In response to a report in the New York Times about Wal-Mart Stores Inc. (WMT) having hushed up a vast bribery campaign at its Mexican subsidiary, the retail giant said Saturday that it was deeply concerned by these allegations. The company confirmed it is investigating into possible violations of the U.S. Foreign Corrupt Practices Act or FCPA at its Mexican unit.
According to the NYT report, Wal-Mart's top executives at its headquarters in Bentonville, Arkansas, learned of allegations of "widespread bribery" at its largest foreign subsidiary, Wal-Mart de Mexico, but hushed up the matter. Neither did the retail giant expand an internal probe of the matter nor notify American or Mexican law enforcement officials.
A senior Wal-Mart lawyer reportedly received an email in September 2005 from a former executive at Wal-Mart de Mexico, describing how the Mexican unit had orchestrated a campaign of bribery to win market dominance in that country. According to the former executive, the Mexican unit paid bribes to obtain permits in virtually every corner of the country.
The NYT reported that the former executive gave names, dates and bribe amounts to the lawyer. Investigators dispatched by Wal-Mart to Mexico unearthed evidence of widespread bribery, with suspect payments totaling more than $24 million.
They also found documents showing that Wal-Mart de Mexico's top executives knew about the payments, but had taken steps to hide them from Wal-Mart's headquarters in Bentonville, Arkansas.
Wal-Mart's lead investigator had reportedly recommended that the company expand the investigation as there was reasonable suspicion to believe Mexican and U.S. laws had been violated.
However, top Wal-Mart executives recognized that the allegations could have devastating consequences on the company. They focused more on damage control than on eliminating the wrongdoing, and thus, shut down the investigation.
The then chief executive of the Mexican unit, Eduardo Castro-Wright, was reportedly identified as the driving force behind years of bribery, but he was promoted to vice chairman of Wal-Mart in 2008.
In response to the NYT report, David Tovar, Vice President of Corporate Communications, Wal-Mart said, "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."
Further, Wal-Mart said it met voluntarily with the U.S. Department of Justice and the Securities and Exchange Commission to self-disclose its ongoing investigation on this matter. The company also filed a Form 10-Q in December to inform its shareholders of the investigation.
Wal-Mart also said it has taken several actions in Mexico to establish stronger FCPA compliance, including the establishing of a dedicated FCPA compliance director in Mexico that reports directly to its head office in Bentonville.
The company said it would be inappropriate for it to comment further on the specific allegations until it has completed the investigation.
WMT closed Friday's trading at $62.45, up $0.70 or 1.13 percent on 9 million shares.
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