MEXICO CITY - In September 2005, a senior Walmart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Walmart de Mexico. In the e-mail and follow-up conversations, the former executive described how Walmart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country.
The former executive gave names, dates, and bribe amounts. He knew so much, he explained, because for years he had been the lawyer in charge of obtaining construction permits for Walmart de Mexico.
Walmart Stores Inc. 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 Walmart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Walmart’s headquarters in Bentonville, Ark. In a confidential report to his superiors, Walmart’s lead investigator, a former FBI 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 Walmart expand the investigation.
Instead, an examination by The New York Times found, Walmart’s leaders shut it down.
Neither US nor Mexican law enforcement officials were notified. None of Walmart de Mexico’s leaders were disciplined. Indeed, its chief executive, Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Walmart in 2008.
Until this article, the allegations and Walmart’s investigation had never been publicly disclosed.
But the Times examination uncovered a prolonged struggle at the highest levels of Walmart, a struggle that pitted the company’s much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.
Under fire from labor critics, worried about news media leaks, and facing a sagging stock price, Walmart’s leaders recognized that the allegations could have devastating consequences, documents and interviews show. Walmart de Mexico was the company’s brightest success story, pitched to investors as a model for future growth. (Today, one in five Walmart stores is in Mexico.) Confronted with evidence of corruption in Mexico, top Walmart executives focused more on damage control than on rooting out wrongdoing.
In one meeting where the bribery case was discussed, H. Lee Scott Jr., then Walmart’s chief executive, rebuked internal investigators for being overly aggressive. Days later, records show, Walmart’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 Walmart de Mexico - a remarkable choice since the same general counsel was alleged to have authorized bribes.
The general counsel promptly exonerated his fellow Walmart de Mexico executives.
When Walmart’s director of corporate investigations - a former top FBI official - read the general counsel’s report, his appraisal was scathing. “Truly lacking,’’ he wrote in an e-mail to his boss. The report was nonetheless accepted by Walmart’s leaders as the last word on the matter.
In December, after learning of the Times reporting in Mexico, Walmart informed the Justice Department that it had begun an internal investigation into possible violations of the Foreign Corrupt Practices Act, which makes it a crime for US corporations and their subsidiaries to bribe foreign officials. Walmart said the company had learned of possible problems with how it obtained permits, but stressed that the issues were limited to “discrete’’ cases.
‘’We do not believe that these matters will have a material adverse effect on our business,’’ the company said in a filing with the Securities and Exchange Commission.
But the Times examination found credible evidence that bribery played a significant role in Walmart’s rapid growth in Mexico, where it is the largest private employer.
A Walmart spokesman confirmed that the company’s Mexico operations - and its handling of the 2005 case - were now a major focus of its inquiry.
“If these allegations are true, it is not a reflection of who we are or what we stand for,’’ said the spokesman, David W. Tovar. “We are deeply concerned by these allegations and are working aggressively to determine what happened.’’
In the meantime, Tovar said, Walmart is taking steps in Mexico to strengthen compliance with the Foreign Corrupt Practices Act. “We do not and will not tolerate noncompliance with FCPA anywhere or at any level of the company,’’ he said.
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Also see:
Walmart faces bribery fallout
Walmart to get a compliance officer
At least Walmart will cut you a DVD library for the outrageously low price of $2 a disk:
"Consumers who bring in physical DVDs and Blu-ray discs can pay $2 per disc to be able to access the movies through Walmart’s Vudu online movie service on computers, mobile devices, Internet-connected TVs, and game consoles....
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Next Day Update:
"Mexico scandal pressures Walmart in US; Its moves get extra scrutiny" by Stephanie Clifford and Steven Greenhouse | New York Times, April 30, 2012
NEW YORK - In Los Angeles, a Walmart building permit is getting a once-over. In New York, the City Council is investigating a possible land deal with the retailer’s developer in Brooklyn. A state senator in California is pushing for a formal audit of a proposed Walmart in San Diego. And in Boston and its suburbs, residents are pressuring politicians to disclose whether they took contributions from the company.
All of it in the past week.
Walmart has worked hard to polish its reputation and give elected officials, community groups, and shoppers a reason to say yes to their stores. Now, the revelation of a bribery scandal involving the retailer’s Mexican subsidiary is giving critics a new reason to say no....
Last week, The New York Times disclosed Walmart had found credible evidence that its Mexican subsidiary - the retailer’s biggest foreign operation - had paid bribes and that an internal inquiry had been suppressed at corporate headquarters in Arkansas. The Mexican government has begun investigations.
Felipe Calderon, Mexico’s president, said he was “indignant’’ about the company’s behavior, and some elected US officials joined the chorus of outrage.
Walmart last week took several steps intended to demonstrate it was serious about getting to the bottom of the scandal - and preventing anything like it from happening again - but the damage could be problematic, analysts said.
“It gives more power to critics, and that might prove to be the biggest negative of all,’’ said David Strasser, at Janney Montgomery Scott.
In the United States, Walmart has largely exhausted places in suburban and rural areas to build stores and is focusing on many of the nation’s biggest cities. That means a lot of red tape for approvals. In the last few years, Walmart has smoothed the way with donations to politicians and local nonprofit organizations, and arguments that it helps economic growth and provides healthy groceries.
Steven Restivo, a Walmart Stores Inc. spokesman, said the bribery investigation would not affect expansion plans. “We remain committed to opening stores all across the United States, including large cities,’’ he said....
For Walmart, the new obstacles come after a long and concerted battle to win over its critics. For years, labor unions said it did not pay fair wages. Environmentalists said it was a polluter. And female employees, claiming discrimination, were locked in a lawsuit against the company.
And city after city denied Walmart entry.
Yeah, poor Walmart.
About seven years ago, as Wall Street analysts began to refer to the negative media coverage, the stock price fell and Walmart decided to burnish its image.
With the help of Leslie Dach, a former adviser to President Bill Clinton hired in 2006, Walmart executives met with activists to improve its labor and health care records, outline an aggressive conservation plan, position Walmart as a company bringing fresh, affordable food to underserved areas, and develop initiatives to help promote women.
Along with a few other thing$, if you know what I mean.
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