Published on: April 25, 2012The Washington Post this morning reports that Walmart “has participated in an aggressive and high-priced lobbying campaign to amend the long-standing U.S. anti-bribery law that the company might have violated.
“The push to revisit how federal authorities enforce the statute has been centered at a little known but well-funded arm of the U.S. Chamber of Commerce where a top executive of Wal-Mart has sat on the board of directors for nearly a decade.”
The revelation was just one of the events unfolding yesterday in the Walmart bribery scandal, which first came to light over the weekend when the New York Times provided an inside look at Walmart’s Mexico division, suggesting that its fast growth over the past decade was fueled by bribes, and that top management was more concerned with details not being revealed and investigations not being allowed to move forward than it was with stopping the systematic corruption and adhering to US law that forbids American companies from bribing foreign officials.
You can - and should - read the entire story here.
The Post story says that Walmart’s efforts to water down the anti-bribery law “has intensified in the past two years, drawing on the backing of several large companies and trade groups such as the Retail Industry Leaders Association, where one of Wal-Mart’s top executives serves as a director. It also has involved high-powered lobbyists, including former attorney general Michael B. Mukasey.”
The Post notes that “in a speech last month, Secretary of State Hillary Rodham Clinton reiterated that the Obama administration has no intention of allowing a scaled-down FCPA.
‘We are unequivocally opposed to weakening the Foreign Corrupt Practices Act,’ Clinton said. ‘We don’t need to lower our standards. We need to work with other countries to raise theirs. I actually think a race to the bottom would probably disadvantage us’.”
Among yesterday’s other developments:
• The New York Times reports that Walmart said yesterday that “it had beefed up its internal controls to make sure it was complying with the Foreign Corrupt Practices Act, which prohibits American companies from bribing foreign officials to secure business. In a newly created position, a top-level compliance official will be responsible for ensuring that the company abides by the law and will oversee five regional compliance directors based in international markets.
“In Mexico,” the Times writes, “the retailer said it had bolstered its training, auditing and internal controls to ensure better compliance with laws against bribery.”
• The Wall Street Journal reports that the company’s soon-to-retire vice chairman, Eduardo Castro-Wright, who was prominently mentioned in the Times story as sanctioning and even orchestrating the bribes, yesterday resigned from the Met Life board of directors, attributing the move to “recent events” and “outside distractions” that he predicted “will be resolved favorably within the next several months.”
• Bloomberg reports that Walmart’s audit committee “has hired New York law firm Cahill, Gordon & Reindel LLP as legal counsel in its probe of bribery allegations.”
• The New York Times has a piece this morning about how bribery is a fact of life in Mexico.
“It is an article of faith here that the fastest way to resolve difficulties with a health inspector, traffic police officer or nettlesome ministry functionary is to pay a sum under the table,” the Times writes. “A baroque bureaucracy, something economists have long warned slows the potential for growth here, and low pay for public servants leads to peso-greased shortcuts for the simplest transactions ... Fiscal watchdogs chafe at the way bribery and other forms of corruption are taken in stride here. Studies have found it costs the economy upward of $114 billion — 10 percent of its gross domestic product — and dampens potential investment.”
In many ways, the Times reports, the Walmart bribery scandal was not an enormous surprise to people who know how business is done in Mexico. “What raised eyebrows were the amounts involved — more than $24 million — and that the surreptitious behavior, which Mexicans are confronted with on a much smaller scale in their everyday lives, was so publicly revealed.”
However, the Times also reports that while investigations are being launched in the US into Walmart’s behavior south of the border, there is no evidence yet that the Mexican government plans to initiate a probe into the alleged pattern of bribes - apparently because the bribery had taken place “at the municipal and state level, outside federal jurisdiction, and did not indicate involvement of federal officials.”
The Times also notes that “a spokesman for Enrique Peña Nieto, the front-runner in the Mexican presidential race, set to vote July 1, said the candidate was in favor of a government investigation of the allegations against Wal-Mart, echoing lawmakers from his party. Another major party candidate, Andrés Manuel López Obrador, who has often criticized Wal-Mart’s practices, said Sunday that the case showed the government was ‘rotten’.”
- KC's View:
- I continue to be amused by the defense being made by Walmart spokesman David Tovar, who keeps saying that the allegations are all six years old and not a fair representation of the company’s culture.
Which would be fair, except that the real problem here is not the pattern of bribery - which is bad enough - but the cover-up that was engineered at the highest levels of Walmart’s leadership, by many of the same people who have been running the company for the past six years.
This is an important paragraph from this morning’s Times story:
“In late 2011 the Justice Department opened a Foreign Corrupt Practices Act investigation into Wal-Mart — apparently after the corporation had learned of The Times’s reporting and disclosed the problems to the government. Wal-Mart said at the time that it was conducting an internal inquiry, a person with knowledge of the matter confirmed.”
In other words, Walmart only moved when it had to.
And the Post story about Walmart contributing to a lobbying effort designed to gut the law - though not everyone would put it that way - does not exactly do much to help the retailer’s sullied image.
The question remains: What did you know and when did you know it?
Tovar won’t be able to take the heat in early June at the Walmart annual meeting, when top management would typically meet with investors, analysts and the media. The blades are already being sharpened in many media outlets as reporters look for an opportunity to cut to the chase.
Casto-Wright’s resignation from the Met Life board is, I suspect, just the first of several such moves. The dominoes will continue to fall.