Fascinating NYT Investigative Report on Alleged FCPA Violations and Cover-Up at Wal-Mart

By Cydney Posner

Following is a link to an amazing investigative piece that appeared in Sunday's New York Times regarding allegations of a major bribery case (FCPA violations) at Wal-Mart's Mexican subsidiary and cover-up at the executive level. It's very detailed and describes how the company, pushing for – and achieving -- market dominance in Mexico, paid bribes and "donations" to facilitate construction permitting, falsifying its financials by recording the bribes as legal fees. According to the story, Wal-Mart management viewed Mexico as "its brightest success story…. Confronted with evidence of corruption in Mexico, top Wal-Mart executives focused more on damage control than on rooting out wrongdoing." The story contends that the executives in charge of this process were lauded and promoted, while the whistle-blowing executive, who implicated himself in the bribery charges in addition to others, was ultimately accused of being the main culprit in the matter (defrauding the company by stealing the funds he said were used as bribes). Confronted with allegations, instead of engaging truly independent investigators to conduct a full-throated investigation, the company engaged outside counsel only to supervise the company's internal investigation group. Senior management had experienced prior instances of the negative effects of self-reporting of corruption, including months of embarrassing publicity. Perhaps as a result, the story suggests, some executives viewed reports by internal investigators as "disruptive and naïve about the moral ambiguities of doing business abroad" and were ultimately dismissive of the internal investigator's advice to conduct a deeper investigation. Instead, senior executives "rebuked internal investigators for being overly aggressive" and revamped the internal investigation process to allow accused executives or their direct reports to be placed in charge of investigations related to their own potential misconduct. Not surprisingly, they were all exonerated. According to the story, Wal-Mart informed the Justice Department of its internal investigation into possible FCPA violations only after learning of the NYT investigation.

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