To the Department of Justice and the Securities and Exchange Commission:
The open-letter draft published on October 23, 2013 generated extraordinary interest among compliance professionals and other readers in the United States and in Latin America, India and China — countries directly affected by the Wal-Mart investigation. Many sent in their observations and support for the letter.
For example, a compliance officer (CO) working in Asia asked for recognition and protection:
“A CO will not stand up against the huge pressure to maintain compliance standards if he does not get sufficient protection under law. Most COs working in overseas operations of U.S. companies are not U.S. citizens, but they usually are first to find the violations. Since the FCPA deals with foreign corruption, how could the DOJ and SEC not protect these COs?”
The letter below speaks for these compliance professionals and readers, incorporating their specific ideas and their commitment to the goals of the FCPA.
Over the past months, fourteen of my FCPA Blog posts examined the importance of the Wal-Mart investigation to the compliance profession and to global anti-corruption work. These posts discuss the following points:
- The alleged conduct in Wal-Mart is contrary to American values
- Extraordinary remediation is warranted
- Enforcement actions should buttress the compliance professions’ efforts to oppose C-Suite criminal misconduct
- The DOJ/SEC Guidance should be amended to require compliance measures that deter senior executive misconduct
Against this background, the final letter is submitted by the open-posting below and by mail. We look forward to your response and to continuing this discussion as the Wal-Mart investigation proceeds.
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November 6, 2013
Office of the Assistant Attorney General
U.S. Department of Justice
950 Pennsylvania Ave.
Washington, D.C. 205300
Office of Enforcement
U.S. Securities and Exchange Commission
100 F Street
Washington, D.C. 20549
Re: Wal-Mart Investigation
To the Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”):
This letter expresses the concerns of many compliance professionals and others about the DOJ and SEC’s Wal-Mart investigation. An open-letter draft published on the FCPA Blog on October 23rd invited comments and suggestions from compliance professionals and readers in America and in other countries. The response in the compliance community indicated extraordinary interest and support for the concerns in this letter. Notable were the observations from compliance officers working in Latin America, China, and India, countries affected by the Wal-Mart activities discussed below.
To be clear at the outset, the rights of Wal-Mart and all involved persons to due process, including the right to the presumption of innocence, should be respected and upheld during the investigation. Further, the right of the public to inquire into matters of public interest through our regulatory authorities, and to exercise rights of free press and freedom of association, should also be respected.
As to the ongoing investigation, the DOJ and SEC have allowed Wal-Mart to proceed by voluntary disclosures, as opposed to responding under subpoena. Wal-Mart is effectively investigating itself. Given the investigation’s lack of transparency to the public, can the DOJ and SEC explain why the investigation is adequate, and will you assure the public that the complete record will be released even if there is a case-closing settlement?
While all the facts are under investigation, the final disposition should address the allegations already in the public record. The public has been informed by, among other sources, Pulitzer prize-winning investigative journalism by the New York Times, ongoing media reporting, Wal-Mart’s regulatory filings and press releases, Congressional Committee announcements and several judicial proceedings.
From this public record, the DOJ and SEC should resolve the following:
- Did certain Wal-Mart executives implement a plan of corrupt means to secure improper business advantages, first in Mexico and later in China, India, Brazil and other countries?
- Wal-Mart’s compliance officers and professionals allegedly were intentionally obstructed by senior executives from conducting a compliance review and subjected to career-ending retaliation. If confirmed, will the DOJ and SEC’s settlement demonstrate that such harassment of compliance professionals is not condoned? Will the DOJ and SEC also make it clear that compliance officers working for multi-national companies like Wal-Mart in countries outside of America will receive the same protections as those working in America?
- Was there an intentional cover up of serious FCPA violations by senior executives? If so, what extraordinary sanctions will apply to deter similar serious criminal misconduct in the future?
- Due to alleged bribery and a cover up, did Wal-Mart’s books and records fail to meet applicable standards for complete and accurate accounting for over six years, 2005-2012?
- Will the DOJ and SEC prosecute any individuals for criminal misconduct? After two years of investigation, it appears no executives or officers will be prosecuted. Some charges are arguably not time barred, such as continuing books and records violations or conspiracy. The DOJ and SEC should either correct, or publicly explain, this gap in its prosecution.
- In a settlement, will Wal-Mart be allowed to retain and profit from improperly obtained stores in Mexico and elsewhere, while nothing is done to improve the countries where the alleged bribery took place? Instead will the DOJ and SEC and Wal-Mart create a new kind of settlement fund that is administered by NGOs and strengthens anti-corruption institutions, such as investigative journalism and an independent judiciary?
- An effective compliance and ethics program must cover potential misconduct in the C-Suite. The problems of compliance at Wal-Mart have been discussed by many compliance professionals in FCPA Blog posts and in other social media. Also, the Rand Center for Corporate Ethics and Governance in its May 2013 comprehensive report on C-Suite misconduct analyses why and how to restructure compliance programs to address such risks. Among the suggestions in the public record to prevent future misconduct are changes to the DOJ/SEC Guidance (FCPA Blog post, “ Wal-Mart: A Gap in the Guidance,” February 2013) and the series of recommendations in the Rand Center report. Will the DOJ and SEC support these changes, or what other changes will the DOJ and SEC require companies to undertake in order to prevent a recurrence of the kinds of problems under review in the Wal-Mart investigation?
I write for myself but also on behalf of the many compliance professionals and members of the public who are concerned by the direction and scope of the Wal-Mart investigation. We look forward to answers to these questions and a continuing public discussion.
The author is a contributing editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He is affiliated with ethiXbase, the owner of the FCPA Blog. He can be contacted here.