Widespread corruption and bribery by Wal-Mart in Mexico

April 22, 2012 4:39 AM

"Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark. [...] The lead investigator recommended that Wal-Mart expand the investigation. Instead, an examination by The New York Times found, Wal-Mart’s leaders shut it down."
posted by reductiondesign (46 comments total)

Read this last night and been expecting it to show up here. I was tempted to say tl:dr but it was really interesting to see how their ethics rules seemed to work okay on some levels once the whistleblower came forward, but as you go up the ranks the cynical self-preservation and CYA approach trumps all else. Who would'a thunk it? I do wonder if this ends up meaning anything much in the big picture. I guess they will say that bribery is just part of the cost of doing business in Mexico and that they didn't get special treatment as a result but rather just made themselves able to compete like everyone else. But this could be yet another example of the coverup ending up more damaging than the crime.
posted by zoinks at 4:52 AM on April 22, 2012 [2 favorites]

Instead, an examination by The New York Times found, Wal-Mart’s leaders shut it down.

'Cause, you never know where an investigation might lead you...say, to the China office. That's the sound of the wagons being circled down in Bentonville.
posted by Thorzdad at 4:55 AM on April 22, 2012 [4 favorites]

These things will happen in companies. The hard part is to honestly evaluate and correct the misdeeds. It is hard to do on a personal level with one's own faults and just as hard for companies. Those that can stand the heat of self examination will be the better for it. Those that cannot are doomed to continue suffering misdeeds and suffering from their misdeeds. This is going to be very expensive for Walmart, very expensive - far more expensive than if they had properly investigated and then self reported their misdeeds. The Foreign Corrupt Practices Act is making a lot of money for the Justice Department these days.
posted by caddis at 4:57 AM on April 22, 2012 [4 favorites]

Happy to see that the Times has not yet deleted this comment: "Now that the Times has spent many hours investigating Wal-Mart's payments of bribes in Mexico to get construction permits, etc., I assume they will now investigate how NY Times investor Carlos Slim got all his cell phone contracts."
posted by (Arsenio) Hall and (Warren) Oates at 5:02 AM on April 22, 2012 [29 favorites]

Of course they shut it down. It is a criminal activity. If I recall there is something called the Corrupt Foreign Practices Act and it is part of the cloud hanging over Rupert Murdoch's head in the US as a result of the UK News International criminality. If they investigate it and then don't turn the evidence it causes the guilt to flow upward on the corporate ladder and that stuff is only supposed to rain down not up.
posted by srboisvert at 5:11 AM on April 22, 2012

There was a story on Wal-Mart in the March/April issue of Mother Jones.
posted by travelwithcats at 5:11 AM on April 22, 2012 [2 favorites]

Of course they shut it down. It is a criminal activity.

They shut down the investigation, not the bribery. And they didn't turn any evidence over, either:

Neither American nor Mexican law enforcement officials were notified. None of Wal-Mart de Mexico’s leaders were disciplined. Indeed, its chief executive, Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Wal-Mart in 2008. Until this article, the allegations and Wal-Mart’s investigation had never been publicly disclosed.

If they investigate it and then don't turn the evidence it causes the guilt to flow upward on the corporate ladder

Yes, now that it's been made public I'd like to see a little of that. Sadly my bet is that the only people to be punished will be the whistleblowers, and maybe the journalists who aided them.
posted by scalefree at 5:34 AM on April 22, 2012 [8 favorites]

Thorzdad: "Instead, an examination by The New York Times found, Wal-Mart’s leaders shut it down.

'Cause, you never know where an investigation might lead you...say, to the China office. That's the sound of the wagons being circled down in Bentonville"

Forget it, Jake. It's the China office.
posted by DoctorFedora at 5:35 AM on April 22, 2012 [24 favorites]

I wish I could say I was surprised, even a little bit.
posted by Scattercat at 6:29 AM on April 22, 2012 [2 favorites]

"As I pulled into the parking lot, I reflected that odds were that not a lot of clandestine meetings involving mystical assassination, theft of arcane power, and the balance of power in the realms of the supernatural had taken place in a Wal-Mart Super Center. But then again, maybe they had. Hell, for all I knew, the Mole Men used the changing rooms as a place to discuss plans for world domination with the Psychic Jellyfish from Planet X and the Disembodied Brains-in-a-Jar from the Klaatuu Nebula. I know I wouldn’t have looked for them there."
~ Harry Dresden
posted by Fizz at 6:37 AM on April 22, 2012 [4 favorites]

If this goes anywhere, I'm pretty sure we'll see another example of how the rules don't apply at the top the way they do at the bottom. Wal Mart will get a wrist-slap and have to pay a fine that's only a fraction of the money that they made from the business the bribes got them.

