If you are not a fan of Wal-Mart, here is yet another reason to be wary of the mega-retailer. A New York Times investigation has found that, after being informed about extensive bribery and corruption in its operations in Mexico, the top levels of Wal-Mart’s management in Bentonville, Arkansas, did not notify either Mexican or American law enforcement, did not discipline any of the executives of Wal-Mart de Mexico and promoted its chief executive, Eduardo Castro-Wright, to vice-chairman of the entire company in 2008.
“Until this article, the allegations and Wal-Mart’s investigation had never been publicly disclosed,” the New York Times states.
Unnamed persons described as familiar with the investigation said that, while Wal-Mart would have acted “like a chicken on a June bug” had the corruption allegations been made about the U.S., some executives shrugged them off as a “Mexican issue” that was best treated with a “Mexican response.” The subsequent failure of Wal-Mart’s executives to address the problem and to assert that Mexico was “a country where bribery was embedded in the business culture” raises serious questions about Wal-Mart’s “much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.”
Allegations of Bribery By Wal-Mart de Mexico
In 2005, a former Wal-Mart de Mexico executive, Sergio Cicero Zapata, sent an email to the then-general counsel of Wal-Mart International, Maritza I. Munich, in which he said that he knew of “irregularities” authorized “by the highest levels” at Wal-Mart de Mexico. Munich and Juan Francisco Torres-Landa, a prominent Harvard-trained lawyer in Mexico City, immediately debriefed Cicero, who recounted how the company — including its board chairman, its general counsel, its chief auditor and its top real estate executive — had condoned and even given the approval for bribes in order to build a record amount of new stores as quickly as possible. The bribes made it possible for Wal-Mart de Mexico to bypass zoning laws, environmental regulations and obtain government permits in days rather than in months.
Cicero, a lawyer by training, had resigned from Wal-Mart de Mexico in 2004 after he was passed over for the position of general counsel of Wal-Mart de Mexico. As he told the New York Times, he “thought… [he] deserved a medal at least” for his years of participating in the corruption.
Wal-Mart Keeps Investigation Internal
Munich sent “detailed memos” to Wal-Mart’s senior executives in Arkansas. But instead of hiring an outside law firm to investigate the allegations about some $24 million in bribery payments — as it had previously done regarding such charges of illegal practices — executives decided to undertake a limited “preliminary inquiry” by in-house investigators in 2005. Such an internal investigation was under the “direct control” of Wal-Mart’s senior management. As Munich indeed pointed out in an email, the investigation was “at the direction of the same company officer who is the target of several of the allegations.”
Wal-Mart considered carrying out a more thorough investigation. In December 2005, the internal investigators told Wal-Mart executives in a confidential report that there was “reasonable suspicion to believe that Mexican and USA laws [had] been violated.” In January of 2006, the chairman of Wal-Mart, S. Robson Walton, received an anonymous email alleging that the upper echelon of Wal-Mart de Mexico’s real estate executives were receiving kickbacks from construction companies. In February of 2006, Munich resigned, but not before she had drafted a memo calling for expanding the investigation in Mexico while treating Mexican and United States laws equally.
In particular, the allegations suggest that Wal-Mart is guilty of violating the Foreign Corrupt Practices Act, under which it is illegal to bribe foreign government officials to acquire or retain business.
According to the New York Times, Wal-Mart executives ultimately shut down the investigation in a “bloodlessly bureaucratic way,” by handing it over to José Luis Rodríguezmacedo Rivera, the general counsel of Wal-Mart de Mexico, who was actually one of the main targets of the investigation in the first place.
1 Out of 5 Wal-Mart Stores Is In Mexico
The BBC says that Wal-Mart is “deeply concerned” about the allegations made in the New York Times article and is investigating. Walmart spokesman David Tovar has responded that the activities therein described are “more than six years old”, and that, even if they are found to be true, “it is not a reflection of who we are or what we stand for.”
(1) an investigation of criminal or civil violations in Mexico by the Department of Justice under the Foreign Corrupt Practices Act that could be expanded to other countries;
(2) an investigation by Mexican authorities of bribery allegations and corruption;
(3) a “new, robust internal investigation” by Wal-Mart itself — which, notes Heineman, is something that Wal-Mart’s board of directors will find it hard to “avoid,” given the scope of the New York Times‘s investigation.
One out of every five Wal-Mart stores is in Mexico today and Wal-Mart is one of Mexico’s largest employers, with 200,000 Mexican employees. Given Sergio Cicero Zapata’s allegations and the evidence uncovered by the New York Times, it is not hard to see how Wal-Mart has come to establish itself so thoroughly in Mexico.
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