In September 2005, a senior Walmart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country.
The former executive gave names, dates and bribe amounts. He knew so much, he explained, because for years he had been the lawyer in charge of obtaining construction permits for Wal-Mart de Mexico.
Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than US$24 million. They also 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 Walmart’s headquarters in Bentonville, Arkansas.
In a confidential report to his superiors, Walmart’s lead investigator, a former FBI special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated.”
The lead investigator recommended that Walmart expand the investigation.
Instead, an examination by the New York Times found, Walmart’s leaders shut it down.
Neither US nor Mexican law enforcement officials were notified. None of Wal-Mart de Mexico’s leaders were disciplined. Indeed, Wal-Mart de Mexico chief executive Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Walmart in 2008. Until this article, the allegations and Walmart’s investigation had never been publicly disclosed.
However, the Times’ examination uncovered a prolonged struggle at the highest levels of Walmart, a struggle that pitted the company’s much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.
Under fire from labor critics, worried about press leaks and facing a sagging stock price, Walmart’s leaders recognized that the allegations could have devastating consequences, documents and interviews show. Confronted with evidence of corruption in Mexico, top Walmart executives focused more on damage control than on rooting out wrongdoing.
In one meeting where the bribery case was discussed, H. Lee Scott Jr, then Walmart’s chief executive, rebuked internal investigators for being overly aggressive. Days later, records show, Walmart’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 — a remarkable choice since the same general counsel was alleged to have authorized bribes.
The general counsel promptly exonerated his fellow Wal-Mart de Mexico executives.
In December last year, after learning of the Times’ reporting in Mexico, Walmart informed the US Department of Justice that it had begun an internal investigation into possible violations of the Foreign Corrupt Practices Act, a federal law that makes it a crime for US corporations and their subsidiaries to bribe foreign officials. Walmart said the company had learned of possible problems with how it obtained permits, but stressed that the issues were limited to “discrete” cases.