That's why they do this kind of shit - it's easier (and much more profitable) to beg forgiveness than to ask permission.
posted by Benny Andajetz at 6:51 AM on April 22, 2012 [5 favorites]

Thanks. Now I have to wear my surprised face all day.
posted by clvrmnky at 7:19 AM on April 22, 2012 [2 favorites]

What's sort of preposterous about these rules is often there's no other way to get things done in third-world countries than to use bribery. Want a telephone line? Wait 3 years... or 3 days with the properly placed bribe.
posted by shivohum at 7:20 AM on April 22, 2012 [4 favorites]

I guess they will say that bribery is just part of the cost of doing business in Mexico

That's not what the article implies though. It says the bribes were paid to get things done fast, to buy permits, and suvvert environmental rules. It also says thay one exec, Maritza Munich, was very familiar with doing business in Mexico and Larin America, and she took a strong stance against bribery.

It's pretty clear they had the ability to run a clean operation and chose not to.
posted by CheeseDigestsAll at 7:25 AM on April 22, 2012 [1 favorite]

Lots of rules seem to create unnecessary inefficiency if you only consider them from the sympathetic POV of the party who stands to gain by breaking them, sivohum. In fact for some value, every rule--even fairly clear-cut ones like our rules against murder--potentially costs or inconveniences someone. Wall Mart could get control of property it needs to build new super centers a lot faster and more cheaply if not for the rules that prevent them from killing or displacing by force all the current owners and just seizing the land. It might even be possible, considering only one such action in isolation, to furnish a plausible seeming economic justification for allowing the practice. But the harm done in the bigger picture by letting companies get used to operating in a fashion that effectively puts them above the law is so much worse than any nominal, short term benefit allowing such behaviors might seem to offer in the short term that it's not even close to justifiable in the bigger picture, social context.
posted by saulgoodman at 8:12 AM on April 22, 2012 [9 favorites]

Ugh. Stupid auto correct. Walmart, of course, not "Wall Mart."
posted by saulgoodman at 8:13 AM on April 22, 2012

What's sort of preposterous about these rules is often there's no other way to get things done in third-world countries than to use bribery. Want a telephone line? Wait 3 years... or 3 days with the properly placed bribe.

Those sorts of bribes are exempted from the Foreign Corrupt Practices Act:

Regarding payments to foreign officials, the act draws a distinction between bribery and facilitation or "grease payments", which may be permissible under the FCPA but may still violate local laws. The primary distinction is that grease payments are made to an official to expedite his performance of the duties he is already bound to perform.

posted by Kirth Gerson at 8:18 AM on April 22, 2012 [16 favorites]

I read this last night, too, and what shocked me the most was the gigantic trail they made in the process of covering up the illegalities, and how obvious they made it that they were shutting down the internal investigations. If you're going to cover something up, this is a textbook case of how not to.
posted by rtha at 8:53 AM on April 22, 2012

I think transparency in cover-ups should be applauded.

Also, allow me to offer you a special introductory price on our new line of crystal clearcoat whitewash.
posted by George_Spiggott at 8:56 AM on April 22, 2012

Ah, the Bentonville Mafia at work again!
posted by Catblack at 9:03 AM on April 22, 2012

If you're going to cover something up, this is a textbook case of how not to.

No, this is a textbook case of how not to.
posted by Fizz at 9:16 AM on April 22, 2012

Regarding payments to foreign officials, the act draws a distinction between bribery and facilitation or "grease payments", which may be permissible under the FCPA but may still violate local laws. The primary distinction is that grease payments are made to an official to expedite his performance of the duties he is already bound to perform.

