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New York Times Details Widespread Bribery in Wal-Mart Mexico and Top Executive Coverup

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The Grey Lady has an amazingly detailed, must-read account of corruption at the highest levels of Wal-Mart. In 2005, Sergio Cicero Zapata, a lawyer who had been with WalMart in Mexico for ten years and had resigned in 2004, came forward with a description of his involvement, sanctioned by top executives in Wal-Mart’s Mexican operation, of handing out bribes totaling over $24 million to accelerate the construction of new stores. This activity is a clear violation of the Foreign Corrupt Practices Act.

Even though the Bentonville giant quickly found evidence corroborating the Cicero’s charges, as well as that of a cover-up by the top brass in Mexico, and looked into hiring an outside law firm to conduct an independent investigation, it quickly converted it to a limited review by an internal unit whose main activity was handling shoplifting cases. And lead responsibility for the probe was assigned to the general counsel of Wal-Mart de Mexico, a sure-fire way to assure no tough questions would be asked. Not only was the Mexico CEO who was deeply involved in this program promoted repeatedly after the notification by Cicero, ultimately becoming vice chairman at the parent level, but the current CEO, Michael Duke, had just been installed as the head of WalMart International, was involved in the coverup. The then-current CEO, Lee Scott, criticized the internal investigators for being too aggressive.

A representative section of the account:

Mr. Cicero recounted how he had helped organize years of payoffs. He described personally dispatching two trusted outside lawyers to deliver envelopes of cash to government officials. They targeted mayors and city council members, obscure urban planners, low-level bureaucrats who issued permits — anyone with the power to thwart Wal-Mart’s growth. The bribes, he said, bought zoning approvals, reductions in environmental impact fees and the allegiance of neighborhood leaders..

The Times also reviewed thousands of government documents related to permit requests for stores across Mexico. The examination found many instances where permits were given within weeks or even days of Wal-Mart de Mexico’s payments to the two lawyers. Again and again, The Times found, legal and bureaucratic obstacles melted away after payments were made.

The Times conducted extensive interviews with participants in Wal-Mart’s investigation. They spoke on the condition that they not be identified discussing matters Wal-Mart has long shielded. These people said the investigation left little doubt Mr. Cicero’s allegations were credible. (“Not even a close call,” one person said.)

WalMart informed the Justice Department of the possible (as in probable) violations of the Foreign Corrupt Practices Act only in December 2011, after it got wind of the New York Times investigation.

This is a Murdoch-News of the World level scandal involving a company that is extraordinarily powerful in the US. The Times account is far more damning, detailed, and supported by documents and interviews than the initial releases by the Guardian on l’affaire Murdoch. It also indicates it found evidence of bribery in Mexico beyond those relating to the store expansion, namely, kickbacks from construction companies. It will reveal a great deal about the state of the rule of law in the US as to what sort of investigations and prosecutions result from these revelations.

Read it now. Or you can read the AP’s rewrite here.

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53 comments

  1. Heavy Seas

    Maybe they’ll walk after a scolding, this is the US Justice Department with Eric Holder napping at the helm, right? Anyone seen John Corzine?

  2. lambert strether

    A classic from Wal-Mart spokeshole David Tovar:

    “If these allegations are true, it is not a reflection of who we are or what we stand for,” the spokesman, David W. Tovar, said. “We are deeply concerned by these allegations and are working aggressively to determine what happened.”

    No, of course not. Move along, people, move along. There’s no story here.

    1. Brooklin Bridge

      I noticed that too. We are not the sum of our actions but rather the sum of our advertising…

    2. Doug Terpstra

      “… it is not a reflection of who we are or what we stand for”. Exactly the same cut-paste lie for ongoing torture and repeated battlefield atrocities, from the POTUS to field commanders on down. This is the very essence of a blood money empire; graft is our currency.

      And no, of course nothing will be done. We have been aspiring to become a plantation economy for some time, and so we are — a banana republic sans bananas. As in Mexico, only little people are accountable.

  3. Sleeper

    Please folks recognize several items:

    1) Bribery is a common business tactic both in foreign climes and in the US.
    2) Bribery often takes the form of cash payments in lesser developed parts of the world. Sometimes described this way – “everyone has their hand out in Ch*n*” Note that there has been a spate of bribery in the cell phone / telecom industry in Africa.
    3) The US has a more disguised system where “givebacks” “campaign contributions / bribes” and a two tier justice system protect the powerful and wealthy.

    So the real question is -

    Why now especially why now when our banking industry has stolen some 10 trillion dollars ?

    This is almost certainly a move by the present administration to either stifle Walmart from supporting anti administration causes .

    Or this is a “fetcher prosecution” designed to generate campaign contributions / bribes.

    Do not think for a moment that this is serious effort at justice or that this is a real effort at reining in bribery.

    1. Dave of Maryland

      Walmart has been after states to provide more welfare so they could further cut salaries. This might be a push back against that.

