Walmart Used Bribes to Open 19 Mexico Stores: NY Times

Wal-Mart store in Mexico City
Wal-Mart store in Mexico City

(New York) - Wal-Mart Stores Inc's (WMT) 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.

In a "Leading with Integrity" letter sent to Wal-Mart employees after Monday's Times report, Chief Executive Mike Duke - who oversaw international operations from 2005 to 2009 - said integrity is the foundation of the company's culture.

"As leaders, we are measured by our weakest moment, so we can't have a weak moment in the area of integrity," Duke wrote. "We can have a bad sales day and a good sales day and hope they average out, but we can't average integrity."

Shares of Wal-Mart rose 0.65 percent to close at $69.20 in New York trading on Monday, before the Times story was posted.

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.

According to Monday's report, Wal-Mart's international real estate committee approved Walmex's plan to spend about $8 million on the Teotihuacan store. The committee consisted of 20 or so top executives including Chairman S. Robson Walton, according to the report. Walton is a son of Wal-Mart founder Sam Walton.

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.

That 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.

Sponsored Links

Wal-Mart lost $10 billion of its 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.

(Reporting By Aruna Viswanatha in Washington, DC, Jessica Wohl in Chicago, Michael O'Boyle in Mexico City and Lauren Tara LaCapra in New York; Editing By Ryan Woo)

Get info on stocks mentioned in this article: