Walmart, the world’s largest retailer, has admitted it is investigating allegations that its managers in Mexico used widespread bribery to secure the company’s presence in the country and expand its market share.
“This work is ongoing and continues today,” David Tovar, vice president of corporate communications, said in a statement. He added, however, that “we don’t have a full explanation of what happened.”
The admission, made late Saturday, followed an online report by The New York Times, which said that in September 2005, a high-ranking company attorney received an email from a former executive at the retail giant’s largest non-US subsidiary, Wal-Mart de Mexico.
In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance.
In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country, The Times reported, saying the attorney had the information because he had been in charge of securing construction permits.
When the Arkansas-based US retailer sent investigators to Mexico City within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million, the Times said.
The Mexican subsidiary’s top brass knew of the bribery, and tried to hide it from US headquarters, the report added.
In a confidential report to his superiors, Walmart’s lead investigator, a former FBI special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated.”
While the lead investigator urged a broader probe, an examination by The New York Times found that Walmart’s leaders shut it down, the report added.
Indeed neither US nor Mexican authorities were alerted, it stressed.
Meanwhile Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Walmart in 2008, the paper noted.
Until this article, the allegations and Walmart’s investigation had never been publicly disclosed, the Times said.
Tovar said in his statement that the company was “deeply concerned,” but tried to downplay the immediacy of the allegations.
“Many of the alleged activities in The New York Times article are more than six years old,” said Tovar. “If these allegations are true, it is not a reflection of who we are or what we stand for. We are deeply concerned by these allegations and are working aggressively to determine what happened.”
“We will not tolerate noncompliance with FCPA (US Foreign Corrupt Practices Act) anywhere or at any level of the company,” he added.
However, Tovar denied that the US government knew nothing about the probe.
“We have met voluntarily with the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to self-disclose the ongoing investigation on this matter,” he said.
He added that Walmart management had also filed a 10-Q statement in December to inform its shareholders of the investigation.
“The company’s outside advisors have and will continue to meet with the DOJ and SEC to report on the progress of the investigation,” the spokesman pointed out.
Walmart became the world’s largest retailer by slashing supply and overhead costs and passing much of those savings on to the consumer.
It was an act that competitors, including mom and pop stores, often found impossible to match.
But in recent years the company has seen fierce competition surge from online retailers like Amazon, which, without the cost of running physical stores, in many cases have been able to match or even beat Walmart at price-cutting.