Wal-mart scandal costs soar
Wal-mart Stores Inc. may spend hundreds of millions of dollars investigating $24 million in alleged Mexican bribes as the U.S. government weighs whether the company or executives also broke the law by covering up an internal probe, former federal prosecutors said.
The company said it’s aiding U.S. probes of payments detailed Saturday in The New York Times. The newspaper said Wal-mart de Mexico failed to fully investigate the bribe claims as well as well as $16 million in “donations” to Mexican local governments to fuel store expansion in the country up to 2005.
Wal-mart disclosed the payments to the Justice Department and Securities and Exchange Commission, according to a December regulatory filing, and said its outside advisers are briefing the agen- cies on its own probe.
Prosecutors will want to know why Wal-mart didn’t fully examine claims in 2005 by a company lawyer that he funnelled bribes to Mexican officials, said Paul Pelletier, a former federal prosecutor.
“If somebody put the kibosh on the investigation, a good prosecutor would ask a lot of questions to figure out why,” Pelletier said.
“It may not be just about the bribery scheme anymore. The questions about why it was or wasn’t investigated fully are going to have potential legal ramifications for the company and individuals, which is why the company would want to dig in there.”
The Justice Department is investigating potential criminal charges under the U.S. Foreign Corrupt Practices Act, according to a person familiar with the probe. The FCPA bans payments by companies or their agents to foreign governments to obtain or retain business.
The probe will probably expand beyond Mexico if the company or government unearth red flags elsewhere or if the government questions both management’s response to reports of misconduct and its current compliance program, said Amy ConwayHatcher, a former federal prosecutor.
“The investigation alone could cost Wal-mart in the tens of millions of dollars or more, and that’s if it’s limited to Mexico,” Conway-hatcher said.
“The cost of a global investigation under these circumstances could rise into the hundreds of millions. This would not include penalties and fines if charges are brought.”
Government investigators, she said, “will look at the acts of individuals to see if they can prove violations of law, how high up it went, who knew about it, who authorized it, and the extent to which there was any coverup.”