• Justice Department, SEC said not to see broad China bribery
  • U.S. probe said to uncover stronger evidence in Brazil, India

U.S. prosecutors are in the final phase of a globe-spanning investigation into bribery allegations at Wal-Mart Stores Inc., according to people familiar with the matter, who said work in China has been bedeviled by disclosure rules and lack of evidence.

As part of a four-year investigation into alleged corruption at the retail giant, Justice Department officials over the past few months have been interviewing former executives and others associated with Wal-Mart’s China operations, according to people familiar with the matter. Investigators haven’t found widespread corrupt payments to government officials there, said the people, who asked not to be named because the investigation is confidential.

That’s consistent with results as investigators have chased bribery allegations across the globe, starting with Mexico. In November 2011, Wal-Mart disclosed possible violations in Mexico to the Justice Department and Securities and Exchange Commission. The New York Times reported in April 2012 that company officials in Mexico had paid $24 million in alleged bribes and then shut down an internal investigation. 

Overhauling Compliance

Wal-Mart, which has said it’s cooperating with U.S. authorities, has spent almost three-quarters of a billion dollars on its own global investigation and to overhaul its compliance operations. Greg Hitt, a spokesman, declined to comment on the investigation process. Compliance programs are “a key priority” for Wal-Mart that the company continues to review and strengthen around the world, Hitt said.

The retailer’s China operation was supposed to be one of the last examined for possible misconduct under the government’s timeline for the investigation, which also covered its businesses in Brazil and India, according to one of the people. The U.S. probe could wrap up by year-end, according to another of the people.

Peter Carr, a spokesman for the Justice Department, and Judy Burns, a spokeswoman for the SEC, declined to comment.

Sufficient Controls

The Wal-Mart case has posed challenges for investigators. Much of the conduct uncovered in Mexico was too old to be used as evidence, according to the people. The government may be able to build stronger cases in Brazil and India, according to two of the people, who added that it’s unclear whether any individuals will be charged.

At the least, prosecutors are likely to bring a case against the company for not having sufficient controls to detect and prevent violations of the Foreign Corrupt Practices Act, two of the people said. The law bars payment to foreign officials to obtain or retain business and requires companies to maintain internal controls to prevent corruption.

In its most recent quarterly report, Wal-Mart said that while it didn’t believe the eventual penalty would be material to the company’s operations, a loss from the matter is “probable.”

Since 2012, Wal-Mart has spent more than $730 million responding to the allegations, with a large amount going toward revamping its compliance operations, according to regulatory filings. Most of the company’s leadership has changed since 2012, including the chief executive officer and heads of China and Brazil.

China Interviews

Over the past several months, U.S. prosecutors have been questioning people about Wal-Mart’s China business in interviews in Texas, Washington and Virginia, where a grand jury was convened to consider criminal charges, the people said. Some of the questions have been about Wal-Mart’s acquisitions in China between 2007 and 2011, the people said.

Those years were the height of Wal-Mart’s rush to open stores in the country during a large expansion. Some outlets were opened without the proper permits, such as those required by the fire marshal, said a former Wal-Mart executive who worked in China and asked not to be named because the investigation is ongoing. Wal-Mart associates allegedly provided favors to Chinese officials, such as entertainment and gifts, according to one person familiar with the U.S. investigation.

While such conduct may violate the FCPA, if investigators don’t find evidence of corrupt payments, the U.S. may choose to bring only civil penalties levied by the SEC rather than criminal charges. 

The lack of clarity about whether the U.S. could build a corruption case in China was one reason why it looked into other countries first, one of the people said. Additionally, Chinese laws prevent the disclosure of certain information outside the country, the person said.

Wal-Mart’s internal probe also put China last, two of the people said. The main production of documents from the internal probe wrapped up last year, one of the people said.

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