Wal-Mart affiliate used bribes to open 19 new stores in Mexico: NY Times

Mon Dec 17, 2012 9:56pm EST

* NY Times cites instances of Wal-Mart affiliate paying off local officials

* Alleged payoffs often related to zoning laws, environmental permits

* Wal-Mart says looking into allegations in NY Times article

NEW YORK, Dec 17 (Reuters) - Wal-Mart Stores Inc's Mexican affiliate routinely used bribes to open stores in desirable locations, according to a New York Times investigation published Monday, which cites 19 instances of the retail giant paying off local officials.

The Times first reported in April that Wal-Mart had intentionally stifled an internal probe into bribery at its Mexican affiliate Walmex. Late last month, Mexico's anti-corruption body said it found no irregularities in the permits Wal-Mart received in the country, but that two audits remain underway.

In the new report published on its web site, the Times detailed specific instances in which Walmex allegedly paid off officials to expand in Mexico. The alleged payoffs often related to zoning laws and environmental permits that would have otherwise prevented Walmex's opening of new stores.

Much of the report focused on a store built near ancient ruins in Teotihuacan, north of Mexico City. Walmex was hit by protests in 2004 after announcing plans to build a warehouse less than a mile from the city.

In a statement Monday night, Wal-Mart spokesman David Tovar said the company was already looking into the allegations in the Times article regarding the permitting and licensing process for the Teotihuacan store, as part of a broader internal probe that Wal-Mart began over a year ago into potential violations of the U.S. Foreign Corrupt Practices Act.

"At this point, the investigation is still ongoing and we have not yet reached final conclusions," he said, adding that the company has taken steps to improve its compliance programs.

Wal-Mart is also cooperating with the Department of Justice and the Securities and Exchange Commission (SEC) on the matter, Tovar said.

The U.S. Justice Department, the SEC, U.S. lawmakers and authorities in Mexico have all been conducting their own probes.

An official at Mexico's federal attorney general's office told Reuters that an initial probe had been opened following the Times' April story, but that prosecutors did not uncover sufficient evidence to file any charges.

The probe closed "a couple months ago," the official said.

STORE NEAR TEOTIHUACAN

The Times report did not give a figure for how much Wal-Mart spent on all of the alleged bribes. But it cites instances in which the company allegedly paid $221,000 in bribes to build a store near the ruins in Teotihuacan, as well as $341,000 in alleged bribes to establish a store near the Basilica de Guadalupe without appropriate permits, and another $765,000 in alleged bribes to set up a refrigerated distribution center in an environmentally fragile area near Mexico City.

The earlier Times report said a 2005 Wal-Mart inquiry had found some $24 million in suspect payments in Mexico, but the world's largest retailer essentially shut down the probe and didn't notify law enforcement officials until December 2011, after the New York Times informed Wal-Mart it was looking at the issue.

The report said Walmex had taken active steps to conceal the bribery from headquarters when it was happening, but alleged that senior Bentonville executives were involved in decisions about the internal investigation.

Wal-Mart lost $10 billion of it market value immediately following the report, and has since disclosed it has spent $30 million to update its global anti-corruption program and undertaken a massive investigation into the allegations.

Wal-Mart has incurred some $100 million in various costs related to the matter.

Also, in November, Wal-Mart disclosed it expanded its internal inquiry to cover bribery allegations in Brazil, China and India, and its joint venture in India suspended its finance chief and other employees as part of its inquiry.

Bribery and corruption are pervasive in Mexico, where the justice system is weak and lower-level public sector workers earn relatively low salaries. A study last year by Transparency International showed Mexican companies were perceived to be the third-most likely behind those in China and Russia to pay bribes abroad.

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