Wal-Mart Stores Inc. (WMT) said it is investigating allegations that some executives bribed officials in Mexico to clear the way for store openings in the early 2000s and that a subsequent internal probe may have fallen short.
The retailer yesterday confirmed the new investigation after a story in the New York Times alleged Wal-Mart had found evidence of more than $24 million in bribes made to Mexican officials to speed store openings. Top executives, including then-Chief Executive Officer and current board member Lee Scott, were briefed about the alleged payments after they were first probed in 2005, the newspaper reported.
Wal-Mart, the world’s largest retailer, said it has met voluntarily with the U.S. Department of Justice and the Securities and Exchange Commission to discuss the case. The Bentonville, Arkansas-based company is also enhancing its audit procedures and internal controls to escalate to management possible violations of the U.S. Foreign Corrupt Practices Act.
“We take compliance with the U.S. Foreign Corrupt Practices Act very seriously and are committed to having a strong and effective global anti-corruption program in every country in which we operate,” David Tovar, a Wal-Mart spokesman, said in a statement yesterday. “We will not tolerate noncompliance with FCPA anywhere or at any level of the company.”
Wal-Mart started the latest investigation last fall through the board’s auditing committee. Tovar said in the statement that the company hasn’t reached any conclusions yet. Wal-Mart will conduct training for its employees and put in place more robust policies and controls, Tovar said in the statement.
Wal-Mart expanded rapidly in Mexico in the 2000s. The company has about 2,088 stores in Mexico, according to its annual report, out of more than 10,000 locations worldwide.
The Times article identified Eduardo Castro-Wright, now a Wal-Mart vice chairman, as a central figure in the expansion of the alleged payments starting after his arrival at Wal-Mart de Mexico in 2001. In a telephone interview, Tovar declined to discuss the executive’s future. Castro-Wright is set to retire July 1 and still works for Wal-Mart.
The newspaper detailed the company’s 2005 investigation by examining hundreds of internal documents, as well as more than 15 hours of interviews with former Wal-Mart de Mexico executive Sergio Cicero Zapata, who recounted years of payoffs to government officials.
The Times said it looked at thousands of government documents related to store permit requests throughout Mexico and found many instances of permits being granted within weeks or days of Wal-Mart de Mexico’s payments to two outside lawyers who gave cash to the officials.
The Times report said that Wal-Mart decided in February 2006 to turn the investigation over to the then-general counsel of the Mexican subsidiary, Jose Luis Rodriguezmacedo Rivera, himself a target of the investigation. Rodriguezmacedo finished the probe within weeks, concluding there was no evidence of bribes paid to Mexican government officials, the Times said.
Rodriguezmacedo declined to comment to the newspaper, and attempts by Bloomberg to reach him were unsuccessful.
The Times said that in December 2011, after learning of the newspaper’s reporting in Mexico, Wal-Mart told the Justice Department of its investigation into whether some of its actions violated U.S. anti-corruption laws. The company is investigating permitting, licensing and inspections, according to its form 10-Q filed with the SEC on Dec. 8, 2011.
Wal-Mart also has hired outside advisers to help with the investigation.
“In a large global enterprise such as Wal-Mart, sometimes issues arise despite our best efforts and intentions,” Tovar said in the statement. “When they do, we take them seriously and act as quickly as possible to understand what happened. We take action and work to implement changes so the issue doesn’t happen again.”
The allegations will do nothing to help Mexico fight a reputation for government corruption. Latin America’s second- biggest economy last year fell to No. 100 out of 183 countries for perceived levels of corruption, according to Berlin-based Transparency International.
Mexican Finance Minister Jose Antonio Meade said his government hasn’t decided whether to open a probe of its own. The government is collecting more information on the allegations, he said.
“I’ve seen the story and we’re looking into it,” Meade said in an interview in Washington after participating in a panel discussion at the World Bank. He later told reporters in the hallway that officials “don’t have enough elements” to open an investigation and “when we have enough, we’ll decide how to proceed.”