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 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 inquiry. 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, Wal-Mart spokesman Dave Tovar said.
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.