There are continuing developments 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.
Among them:
• The Washington Post reports that the two Congressmen conducting an inquiry into the bribery scandal - Rep. Henry Waxman (D-California) and Rep. Elijah Cummings (D-Maryland) - have written letters to the US Chamber of Commerce and the Retail Industry Leaders Association (RILA) requesting information about their ongoing lobbying efforts aimed at watering down the Foreign Corrupt Practices Act (FCPA).
“In their letters,” the story says, “the lawmakers expressed concern that there might be a conflict of interest if Wal-Mart was backing a campaign to soften enforcement of the statute at the same time corporate executives were examining their own corruption allegations in Mexico.”
The Post reported earlier this week that “a top Wal-Mart official sat on the board of the Chamber’s Institute for Legal Reform as that organization sought to change the FCPA,” and that “a senior Wal-Mart executive also serves as a director at the Retail Industry Leaders Association.”
Walmart denies any role in those lobbying efforts.
“Wal-Mart has never lobbied on FCPA,” David Tovar, vice president for corporate communications at Walmart, tells the Post. “Simply because Wal-Mart is a member of an organization does not mean we agree with every position they take.”
• The New York Times reports that Walmart’s timing could not be worse because the federal government is ramping up enforcement of the FCPA.
“Criminal enforcement under the act has soared,” the Times writes, “from just two enforcement actions in 2004 to 48 in 2010. The dollar amount of fines imposed by the Justice Department and the Securities and Exchange Commission has increased even more, including a record-setting $800 million paid by Siemens in 2008. There are currently at least 100 open investigations, specialists estimate.”
• Reuters reports that “Mexican President Felipe Calderon said on Wednesday that allegations the Mexican unit of Wal-Mart Stores Inc (WMT) sought to bribe officials in Mexico to grow its business there had made him ‘very indignant’.” He went on to say, “The company has certainly generated many jobs in Mexico and done good things, but what's not right is doing business on the basis of bribes.”
• There is an analysis piece on Business-Standard.com suggesting that making the legal case against Walmart may be tougher than some think. “U.S. law prohibits companies from making under-the-table payoffs to get new contracts from foreign officials,” the piece says. “But the mega-retailer's Mexican unit allegedly greased only low-level palms to grow an existing business. That's arguably not covered, and the feds should beware bending an already controversial law to punish what may technically just be unethical.”
The analysis suggests, however, that even if Walmart is able to make this argument in court, “ It could face prosecution under Mexican law or provisions of the FCPA or the Sarbanes-Oxley law that require accurate accounting for payments.”
• The Chicago Tribune reports this morning that Walmart’s board of directors and several executives are being sued by one of the company’s shareholders.
According to the story, “The ‘illegal payments have and will continue to irreparably damage Wal-Mart's corporate image and goodwill and jeopardize its ability to do business in foreign countries,’ said the lawsuit, which was brought by Henrietta Klein.
“The complaint was filed as a derivative lawsuit, which seeks to recover money on behalf of the company rather than shareholders. “
Among them:
• The Washington Post reports that the two Congressmen conducting an inquiry into the bribery scandal - Rep. Henry Waxman (D-California) and Rep. Elijah Cummings (D-Maryland) - have written letters to the US Chamber of Commerce and the Retail Industry Leaders Association (RILA) requesting information about their ongoing lobbying efforts aimed at watering down the Foreign Corrupt Practices Act (FCPA).
“In their letters,” the story says, “the lawmakers expressed concern that there might be a conflict of interest if Wal-Mart was backing a campaign to soften enforcement of the statute at the same time corporate executives were examining their own corruption allegations in Mexico.”
The Post reported earlier this week that “a top Wal-Mart official sat on the board of the Chamber’s Institute for Legal Reform as that organization sought to change the FCPA,” and that “a senior Wal-Mart executive also serves as a director at the Retail Industry Leaders Association.”
Walmart denies any role in those lobbying efforts.
“Wal-Mart has never lobbied on FCPA,” David Tovar, vice president for corporate communications at Walmart, tells the Post. “Simply because Wal-Mart is a member of an organization does not mean we agree with every position they take.”
• The New York Times reports that Walmart’s timing could not be worse because the federal government is ramping up enforcement of the FCPA.
“Criminal enforcement under the act has soared,” the Times writes, “from just two enforcement actions in 2004 to 48 in 2010. The dollar amount of fines imposed by the Justice Department and the Securities and Exchange Commission has increased even more, including a record-setting $800 million paid by Siemens in 2008. There are currently at least 100 open investigations, specialists estimate.”
• Reuters reports that “Mexican President Felipe Calderon said on Wednesday that allegations the Mexican unit of Wal-Mart Stores Inc (WMT) sought to bribe officials in Mexico to grow its business there had made him ‘very indignant’.” He went on to say, “The company has certainly generated many jobs in Mexico and done good things, but what's not right is doing business on the basis of bribes.”
• There is an analysis piece on Business-Standard.com suggesting that making the legal case against Walmart may be tougher than some think. “U.S. law prohibits companies from making under-the-table payoffs to get new contracts from foreign officials,” the piece says. “But the mega-retailer's Mexican unit allegedly greased only low-level palms to grow an existing business. That's arguably not covered, and the feds should beware bending an already controversial law to punish what may technically just be unethical.”
The analysis suggests, however, that even if Walmart is able to make this argument in court, “ It could face prosecution under Mexican law or provisions of the FCPA or the Sarbanes-Oxley law that require accurate accounting for payments.”
• The Chicago Tribune reports this morning that Walmart’s board of directors and several executives are being sued by one of the company’s shareholders.
According to the story, “The ‘illegal payments have and will continue to irreparably damage Wal-Mart's corporate image and goodwill and jeopardize its ability to do business in foreign countries,’ said the lawsuit, which was brought by Henrietta Klein.
“The complaint was filed as a derivative lawsuit, which seeks to recover money on behalf of the company rather than shareholders. “
- KC's View:
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I’m sorry, but the argument that Walmart had no influence in the lobbying efforts by the Chamber of Commerce and RILA does not pass the credibility test. Walmart is the biggest and most influential member of both organizations - it is impossible to imagine that its opinions were not solicited and factored into any decisions made either of them.
I’d also like a list of positions taken by either RILA or the Chamber on which Walmart had a significant disagreement. Just out of curiosity.
And I’ll bet that President Calderon is indignant ... at least in part because shining a spotlight on these kinds of practices could have the impact of slowing down investment in his country by outside corporations.
I’m going to steal a line from an email I got yesterday from an MNB user ... noting that such protestations are reminiscent of the scene in Casablanca when Captain Renault (Claude Rains) says that he’s “shocked, shocked to find gambling” going on at Rick’s .... just as he receives his gambling 'winnings'.”
(Gosh, I love it when readers send in life and business lessons from the movies.)
As for lawsuits against Walmart and its executives and board ... it is a pretty safe bet that this will be just the first of many. And that does not even include the possible criminal prosecutions.
