Retail News Breaks
Walmart responds to corruption charges
April 23rd, 2012
A Walmart store in Mexico City.
BENTONVILLE, Ark. – Walmart this weekend responded to a New York Times article alleging the retail giant covered up evidence of bribery in its Walmart de Mexico unit and that the cover-up was effected with the knowledge of Walmart's most senior management.
"We take compliance with the U.S. Foreign Corrupt Practices Act (FCPA) very seriously and are committed to having a strong and effective global anticorruption program in every country in which we operate," David Tovar, vice president of corporate communications at Walmart, in a statement released Saturday. "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."
Tovar added that last fall Walmart initiated an extensive investigation related to FCPA compliance through the audit committee of the board of directors, an investigation that is being conducted by outside legal counsel and forensic accountants.
"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," Tovar stated.
"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."
The company has also taken several actions in Mexico to strengthen FCPA compliance, Tovar went on, including establishing a dedicated FCPA compliance director who reports directly to Walmart's home office in Bentonville, Ark.
The New York Times article by David Barstow, published April 21, contends that bribes were regularly paid to obtain permits needed for store development all over Mexico and that Walmart's senior leadership in Mexico knew about the payments and took measures to conceal them from Walmart headquarters in Bentonville.
The story identifies Walmart vice chairman Eduardo Castro-Wright, who served as president and chief executive officer of Walmart de Mexico from 2002 to 2005, as the main driver behind the use of bribes. Castro-Wright is due to retire in September.
Details of the corrupt practices — intended to secure zoning approvals, lower environmental impact fees and obtain the goodwill of neighborhood leaders — were provided by a former attorney with Walmart de Mexico who was responsible for organizing the payments. That executive reported the activity to the then general counsel of Walmart International, who urged an independent investigation.
The core allegations assert that, although bribes were occasionally used before Castro-Wright took leadership of Walmart de Mexico, the practice became much more common after his appointment, when the unit undertook an aggressive expansion program that involved opening hundreds of stores. Memos detailing the debriefings of the whistle-blower were sent by the general counsel of Walmart International to several members of senior management.
According to the Times, the company turned to an outside law firm with extensive experience in FCPA cases, Willkie Farr & Gallagher, which recommended a full-scale, independent investigation. Instead, management opted to conduct a far more limited internal investigation over which it would retain control.
However, the article maintains, even that internal investigation was criticized as being too aggressive, and it was ultimately handed over to the general counsel of Walmart de Mexico, who had been seriously implicated in the original charges.
The Times article states that Walmart notified the Justice Department that it had begun an internal probe of possible FCPA violations after the company learned of the newspaper's investigation, which included examination of hundreds of internal company documents.
The Times said it provided its findings to Walmart weeks ago, and the retailer reportedly shared them with a number of executives, including Castro-Wright and H. Lee Scott, who was president and chief executive officer of Walmart at the time and is now a member of the board. Both executives declined to comment for the Times story.
As of late morning trading on Monday, Walmart's stock price was down $3.03, or almost 5%, to $59.42.
More Retail News Breaks >>