Ahaha, so if the official "cuts corners" to "speed up" the process it's not corruption, as the fault rests on the official not doing his/her job properly, but they main company "just gave incentives to speed up, not to do anything illegal". Yeah, right.

Uh well, what about declaring acts made by "incentivized" officers radically null and void?
posted by elpapacito at 9:23 AM on April 22, 2012

It is interesting to find out that this isn't against federal law. So I guess the damage here is going to be done (a) to their business in Mexico and (b) to their reputation here.
posted by koeselitz at 9:26 AM on April 22, 2012

How could this possibly damage their reputation here? Anyone still shopping at Wal Mart clearly prioritized price and or convenience above any other concern. How is this news, if it even reaches 85% of their customer base, going to change that?
posted by spicynuts at 9:39 AM on April 22, 2012 [1 favorite]

How is this news, if it even reaches 85% of their customer base, going to change that?

In this form, hardly any change. Maybe, just maybe, pointing out that 1. money was paid to corrupt officials 2. so this causes prices to rise, your low low price is actually higher, to pay the corruption 3. if corruption was covered, maybe there's more corruption.... maybe your low low prices aren't really low, much is being eaten by fat cats who work 1 hour/day earning $1000/hour.
posted by elpapacito at 9:53 AM on April 22, 2012

Does the Foreign Corrupt Practices Act apply if you don't know about the bribes?

I wonder if, from a legal perspective, you might be better off not investigating. If you do investigate, and you find out a bribes you can't stop paying without seriously negatively impacting your business, would it be better to simply not do the investigation?
posted by delmoi at 10:07 AM on April 22, 2012

Uh well, what about declaring acts made by "incentivized" officers radically null and void?

The US legal system doesn't have the power to declare acts by foreign officials void - what would it even matter if your Mexican building permit were considered void under US law?
posted by strangely stunted trees at 10:11 AM on April 22, 2012

There is a fine line between bribery and extortion, and particularly between "grease payments" and extortion: "Oh, so you need to get that fresh produce you got sitting down there at docks to clear customs... Well I'm really backlogged right now, but if you just fill out these forms I'm sure we'll get to it eventually..." *you look nervously at his smile while he sticks your paperwork at the bottom of a huge stack of similar forms*
posted by Stu-Pendous at 10:17 AM on April 22, 2012

In fact for some value, every rule--even fairly clear-cut ones like our rules against murder--potentially costs or inconveniences someone. Wall Mart could get control of property it needs to build new super centers a lot faster and more cheaply if not for the rules that prevent them from killing or displacing by force all the current owners and just seizing the land.

That only works in Africa and you have to hire local contractors to do the job.
posted by psycho-alchemy at 10:25 AM on April 22, 2012

Happy to see that the Times has not yet deleted this comment: "Now that the Times has spent many hours investigating Wal-Mart's payments of bribes in Mexico to get construction permits, etc., I assume they will now investigate how NY Times investor Carlos Slim got all his cell phone contracts."

Slim no longer owns any part of the NYT. He actually sold his investment a few months later, at a huge profit.

Lots of rules seem to create unnecessary inefficiency if you only consider them from the sympathetic POV of the party who stands to gain by breaking them, sivohum. In fact for some value, every rule--even fairly clear-cut ones like our rules against murder--potentially costs or inconveniences someone. Wall Mart could get control of property it needs to build new super centers a lot faster and more cheaply if not for the rules that prevent them from killing or displacing by force all the current owners and just seizing the land.

Bribery isn't murder. If Wall-Mart were to suspend all lobbying activity in the U.S, likely their business would suffer a great deal, as competitors who do pay lobbyists get the government to break them up (Just look at Microsoft, which didn't do much lobbying before the DOJ investigation)

The bribes were supposed to be used to pay to build things quicker, but often times the officials purposely slow things down if you don't bribe them. It may be better for society if people as a whole don't pay bribes. But it is better for the briber and clearly for the bribee, which is why it happens. But the negative side effects are diffused among the entire population, rather then a single person who gets murdered.
posted by delmoi at 11:03 AM on April 22, 2012 [1 favorite]

I really don't get the apologists who say "that's the only way to do things in these corrupt countries." That might be true for the guy trying to get the city power connected to his house, but huge multinationals like WalMart are hardly powerless.

