Wal-Mart runs into the Foreign Corrupt Practices Act

Posted by AzBlueMeanie:

Have you heard that Wal-Mart is currently facing investigations by the U.S. Justice
Department, the S.E.C., and Congress for violations of the Foreign Corrupt Practices Act, and by Mexican authorities for violating Mexican
law?

The New York Times' investigative reporters David Barstow and Alejandra Xanic von Bertrab reported on the corporate corruption on Monday. The Bribery Aisle: How Wal-Mart Got Its Way
in Mexico
:

Bribery[Wal-Mart wanted to build a store in San Juan Teotihuacán (barely a mile from its ancient pyramids, which draw tourists from around the world) on the outskirts of Mexico City. The town’s elected leaders had just approved a new zoning map that prohibited commercial development on Mrs. Pineda’s field, seemingly dooming Wal-Mart’s hopes.]

But 30 miles away in Mexico City, at the headquarters of Wal-Mart de
Mexico, executives were not about to be thwarted by an unfavorable
zoning decision. Instead, records and interviews show, they decided to
undo the damage with one well-placed $52,000 bribe.

The plan was simple. The zoning map would not become law until it was
published in a government newspaper. So Wal-Mart de Mexico arranged to
bribe an official to change the map before it was sent to the newspaper,
records and interviews show. Sure enough, when the map was published,
the zoning for Mrs. Pineda’s field was redrawn to allow Wal-Mart’s
store.

Problem solved.

Wal-Mart de Mexico broke ground months later, provoking fierce
opposition. Protesters decried the very idea of a Wal-Mart so close to a
cultural treasure. They contended the town’s traditional public markets
would be decimated, its traffic mess made worse. Months of hunger
strikes and sit-ins consumed Mexico’s news media. Yet for all the
scrutiny, the story of the altered map remained a secret. The store
opened for Christmas 2004, affirming Wal-Mart’s emerging dominance in
Mexico.

The secret held even after a former Wal-Mart de Mexico lawyer contacted
Wal-Mart executives in Bentonville, Ark., and told them how Wal-Mart de
Mexico routinely resorted to bribery, citing the altered map as but one
example. His detailed account — he had been in charge of getting
building permits throughout Mexico — raised alarms at the highest levels
of Wal-Mart and prompted an internal investigation.

But as The New York Times revealed in April,
Wal-Mart’s leaders shut down the investigation in 2006. They did so
even though their investigators had found a wealth of evidence
supporting the lawyer’s allegations.
The decision meant authorities were
not notified. It also meant basic questions about the nature, extent
and impact of Wal-Mart de Mexico’s conduct were never asked, much less
answered.

The Times has now picked up where Wal-Mart’s internal investigation was
cut off, traveling to dozens of towns and cities in Mexico
, gathering
tens of thousands of documents related to Wal-Mart de Mexico permits,
and interviewing scores of government officials and Wal-Mart employees,
including 15 hours of interviews with the former lawyer, Sergio Cicero
Zapata.

The Times’s examination reveals that Wal-Mart de Mexico was not the
reluctant victim of a corrupt culture that insisted on bribes as the
cost of doing business. Nor did it pay bribes merely to speed up routine
approvals. Rather, Wal-Mart de Mexico was an aggressive and creative
corrupter, offering large payoffs to get what the law otherwise
prohibited. It used bribes to subvert democratic governance — public
votes, open debates, transparent procedures. It used bribes to
circumvent regulatory safeguards that protect Mexican citizens from
unsafe construction. It used bribes to outflank rivals.

Through confidential Wal-Mart documents, The Times identified 19 store
sites across Mexico that were the target of Wal-Mart de Mexico’s bribes
.
The Times then matched information about specific bribes against permit
records for each site. Clear patterns emerged. Over and over, for
example, the dates of bribe payments coincided with dates when critical
permits were issued
. Again and again, the strictly forbidden became
miraculously attainable.

Thanks to eight bribe payments totaling $341,000, for example, Wal-Mart
built a Sam’s Club in one of Mexico City’s most densely populated
neighborhoods, near the Basílica de Guadalupe, without a construction
license, or an environmental permit, or an urban impact assessment, or
even a traffic permit. Thanks to nine bribe payments totaling $765,000,
Wal-Mart built a vast refrigerated distribution center in an
environmentally fragile flood basin north of Mexico City, in an area
where electricity was so scarce that many smaller developers were turned
away.

But there is no better example of Wal-Mart de Mexico’s methods than its
conquest of Mrs. Pineda’s alfalfa field. In Teotihuacán, The Times found
that Wal-Mart de Mexico executives approved at least four different
bribe payments — more than $200,000 in all — to build just a medium-size
supermarket. Without those payoffs, records and interviews show,
Wal-Mart almost surely would not have been allowed to build in Mrs.
Pineda’s field.

The Teotihuacán case also raises new questions about the way Wal-Mart’s
leaders in the United States responded to evidence of widespread
corruption in their largest foreign subsidiary
.

[One investigation was still under way when Wal-Mart’s top executives first learned of Mr. Cicero’s account of bribes in Teotihuacán.]

But Wal-Mart’s leaders did not tell Mexican authorities about his
allegations, not even after their own investigators concluded there was
“reasonable suspicion” to believe laws had been violated, records and
interviews show. Unaware of this new evidence, Mexican investigators
said they could find no wrongdoing in Teotihuacán.

Wal-Mart has been under growing scrutiny since The Times disclosed its
corruption problems in Mexico, where it is the largest private employer,
with 221,000 people working in 2,275 stores, supermarkets and
restaurants.

In the United States, the Justice Department and the Securities and Exchange Commission are investigating possible violations
of the Foreign Corrupt Practices Act, the federal law that makes it a
crime for American corporations or their subsidiaries to bribe foreign
officials. Mexican authorities and Congressional Democrats have also
begun investigations, and Wal-Mart has been hit by shareholder lawsuits
from several major pension funds.

Wal-Mart declined to discuss its conduct in Teotihuacán while it is continuing its own investigation.
The company has hired hundreds of lawyers, investigators and forensic
accountants who are examining all 27 of its foreign markets. It has
already found potentially serious wrongdoing, including indications of
bribery in China, Brazil and India. Several top executives in Mexico and
India have been suspended or forced to resign in recent months.

Wal-Mart has also tightened oversight of its internal investigations. It
has created high-level positions to help root out corruption. It is
spending millions on anticorruption training and background checks of
the lawyers and lobbyists who represent Wal-Mart before foreign
governments. The company has spent more than $100 million on
investigative costs this year.

This is a richly detailed investigative report that is quite lengthy. Read the whole report at The Bribery Aisle: How Wal-Mart Got Its Way
in Mexico
. This is what journalism is supposed to do.

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