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Wal-Mart will test FCPA enforcement in new ways

What else did Wal-Mart do in Mexico, and when, if ever, will compliance professionals and the public know about it?

That is the question that must be asked after the latest report from the New York Times.

All those who care about the goals of the FCPA are indebted to the Times for its investigative reporting. I was shocked back in April when the Times first broke the story. I am more shaken and troubled by the new report.

(Wal-Mart, in the midst of a DOJ and an internal global investigation, does not admit the allegations and is entitled to its due process rights, including the presumption of innocence.)

According to the New York Times, Wal-Mart was not the victim of extortion. Until now it has enjoyed the image of a global corporation subjected to shake downs by the locals, with their culture of corruption and payoffs. Some have said Wal-Mart was just making facilitation payments to get real estate licenses otherwise due. Others said Wal-Mart followed local customs for doing business in Mexico — and yes, it should have known better but rogue operators can slip past the best compliance programs.

The latest Times report refutes these claims. It demonstrates that Wal-Mart was a corruption provocateur:

The Times’ examination reveals that Wal-Mart de Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of doing business. Nor did it pay bribes merely to speed up routine approvals. Rather, Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance — public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.

If time does not permit reading the whole report now, watch the Time’s short video. You can see the secret, one-line alteration on the town’s public zoning map made by an allegedly bribed zoning publication official after the town denied Wal-Mart a building permit.

Compliance professionals have a duty even beyond that of the public to follow this case.  We should advocate for full transparency by the DOJ. When will it share the full details with the public? What extraordinary sanctions might it create to set precedents or to acknowledge the impact on Mexican communities?

What went wrong at Wal-Mart? The complete factual record is essential if we are to draw lessons for the global anti-corruption movement that is starting to take off. Among them, how to improve compliance programs so they do not collapse under pressure, and how to detect when a corrupt business culture arises that nurtures the crime and sustains the cover up.

As a senior compliance officer at a major company said to me: “If the DOJ does not get enforcement right for Wal-Mart, the FCPA is a joke.”  I agree.


Michael Scher is a contributing editor of the FCPA Blog.

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