In fact, they are one of the few forces that could exert the political and financial muscle to make a change for the better. Yes, corporations have no legal requirement to act in the public good, but when the alternative is criminal activity, it would be nice if the choice that did the least harm also did the most good.
posted by CheeseDigestsAll at 11:54 AM on April 22, 2012 [2 favorites]

We're jumping to all kinds of specious assumptions here. It's not clear these bribes are the kind that would qualify as acceptable under the law or not. It is decidedly not true that the Foreign Corrupt Practices Act exempts all forms of bribery--and it's also not clear that the specific acts WalMart's investigators identified were the kind that qualify as exempted. In fact, if they were, it's doubtful the investigation would have been preemptorily dropped the way it was. In many cases, paying bribes in foreign countries is still illegal.
posted by saulgoodman at 12:02 PM on April 22, 2012

I really don't get the apologists who say "that's the only way to do things in these corrupt countries." That might be true for the guy trying to get the city power connected to his house, but huge multinationals like WalMart are hardly powerless.

I don't really care one way or the other - but why would it be surprising that WM would cancel the investigation? If their Mexico branches are paying bribes, why would they want to know, so long as the stores are profitable?

Obviously I'm not a lawyer but does the FCPA require you to investigate yourself? In fact, it seems like doing an internal investigation could actually make the situation worse for you legally, since you'd be creating an easily discoverable paper trail, and if you did turn up any bribery you'd need to either deal with it immediately or else make yourself personally liable.
posted by delmoi at 12:30 PM on April 22, 2012

Waltons aren't even subject to a wrist slap when their drunk driving kills innocent people.
posted by jeffburdges at 2:30 PM on April 22, 2012

In the USA they can acquire land with a reasonably straightforward process, but must bribe politicians to let them abuse their employees. In Mexico, they get to abuse employees as a matter of course, but must pay bribes to acquire land. There's no real moral difference.
posted by aeschenkarnos at 2:51 PM on April 22, 2012 [2 favorites]

People! /Please/ find out what "third-world" means, and why it is an out-moded way of referring to what you probably want to say is "the global South."

Even when there /was/ a "third-world" I'm not sure Mexico was part of it.
posted by clvrmnky at 5:26 PM on April 22, 2012 [2 favorites]

I can't believe that it's possible to have a discussion about whether or not a given bribe is an illegal bribe or a legal bribe.
posted by feloniousmonk at 5:49 PM on April 22, 2012

Walmart has essentially forced the Justice Department to go after this crime aggressively:

For many years the FCPA was a statute that was hardly enforced, but for a variety of reasons the Justice Department has vastly increased its enforcement of the FCPA in recent years. There have been at least 150 FCPA investigations by the feds in recent years, and companies have entered into many deferred prosecution or non-prosecution agreements, and even plea bargains, with the government that have included massive fines. After pleading guilty to FCPA violations, Siemens paid nearly $3 billion in fines and other associated costs.

During this unprecedented FCPA enforcement campaign, the Justice Department has promoted a custom in corporate America where companies are encouraged to self-report potential FCPA violations to the feds immediately upon learning about them in order to obtain leniency from the government. The companies almost always come to settlement agreements after they self-disclose.

...

So the feds have a situation in which one of the nation’s biggest and most powerful companies, Wal-Mart, has allegedly rolled the dice and not self-reported allegations that were made. Now, those allegations are on the front page of the New York Times.

Worse still, the man who the New York Times describes as being “the driving force behind systematic bribery in Mexico,” Eduardo Castro-Wright, is now vice-chairman of Wal-Mart. He is retiring in July. H. Lee Scott Jr., Wal-Mart’s CEO in 2005, reportedly “rebuked internal investigators for being overly aggressive.” Mike Duke, Wal-Mart’s current chief executive, headed Wal-Mart International in 2005 and was “kept informed” about the internal investigation into the bribery allegations.

posted by caddis at 6:04 PM on April 22, 2012 [2 favorites]

Coming in here to say what clvrmnky already did, please stop calling Mexico a third-world country. It's not appropriate and it's also really offensive. Mexico also is not "a corrupt country", it's a country with corruption.
posted by CrazyLemonade at 6:51 PM on April 22, 2012 [1 favorite]

Those sorts of bribes are exempted from the Foreign Corrupt Practices Act:


Well that's very interesting.

