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Wal-Mart ensnared in Mexican bribery probe
NEW YORK (CNNMoney) -- Wal-Mart says it has been conducting an "extensive investigation" since 2011 into its compliance with a federal law that prohibits American companies from bribing foreign officials.
The statement came in response to a New York Times article published online Saturday alleging that top executives in Wal-Mart (WMT, Fortune 500) Mexican division attempted to conceal a widespread bribery scheme from the company's headquarters in Bentonville, Ark.
The Times story alleges that executives at Wal-Mart headquarters -- including former CEO H. Lee Scott -- were more concerned with damage control from the matter than with correcting the situation.
The allegations date back to 2005, when a former Wal-Mart de Mexico executive supposedly e-mailed one of Wal-Mart's senior lawyers, spelling out how the company had paid more than $24 million in bribes to secure construction permits throughout Mexico.
The Times said its investigation included 15 hours of interviews with former Wal-Mart executive Sergio Cicero Zapata, who said he had personally facilitated many of the alleged payoffs, which bought zoning approvals and cleared bureaucratic hurdles.
Cicero allegedly pointed to Eduardo Castro-Wright, who was CEO of Wal-Mart de Mexico from 2003-2005, as one of the main proponents behind the payoffs. Castro-Wright has not been disciplined and his role remains unclear, according to the Times.
Castro-Wright was a popular figure within Wal-Mart, and hailed for his success at Wal-Mart de Mexico, according to the Times. Under his leadership, Wal-Mart de Mexico's net sales grew by 25%, according to a 2005 annual report. Castro-Wright was promoted to chief operating officer of Wal-Mart USA in 2004, quickly moving up to become CEO of the U.S. division a year later. In 2008, he was promoted to vice chairman.
According to the Times, Wal-Mart acted on the information by swiftly conducting its own investigation -- and then just as swiftly moving to conceal it from U.S. and Mexican authorities.
"We are working hard to understand what occurred in Bentonville more than six years ago and are committed to conducting a complete investigation before forming conclusions," said David Tovar, Wal-Mart's vice president of corporate communications.
He added that Wal-Mart has already met with the U.S. Department of Justice and the Securities and Exchange Commission, and that it disclosed the investigation to shareholders in a regulatory filing in December.
Tovar said the company initiated a review of its worldwide anti-corruption practices and policies a year ago."We are committed to getting to the bottom of this matter," he said, adding that Wal-Mart has taken a number of steps in Mexico to strengthen its compliance with the U.S. Foreign Corrupt Practices Act.
Along with its joint venture partner, Wal-Mart owns 2,099 stores in Mexico, including 213 Walmart Supercenters and 126 Sam's Clubs. Wal-Mart employs nearly 190,000 associates in the country, according to its website.
Re: Wal-Mart ensnared in Mexican bribery probe
It would be impossible for Wal-mart to do business in Mexico without paying bribes. Impossible. Permits simply won't be granted, land leases will never be approved, etc. When in Rome...
At the end of the day, I don't think it will make a dent for them. People would shop at Walmart if they had child slaves actively making the products in front of them. I truly believe that. They've destroyed competition in many communities and fill a void that now makes them a Too Big To Fail retailer as far as consumers are concerned.
But as far as the bolded, that may be but it doesn't make it right. They don't have to do business in Mexico at all. They chose to. If you care at all about the integrity of your company then don't expand to other countries where you can't operate without being corrupt. If you don't care about integrity, then don't act all surprised and concerned when a newspaper outs you after you've known damned well what you did for years and covered it up. Like I said, I doubt shoppers will care at all.
So maybe they shouldn't be doing business in Mexico.
Ha! I just took my 2nd Q ethics class and it was on the Forigen Corrupt Practices Act. One of the senarios had to do with getting the power turned on at a plant and the company rep requiring an "advance". The answer was still "you can't bribe them." Thems the rules.
And here I thought those ethics classes would never be useful.
That's ridiculous! Mexicans want cheap Chinese crap too
Mexico is a huge market and it would be crazy for Wal-mart not to go in. But going in means playing on their terms.
The rest of the world doesn't have the same standards of business ethics as the US purports to have. Businesses and people have to adapt to the local culture in order to be successful. As appalling as bribes may be to you, it's a normal and expected practice of business transactions in Mexico.
Never said it was legal. It's not legal in Mexico either! If the US wants to bring Wal-mart up on charges then so be it. My point is that bribery is a common and expected business practice in Mexico. Just a little grease for the wheels... I would actually be more shocked to find out that Wal-mart was refusing to pay bribes.
The UK has Bribery Act that is similar to, if not more strict than, the US FCPA. Australia has laws about bribing foreign officials, Singapore has anti-corruption laws, etc. Not to say it is the rest of the world, but we aren't alone in what we require/aspire to.
Also, the "local culture" you stress adapting to - do you think there is a line to be drawn somewhere? I don't think bribery is that big a deal in this type of situation, but there are tons of things I won't do just because it's the local culture.
It's not just about that. Going over there and all out supporting the corruption that is ruining Mexico is a sh*tty thing to do. There are people working hard in Mexico to make it a place that isn't like that and here Walmart goes trying to make a buck off the same people they are ultimately hurting.
Why is it "crazy" to have ethics? There are plenty of busineses that decide not to break the law everyday. Just because one can doesn't make it a good idea. It doesn't make Walmart good business, it makes these people crooks who also happen to be good at creating a market for what they are selling.
It's the norm to do a lot of heinous stuff in a number of other countries. It doesn't make it a good effin idea and certainly doesn't excuse a billion dollar company that was a billion dollar company doing borderline unethical stuff here. They didn't need to go across the border to support the corrupt people who are making Mexico a hot a** mess.
Of course there's a line to be drawn. But in this case, if Wal-mart didn't "grease the wheels," it would find itself mired in pointless bureaucracy and red tape. So I'm more forgiving of this sin than disposing of toxic chemicals into local water supplies, for example.
I see what you're saying. There are definitely degrees of bad. But I still can't wonder if perhaps by paying for it they are just contributing to that culture in Mexico. Perhaps if companies in the US and elsewhere didn't do business there until they got their act cleaned up, the corruption would come to an end sooner in an attempt to attract more foreign investment.
Of course, China basically proves this is not the case. A girl can dream, huh.
Sorry, but I lived in Mexico and my rose-colored glasses got tarnished. Corruption is endemic in Mexico. The police, the politicians, everyone's for sale. Wal-mart "taking a stand" against corruption by refusing to pay bribes would make for a very lonely Wal-mart. Soriana, HEB, and other competitors would laugh their way to the bank.
Exactly what I was going to say.