Wal-Mart faces big fines amid bribery charges

By Anne D'innocenzio

Associated Press

Published: Monday, April 23 2012 5:15 p.m. MDT

FILE - In this Dec. 1, 2010 file photo, Mike Duke, CEO of Wal-Mart, is interviewed at The Associated Press in New York. Allegations that top executives at Wal-Mart Stores Inc.'s Mexican subsidiary bribed officials in that country could have huge implications for the world's biggest retailer's business and executives. Wal-Mart said Duke directed last spring a worldwide FCPA compliance review aimed to ensure that effective policies and procedures were in place in every company it does business. Duke oversaw the company's international business at the time the alleged violations occurred.

Mark Lennihan, File, Associated Press

NEW YORK — Allegations that Wal-Mart Stores Inc. covered up the findings of an internal probe that proved its Mexican subsidiary bribed officials in that country could have huge implications for the world's biggest retailer and its executives.

The alleged bribery scheme was revealed by The New York Times, which reported that Wal-Mart failed to notify law enforcement after the company's investigators found evidence of millions of dollars in bribes given to Mexican officials in exchange for getting building permits faster and other favors to help it aggressively expand in the region.

If Wal-Mart violated the Foreign Corrupt Practices Act, which forbids paying bribes to foreign officials, the company could face fines of hundreds of millions of dollars. Top Wal-Mart executives could lose their jobs — or worse, go to jail. And the retailer could suffer a public relations nightmare if a lengthy investigation ensues.

"Unlike prior bad PR stories in recent years, this will be a material distraction for Wal-Mart on multiple fronts," said Charles Grom, a retail analyst at Deutsche Bank.

The Times reported on Saturday that a former company executive told Wal-Mart top brass in 2005 details of a bribery campaign that was used to help the retailer expand in Mexico. The paper said Wal-Mart officials launched an investigation into its Wal-Mart de Mexico subsidiary, but shut it down despite a report by its lead investigator that Mexican and U.S. laws likely were violated.

Over the weekend, Wal-Mart said it had disclosed the findings of its investigation to the U.S. Department of Justice and the Securities and Exchange Commission in December, and that it met with officials from both agencies to discuss the company's ongoing investigation. But, according to the Times, Wal-Mart only did so after being informed that the paper was looking into the allegations.

"We are committed to getting to the bottom of this matter," Dave Tovar, a Wal-Mart spokesman, said in a statement.

The Department of Justice and the SEC declined to comment for this story. But legal experts say the government likely will launch its own investigations into the bribery allegations. Based on the results of past investigations of companies — and their executives — the penalties for violating the law can range widely from fines to jail time.

In February, for instance, Albert "Jack" Stanley, a former KBR Inc. CEO got a 2.5-year prison sentence for his role in a scheme to bribe Nigerian government officials in return for $6 billion in engineering and construction contracts. KBR, homebuilder, was a Halliburton subsidiary at the time of the bribes.

And in March, medical device maker Biomet Inc. agreed to pay $22.7 million to settle U.S. criminal and civil allegations that it bribed government-employed doctors in Argentina, Brazil and China for more than eight years to win business with hospitals.

Experts say it's difficult to speculate on how an investigation into Wal-Mart's alleged bribery campaign could turn out. But they say if the government decides to do its own probe, it will likely look at whether the company had adequate controls in place to prevent bribery, whether there was adequate training to discourage the practice before the violations occurred, and how high up any alleged cover-up took place.

If the government finds that the company or its executives were negligent, Wal-Mart could face fine and top executives could lose their jobs. But if it's determined that there was a cover-up that involved actions such as falsifying records, there could be criminal charges.

Eduardo-Castro Wright, who was head of Wal-Mart de Mexico at the time of the alleged bribes and, could face criminal charges, experts say. According to the New York Times, he was the driving force behind the bribery.

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