Wal-Mart extends bribery scam probes to India

Wal-Mart has begun investigation into violations of a federal anti-bribery law beyond Mexico to China, India and Brazil, some of the retailer’s most important international markets.

The disclosure suggests that Wal-Mart has uncovered evidence into potential violations of Foreign Corrupt Practices Act, as the fallout continues from a bribery scheme involving the opening of stores in Mexico that was the subject of a New York Times investigation in April.

Sources described how a routine compliance audit transformed into a full-blown investigation, involving hundreds of lawyers and three former federal prosecutors, when the company learned that The Times was examining problems with its operations in Mexico. They, however, cautioned that it did not mean Wal-Mart had concluded it had paid bribes in China, India and Brazil. But that the company had found enough evidence to justify concern about its business practices in the three countries — concerns that go beyond initial inquiries and that are serious enough that shareholders needed to be told.
Wal-Mart said it would be inappropriate to comment further on the new allegations until it had concluded the investigations. Wal-Mart has so far spent $35 million on a compliance programme that began in spring 2011, and has more than 300 outside lawyers and accountants working on it, the company said. It has spent $99 million in nine months on the current investigation.

The company said that new inquiries had begun in countries “including but not limited to” China, India and Brazil. Wal-Mart’s expanding investigation began in 2011 as a relatively routine audit of how well its foreign subsidiaries were complying with its anticorruption policies. It is keeping the Justice Department and the SEC apprised of the investigation.

The audit began in Mexico, China and Brazil, countries Wal-Mart executives considered the most likely source of problems. The problems were enough to persuade Wal-Mart to expand the audit to all 26 of its foreign subsidiaries. This work began in autumn 2011. In late 2011, Wal-Mart learned that The Times was examining Wal-Mart’s response in 2005 to serious and specific accusations of widespread bribery by Wal-Mart de Mexico, the company’s largest foreign subsidiary. In October 2005, a former lawyer for Wal-Mart de Mexico had spent hours telling company investigators how Wal-Mart de Mexico’s leadership had orchestrated a vast campaign of bribery to accelerate expansion.
Hundreds of bribes, he said, were paid to obtain construction permits and other licenses needed to open new stores.

Wal-Mart rapidly escalated its internal investigation. The company began to look into other specific accusations of wrongdoing, both in Mexico and it its other subsidiaries. It effectively created two lines of inquiry — the first being the global compliance review begun by Greenberg Traurig and KPMG. The second was internal inquiry into specific accusations of bribery and corruption.

It was not clear whether authorities in China, India and Brazil were conducting investigations of their own into Wal-Mart’s practices, as the authorities in Mexico have done in response to the bribery accusations in that country. Last month, Indian regulators started looking into whether Wal-Mart violated an Indian foreign investment rule.