the last several years, Walmart has focused diligently on FCPA compliance and implemented a series of changes to our FCPA compliance program to further strengthen them. This work is ongoing and continues today.

“As part of that effort, in the spring of 2011, we initiated a worldwide review of our anti-corruption program. We are taking a deep look at our policies and procedures in every country in which we operate. This includes developing and implementing recommendations for FCPA training, anti-corruption safeguards, and internal controls.

“Acting with integrity is the essence of our corporate culture. We have the same high standards of integrity for every associate – regardless of his or her position – and everyone is held accountable for those standards.

“In a large global enterprise such as Walmart, sometimes issues arise despite our best efforts and intentions. When they do, we take them seriously and act as quickly as possible to understand what happened. We take action and work to implement changes so the issue doesn’t happen again. That’s what we’re doing today.

“Walmart is committed to doing the right thing and we are working hard every day to become an even better company.”