  4. securecare

    Anyone that thinks this is unique to either Mexico or Wal-Mart is really kidding themselves.

    1. jake chase

      As someone who has been to Mexico I would suggest Walmart got off cheap. It would have cost that much to hire Guiliani just to hand over money in a legitimate transaction, assuming one is possible down there, which I am inclined to doubt.

      What do you suppose is motivating this lawyer to sing just now to the NYT?

      The only thing interesting about this story is the response to it. Personally, I’m shocked, shocked.

  5. F. Beard

    Interestingly (I just noticed today), the Bible condemns the taking of bribes but not the offering of bribes or so it seems to me:

    “bribe” in the Bible

    That makes sense to me since the Hebrews were to be held to a higher standard than the nations they dealt with.

    1. Kim Lust

      Not exactly confidence inspiring. Is the Bible kinda contradicting itself here? By the way – which version of the Bible is on sale at Walton Mart?

      1. F. Beard

        which version of the Bible is on sale at Walton Mart? Kim Lust

        I don’t know. I’ll check next time I go, if I remember to. I usually don’t shop at Wal-Mart but some things like allergy pills and contact lens solution are 1/2 what Kroger charges.

        1. Brooklin Bridge

          [...]allergy pills and contact lens solution are 1/2 what Kroger charges

          Indeed, there is no calculator in existence that can come up with the actual cost to society of purchasing so much as a pin at Wall-Mart.

          1. F. Beard

            I would have paid 25% more gladly but a 100% more screams “You are being ripped-off, sucker!”

            And it’s not like Krogers does not have the ability itself to buy in huge quantities and pass on the savings.

  6. Cap'n Magic

    You don’t want to deal with FCPA? Don’t have foreign subsidiaries or deal with foreign companies. Problem solved.

    1. Yves Smith Post author

      I provided a link to the AP rewrite, which does not not have the gory details. It’s being re-reported everywhere, I also see it as the WSJ.

    2. Brooklin Bridge

      HuffPo’s main Splash has a link to the NYT article that gets you behind the pay wall.

        1. Brett

          You could also try the nytimes’s twitter feed. All links from twitter are supposed to by pass the paywall, though they count against your monthly “free” views.

  7. Gringo Jay Walker

    We do realize we are talking about a country where a gringo can walk behind 20 local jay walkers crossing the street, and will be the only one arrested. Then be told an immediate payment of a “fine” – whatever cash amount in his wallet – can expedite the trip to the police station, judge appointment, jail, etc…and you can quickly go on your way without having the inconvenience of actually doing those things.

    I hope Walmart arrests Mexico.

  8. Kathi Berke

    Walmart’s been trying to get a foothold in my hometown, the sinful site of ejected OWS. Certainly they’ve been “donating” to causes dear to NYers hearts–out with the Brooklyn Dodgers, in with the impoverished employees supplementing their meager incomes with government-sponsored health care. They make so little they qualify for Medicare.

    Where’s my graft? That’s my grift.

  9. Brooklin Bridge

    Well, at least we know for a fact that Obama and Eric Holder will be all over this. Heads will roll, the guilty will do time, justice will prevail for big and small alike…

    I imagine they will even appoint Wall Mart to investigate themselves, so as to let the world know how seriously we take crime in high places.

  10. skippy

    A series of image-improving initiatives announced by Wal-Mart Stores Inc. in recent days closely follows the recommendations of a consultant’s report that found that the public believes the retailer treats its employees poorly and is a negative force in communities where it operates.

    The report, by consulting firm McKinsey & Co., was obtained from Wal-Mart Watch, a union-backed nonprofit that opposes the company’s business practices. Wal-Mart Watch spokeswoman Tracy Sefl said the report was sent to the group anonymously.

    “Sincere concerns exist that Wal-Mart is not treating its employees well, is too aggressive and is hurting local companies,” the Aug. 24, 2004, report said. “The challenge is likely only to intensify,” said the report, which went on to lay out a plan to defuse those concerns.

    http://www.washingtonpost.com/wp-dyn/content/article/2005/10/28/AR2005102802079.html

    http://makingchangeatwalmart.org/

    Severe Human Rights Violations at Food Processing Facilities Result in Global Labor Issues for Walmart

    http://makingchangeatwalmart.org/2012/04/19/severe-human-rights-violations-at-food-processing-facilities-result-in-global-labor-issues-for-walmart/

    Skippy… beard enjoys the savings… snort.

    1. F. Beard

      Well, no mere human is perfect.

      BTW, the way you oppose principal reductions or a universal bailout, I wonder if you own bank stock?

    2. skippy

      “And it’s not like Krogers does not have the ability itself to buy in huge quantities and pass on the savings.” …. hahahahah.

      Skippy… try screwing everyone down, polluting every water source it can find, establishing market dominance, employing so many until its TBTF…. shezzz.

