By Aruna Viswanatha
WASHINGTON Dec 18 Wal-Mart Stores may
be facing sizable fines related to allegations of widespread
bribery at its Mexican affiliate, after a second report from the
New York Times provided more details about the scope of the
Experts said the latest report, published online late on
Monday, is significant because it appears to show that the
alleged bribes were a substantial part of its business methods,
and more than routine payments to speed up approvals, which are
allowed under U.S. law.
The newspaper said the world's largest retailer opened some
19 stores by using hundreds of thousands of dollars in bribes to
get what local laws otherwise prohibited.
On Monday, Wal-Mart said the allegations in the Times report
have been part of the investigation of potential FCPA violations
the company began conducting more than a year ago. Wal-Mart
declined to provide additional comment on Tuesday.
In April the newspaper reported that Wal-Mart had stifled an
internal probe of bribery at its Mexican affiliate Walmex
, but gave the impression that many of the bribes
paid may have been used to facilitate approval processes already
"I think the Times story, if it is true, changes the
perception of the Wal-Mart matter from being about facilitating
payments to something larger than that," said Danforth Newcomb,
an expert on the U.S. Foreign Corrupt Practices Act who defends
such cases at the law firm Shearman & Sterling.
The latest story describes, for example, $765,000 in bribes
that helped Walmex build a refrigerated distribution center in
an environmentally fragile area where electricity was scarce and
smaller developers were turned away. It also describes in detail
how Walmex allegedly paid $52,000 to change a zoning map so it
could open a store near the ancient pyramids in Teotihuacan.
It is difficult to put a ballpark figure on any settlement,
especially because the U.S. investigation of Wal-Mart is in
early stages, but experts said it could rival other major FCPA
In the largest FCPA case to date, Siemens paid
$800 million to resolve allegations of widespread bribery in
2008. In other sizable cases, KBR and its former parent
Halliburton paid $579 million in 2009, and BAE Systems
paid $400 million in 2010.
The company is cooperating with the U.S. Justice Department
and the U.S. Securities and Exchange Commission on the matter.
Representatives of the SEC and DOJ declined to comment.
Shares of Wal-Mart rose 30 cents to close at $69.50 on the
New York Stock Exchange.
The Justice Department usually calculates fines in foreign
bribery cases either by levying a per-violation fine or a
penalty tied to the profits a company earned through the alleged
bribery. Related SEC settlements usually also involve disgorging
profits earned due to the bribery.
Including Walmex's profits at stores throughout Mexico could
prove a sizable fine. It is unclear how many of the roughly
2,000 locations in Mexico could be included.
In 2011, Walmex posted gross profit of nearly 83.7 billion
pesos ($6.58 billion).
In 2004, the year in which it allegedly pushed for zoning to
open the store near the ancient pyramids, Walmex's gross profit
was 28.84 billion pesos ($2.27 billion). The 2011 results
include Central America.
When calculating potential fines, prosecutors take into
account how widespread the conduct was and whether senior
management knew about it or was involved in any way. Wal-Mart
has said it is investigating allegations related to its
operations in Brazil, India, and China.
"Wal-Mart de Mexico didn't stumble into a bit of bribery. If
the allegations are correct, it used systematic bribery as part
of its business strategy as a way to grow," said Richard Cassin,
an FCPA expert and author of a popular FCPA blog.
The company's costs to conduct the entire investigation -
which already stand at $100 million - could be larger than its
eventual fines, lawyers said.
Wal-Mart has also been proactive with other measures that
could blunt some demands from authorities. When settling FCPA
cases, companies are usually required to make some management
changes and overhaul their compliance programs.
In October the company said it reorganized its compliance
department and created a new global chief compliance officer
position as part of an overhaul of its anti-corruption efforts.
The company has spent some $35 million to update its
anti-corruption program and has named a new chief compliance
officer for Wal-Mart International and a new vice president of
global investigations, which are both new positions for the
company. It also named a new chief compliance officer for
Walmex, and created a new global FCPA compliance officer