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Walmart to Pay $282 Million to End Investigation Into a Decade of Bribes A ‘Sorceress’ in Brazil, a ‘Wink’ in India: Walmart Pleads Guilty to a Decade of Bribes
(about 1 hour later)
Walmart has agreed to pay $282 million to settle a long-running investigation into questionable payments the world’s largest retailer made to obtain government permits in countries like Mexico and Brazil. Inside Walmart’s corporate offices in Brazil, one local contact was known as the “sorceress” for the ability to obtain government permits quickly.
The settlement with the Department of Justice and the Securities and Exchange Commission caps one of the biggest investigations ever under the Foreign Corrupt Practices Act, which makes it illegal for American corporations to bribe foreign officials. In India, concerns about bribery were met with a “wink and a nod” by Walmart’s local business partner. In China, money was funneled to a local landlord for “government relationship consulting services.” And in Mexico, cars and computers were donated to governments in communities where Walmart was planning to build new stores.
The investigation, which was conducted by the two federal agencies, came after The New York Times revealed in 2012 that Walmart had made suspicious payments to officials in Mexico and then tried to conceal them from the company’s headquarters in Bentonville, Ark. For more than a decade, Walmart was involved in making questionable payments to governments around the globe in order to open new locations, United States prosecutors and securities regulators said in a settlement agreement on Thursday. But even as employees frequently raised alarm, the company’s top leaders did little to prevent Walmart from being involved in bribery and corruption schemes.
The Times investigation included extensive interviews with a former Walmart executive in Mexico, who described how the company delivered envelopes of cash to officials to buy zoning approvals, reductions in environmental fees and the loyalty of neighborhood leaders. A Walmart subsidiary pleaded guilty on Thursday to a federal crime related to its improper record-keeping. The guilty plea, and the $282 million in fines that Walmart has agreed to pay, capped one of the biggest investigations ever under the Foreign Corrupt Practices Act, which makes it illegal for American corporations to bribe overseas officials.
“Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption,” Brian A. Benczkowski, an assistant attorney general, said in a statement.
The investigation, which was conducted by the Department of Justice and the Securities and Exchange Commission, came after The New York Times revealed in 2012 that Walmart had made suspicious payments to officials in Mexico and then tried to conceal them from top executives at the company’s headquarters in Bentonville, Ark. And even when the issues, particularly in Mexico, reached the main office, an internal investigation essentially went nowhere.
[Read The New York Times investigation that spurred the bribery case in 2012.][Read The New York Times investigation that spurred the bribery case in 2012.]
Executives at company headquarters learned of the misdeeds in 2005 but subsequently shut down an internal investigation instead of reporting potential violations to regulators. The federal investigations that followed the Times article expanded beyond Mexico to China, India and Brazil. The Times’s reporting set off years of legal trouble and executive reshuffling at Walmart. The company has spent roughly $900 million on lawyers and investigators trying to root out the problems, as well as on hiring more people to bolster its compliance and internal controls.
On Thursday, the S.E.C. said that it found that Walmart failed to “operate a sufficient anti-corruption compliance program for more than a decade as the retailer experienced rapid international growth.” The fine Walmart will pay is less than the $600 million that federal prosecutors and regulators had sought when Walmart was discussing a plea agreement during the waning days of the Obama administration, The Times reported last November.
As part of its agreement with prosecutors, Walmart’s Brazilian subsidiary pleaded guilty to charges stemming from payments the retailer made to an intermediary who was known as “sorceress” and “genie” because of this person’s ability to acquire building permits quickly. Walmart was able to negotiate a lower fine after President Trump, who had previously criticized the Foreign Corrupt Practices Act, took office.
The bribery scandal was a huge blow to Walmart’s reputation, spurring investor lawsuits and prompting the company to spend hundreds of millions on bolstering its compliance programs and dealing with investigations. The plea agreement announced on Thursday also showed that problems went far beyond its operations in Mexico, the original focus of The Times’s reporting.
The $282 million fine Walmart will pay is less than the $600 million that federal prosecutors and regulators had sought when Walmart was discussing a plea agreement during the waning days of the Obama administration, The Times reported last November. Federal prosecutors said Walmart looked the other way as subsidiaries on three continents paid millions of dollars to middle men with ties to foreign governments from July 2000 to April 2011.
In Brazil, many payments flowed through the “sorceress,” an otherwise unidentified individual who was also nicknamed the “genie” for sorting “things out like magic,” according to court documents.
This person charged a steep price, roughly $400,000, to help smooth the process of getting building permits. Walmart employees in Brazil raised alarms that the “sorceress” may have been a government employee, but those concerns went nowhere.
The questionable payments made to fixers in India were often recorded on the company’s books with vague descriptions like “professional fees” and “incidental.” As late as July 2011, Walmart received an anonymous tip that an employee in India was involved in a scheme to make improper payments to government officials, but the company never looked into it.
In a statement, Walmart said federal regulators had acknowledged the steps the company had taken to improve its anti-corruption measures since the investigations began seven years ago, “Walmart is committed to doing business the right way, and that means acting ethically everywhere we operate,” Walmart’s chief executive, Doug McMillon, said.
The Times’s investigation included extensive interviews with a former Walmart executive in Mexico, who described how the company delivered envelopes of cash to officials to buy zoning approvals, reductions in environmental fees and the loyalty of neighborhood leaders.
Executives at company headquarters learned of the misdeeds in 2005 but subsequently shut down an internal investigation instead of reporting potential violations to regulators.
At one point, the primary responsibility for investigating whether any wrongdoing occurred was given to the general counsel of Walmart’s Mexico unit, who had been accused of authorizing many of the bribes. That general counsel exonerated his fellow Mexico executives.
The bribery scandal was a huge blow to Walmart’s reputation, spurring investor lawsuits and broader questions about the company’s leadership.
Many of the Walmart’s most senior executives in Mexico, India and Bentonville, Ark., left the company in the wake of The Times’s investigation.