Lots of rules seem to create unnecessary inefficiency if you only consider them from the sympathetic POV of the party who stands to gain by breaking them, sivohum.

These are not some beautiful public policies created in some mythical, beautiful deliberative democracy with citizens joining hands and singing songs. Bribes have to be paid because of widespread corruption, of officials not performing their legal duties, of laws created by downright straightforwardly corrupt legislators, enforced by corrupt bureaucrats, watched over by corrupt judges.

This is not "rule of law" in any meaningful sort of way.

/Please/ find out what "third-world" means, and why it is an out-moded way of referring to what you probably want to say is "the global South."

Why? I think the way it's used reflects the way most people understand what it means: the developing world. Why should a perfectly good phrase that communicates exactly what it's meant to communicate be abandoned?
posted by shivohum at 7:38 PM on April 22, 2012

The US doesn't further the rule of law around the world by incentivizing and rewarding systemic corruption. Walmart likewise is not mythical or virtuous, nor evidently above corruption. Nobody has to sing kumbaya here (nor do laws have to attain some kind of theoretical perfection) in order for us to recognize that just shrugging our shoulders philosophically and cozying up to the idea that filth and muck are a legitimate currency of exchange doesn't suddenly leave everybody's hands clean. If Walmart doesn't have anything to hide, then let them prove it.
posted by saulgoodman at 9:31 PM on April 22, 2012 [2 favorites]

@shivohum, precisely because the definition you give as "perfectly good" is, at best, imperfectly used as the meaning continues to drift into some vague "developing world", itself a misnomer.

There is a huge difference between North Korea, India and Mexico, and yet by some estimations all of these are still "developing".

The problems facing Mexico are completely different from those facing, say, West African nations. They are somewhat tied to problems with global capital and trade, which highlights even more why there is no Third World any longer. There is One World, With Trade Imbalances, Political and Historical Precedences and Complicated International Relationships.

Mexico was never part of any Third World, and their problems stem from a completely different source than from being a First, Second or Third World nation.

Put another way, if Third World means Developing Nation, then what does Second World mean? Since we can't scale the so-called developing world into two neat packages any more than we can one neat package, the phrase is even dumber.

NGOs and governments use precise terms. If we want to have intelligent discussions about the global problems with trade and capital imbalances, it would behove us to use those terms. It ain't harder to use those terms rather than imprecise, out-moded, incorrect and misunderstood terms.
posted by clvrmnky at 8:34 AM on April 23, 2012 [1 favorite]

Wal-Mart CEO Mike Duke at risk in bribery allegations

Wal-Mart Stores Inc lost $10 billion of its market value on Monday on concerns that a bribery investigation in Mexico could be very costly and hinder its plans to grow.
posted by caddis at 4:34 PM on April 23, 2012 [1 favorite]

Walmart stock falls nearly 5%.
posted by saulgoodman at 8:12 PM on April 23, 2012 [1 favorite]

During this unprecedented FCPA enforcement campaign, the Justice Department has promoted a custom in corporate America where companies are encouraged to self-report potential FCPA violations to the feds immediately upon learning about them in order to obtain leniency from the government. The companies almost always come to settlement agreements after they self-disclose.

...

So the feds have a situation in which one of the nation’s biggest and most powerful companies, Wal-Mart, has allegedly rolled the dice and not self-reported allegations that were made. Now, those allegations are on the front page of the New York Times.

Well, that answers my question about why WM would want to continue the investigation: the government has been working to incentivise corporations to do so. And now not prosecuting them would risk that incentivisation

My guess is that the walmart guys looked at what was going on wallstreet and assumed it wasn't going to be an issue. After all, they both start with "wal"! Totally the same. But the government hasn't quite shown the same leniency to corporations that aren't banks. I would certainly like to see WM prosecuted and forced to pay huge fines.

Now I wonder, how much did the weak government response to wallstreet shenanigans encourage other corporate leaders to flout the law, and assume that government oversight was basically non-existent.
posted by delmoi at 1:37 AM on April 24, 2012

"The Long Adios," A Walmart Detective Story
posted by homunculus at 9:58 AM on April 25, 2012