More details released on Wal-Mart Mexico bribery issue

story by Frank Longid
Bloomberg News

Wal-Mart Stores Inc., the world’s biggest retailer, said it’s investigating how it got a license for a store in Mexico as the New York Times reported its local unit bribed an official to change a zoning map.

Wal-Mart de Mexico SAB gave $52,000 to an official to redraw a 2003 zoning map that would have prohibited commercial development on a field less than a mile from the pyramids of Teotihuacan, according to the report. A former lawyer of the company known as Walmex cited the incident as he told Wal-Mart executives of how the unit used bribery, the newspaper reported.

“The allegations contained in the New York Times article surrounding events in 2003-2004 involving the permitting and licensing process for a Walmart de Mexico store in Teotihuacan, Mexico, have been part of the company’s ongoing investigation of potential violations of the U.S. Foreign Corrupt Practices Act we began more than a year ago,” Wal-Mart said in a statement. “We take these allegations very seriously because, as you know, we do not accept ethical violations,” Wal-Mart CEO Mike Duke said in a message to employees.

Wal-Mart last month said it was investigating possible FCPA violations in Brazil, India and China, in addition to its bribery probe in Mexico. The inquiries come as growth for Wal- Mart’s international sales slowed to 2.4 percent in the three months ended October, the slowest quarterly pace in three years, according to data compiled by Bloomberg.

Wal-Mart shut its investigation of the former Walmex lawyer’s account of bribery in 2006 even as the company’s investigators found evidence to support his allegations, the New York Times reported.

“The Audit Committee of the board, comprised entirely of independent directors, is overseeing the investigation” it initiated more than a year ago, Bentonville-based Wal-Mart said. “We are also continuing to cooperate with the Department of Justice and the Securities and Exchange Commission on this matter.”

Walmex had used bribes to skirt regulations on unsafe construction, the New York Times said, citing its investigation, which it said used confidential Wal-Mart documents.

The newspaper reported 19 store sites in Mexico were targets of Walmex’s bribes. Eight bribes totaling $341,000 were paid in relation to the building of a Sam’s Club in Mexico City without a construction license, environmental permit or urban-impact assessment, the New York Times said.

The newspaper identified nine bribes amounting to $765,000 related to the construction of a refrigerated distribution center in a flood basin north of Mexico City. The store in Teotihuacan involved more than $200,000 of bribes, it said.

“As leaders, we are measured by our weakest moment, so we can’t have a weak moment in the area of integrity,” Duke said in the note. “We can have a bad sales day and a good sales day and hope they average out, but we can’t average integrity. The only way our company can grow and thrive is for every Walmart associate to do the right thing – 24 by 7 in every country that we operate in.”

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The company has spent more than $35 million on new processes and procedures, Wal-Mart said in its statement dated yesterday (Dec. 17).

“We are committed to having a strong and effective global anti-corruption program everywhere we operate and taking appropriate action for any instance of non-compliance,” Wal- Mart said. “We recognize that our effort to date is a work in progress and there is more to be done as we continue building a world-class FCPA compliance program.”

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