Wal-Mart silenced Mexico bribe inquiry: NY Times

Sat Apr 21, 2012 6:39pm EDT

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(Reuters) - Retail giant Wal-Mart Stores Inc squelched its own internal investigation of allegations made by a former executive of its subsidiary in Mexico that the Mexican division had orchestrated a campaign of bribery to grab market dominance, the New York Times reported on Saturday.

The paper said in September 2005 a senior Wal-Mart lawyer received an e-mail from Sergio Cicero Zapata, a former executive at the company's largest foreign unit, Wal-Mart de Mexico, describing how the subsidiary had paid bribes to obtain permits to build stores in the country.

Wal-Mart sent investigators to Mexico City and found evidence of widespread bribery, but Wal-Mart's leaders then shut down the investigation and notified neither American nor Mexican law enforcement officials, the Times reported. The Times said the company had found a paper trail of hundreds of suspect payments totaling more than $24 million.

The Times reported that the former Wal-Mart executive gave names, dates and bribe amounts, adding that he knew so much because for years he had been the lawyer in charge of obtaining construction permits for Wal-Mart de Mexico, or Walmex as the company is known locally.

"We take compliance with the U.S. Foreign Corrupt Practices Act (FCPA) very seriously and are committed to having a strong and effective global anti-corruption program in every country in which we operate," Wal-Mart said in a statement.

The Justice Department and the U.S. Securities and Exchange Commission in the past few years have aggressively stepped up enforcement of the FCPA, a 1970s law that bars bribes to officials of foreign governments.

But the government units that enforce the law are staffed with only a few dozen prosecutors and agents. Those units traditionally rely on the companies to hire outside lawyers to conduct the bulk of the investigation themselves since such probes usually involves collecting millions of documents and interviewing hundreds of witnesses outside the United States.

The companies then generally turn over to the agencies the results of the investigation, which can cost tens or even hundreds of millions of dollars in legal fees and take several years to complete.

STEPS TO CONCEAL PAYMENTS

Wal-Mart found documents showing that Wal-Mart de Mexico's top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart's headquarters in Bentonville, Arkansas, the newspaper reported.

The Times said that the company's lead investigator said there was reasonable suspicion to believe Mexican and U.S. laws had been violated and had recommended an expanded investigation, but that instead Wal-Mart's leaders shut it down.

None of Wal-Mart de Mexico's leaders were disciplined, the report said.

Eduardo Castro-Wright, whom the former executive identified as the driving force behind years of bribery, was promoted to vice chairman of Wal-Mart in 2008, the paper said.

Wal-Mart declined to make him available for an interview.

In a meeting at which the bribery was discussed, then-Chief Executive H. Lee Scott rebuked internal investigators for being overly aggressive, the report said.

Days later, the paper said its records showed Wal-Mart's top lawyer arranged to ship the internal investigators' files on the case to Mexico City.

Primary responsibility for the investigation was then given to the general counsel of Wal-Mart de Mexico, who was alleged to have authorized bribes, the Times said.

"Many of the alleged activities in The New York Times article are more than six years old," the company said in a statement.

"We are deeply concerned by these allegations and are working aggressively to determine what happened."

A spokesman at the U.S. Securities and Exchange Commission said the agency did not have any comment on the Times report. A Justice Department spokeswoman declined to comment.

(Reporting by Nivedita Bhattacharjee and Aruna Viswanatha; Editing by Jennifer Ablan and Will Dunham)

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