      1. skippy

        Disclaimer, no stocks or bonds, liquidated everything post GFC, only own physical assets.

        Whilst family car is euro luxury, mine is, the truck Top Gear could not destroy an 85 toyota hilux 4×4, now stripped and being rebuilt, ground up, by father and sons.

        Skippy… Support wife in her medical education and work, kids, assist in kids sports and help anyone that lacks information about financial problems pro bono, engage in random acts of kindness ie: mow neighbors lawn when they go on holidays, nice surprise when they get home, pull in drive way. Help fiends and neighbors with any home or property mending, tools, supplies, free labor, knowledge, its called mateship… get sum.

          1. skippy

            I wish America would stop trying to blow the world up, some of us are try to fix things.

            Skippy… Hay I’m a carrying capacity proponent, I want to put debt where it really belongs, too the planet. We own a debt to it. Vote Greens!

          2. Mansoor H. Khan

            “Skippy… Hay I’m a carrying capacity proponent, I want to put debt where it really belongs, too the planet. We own a debt to it. Vote Greens!’

            Cheer up.

            Effective Carrying Capacity = Earth’s Raw Materials X Engineering Skill/Creativity/Knowledge X Management Skill/Creativity/Knowledge

            mansoor h. khan

        1. F. Beard

          its called mateship… get sum. skippy

          Yet you oppose the reduction of your neighbors’ mortgage principal and oppose a universal bailout?

          BTW, I am sad I provoked you into boasting about your good deeds since you might lose some Heavenly reward thereby.

          1. Richard Juneau

            Are you two going to get a room? There is nothing like a mattress, AC unit and running water. Great thanks from Homeless America!

          2. F. Beard

            Iron sharpens iron, so one man sharpens another. Proverbs 27:17

            Great thanks from Homeless America! Richard Capitol of Alaska

            You lost me there, I’m afraid.

  11. skippy

    WHEREAS, Investment & Pensions Europe—IPE.com reported that Wal-Mart was excluded from the Norwegian Government Pension Fund—Global investment universe because of alleged serious and systemic human rights violations (IPE.com 6/Jun/06);

    http://www.wikinvest.com/stock/Wal-Mart_%28WMT%29/Social_Reputation_Impact_Report

    A scene from a campaign war room? Well, sort of. It is a war room inside the headquarters of Wal-Mart, the giant discount retailer that hopes to sell a new, improved image to reluctant consumers.

    Wal-Mart is taking a page from the modern political playbook. Under fire from well-organized opponents who have hammered the retailer with criticisms of its wages, health insurance and treatment of workers, Wal-Mart has quietly recruited former presidential advisers, including Michael K. Deaver, who was Ronald Reagan’s image-meister, and Leslie Dach, one of Bill Clinton’s media consultants, to set up a rapid-response public relations team in Arkansas.

    http://www.nytimes.com/2005/11/01/business/01walmart.html?_r=1&pagewanted=all

    Skippy… The McKinsey & Co report, read it!

  12. scottinnj

    So with caveats around innocent until proven guilty in a court of law, what is the realistic downside to the named senior execs and/or to the company if the DOJ decides to pursue a FCPA case. Is is just fines, or something more material?

    1. Nathanael

      … and it becomes more important to “have your own side”, i.e. a huge group of people personally loyal to you.

  13. Paul Tioxon

    The AFL should open up a prop trading desk with its pension and health and welfare funds. Then buy up Wal Mart.

  14. Conscience of a Conservative

    Self Reporting doesn’t work. The risks and rewards of doing so in the face of the huge sums of money are proof to that, and we don’t see companies facing huge fines or individuals in companies typically facing prosecution when transgressions become known.

    1. ambrit

      Dear M Chandler;
      Haven’t you heard? Since NAFTA was rammed down our throats. or was it the other end, North America is now one big happy Family. Thus, bribes paid to Mexican oficials come back as luxury goods bought from ‘American’ retailers through their, here it comes, Mexican subsidaries! Once Highway 69 is completed, yes, that’s its’ real name, we will all luxuriate in the smog of Mexican 18-wheelers hauling cheap, overpriced stuff from la Republica up to the Heartland. Who’d a thunk it?
      Thank you, B–wjob Bill!

  15. BondsOfSteel

    I’m sure that Walmart will get a cease and desist letter and will be forced to pay a bribe… oop… I mean fine.

  16. bmeisen

    Was there ever any doubt that the loudmouths at the Big Box retail debauch, a macroeconomic Sodom and Gomorrah for microeconomic swingers, were in fact as awful as we thought they were. Is there any reason to believe that they haven’t behaved similarly in the US? You’ll never go broke underestimating the American public.

  17. chitown2020

    Corzine is a proxy. Just did what he was told. Like all of the traitor politicians do. That’s why there have been no arrests of the FED crooks. The ex CEO’s of Fannie already confessed their fraud was approved by their owners at the FED…The FED has hijacked the country.

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