Walmart Ensnared in Mexican Bribery Probe
By: CNN News
Updated: April 23, 2012
Walmart says it has been conducting an "extensive investigation" since 2011 into its compliance with a federal law that prohibits American companies from bribing foreign officials.
The statement came in response to a New York Times article published online Saturday alleging that top executives in Walmart (WMT, Fortune 500) Mexican division attempted to conceal a widespread bribery scheme from the company's headquarters in Bentonville, Ark.
The Times story alleges that executives at Walmart headquarters -- including former CEO H. Lee Scott -- were more concerned with damage control from the matter than with correcting the situation.
The allegations date back to 2005, when a former Walmart de Mexico executive supposedly e-mailed one of Walmart's senior lawyers, spelling out how the company had paid more than $24 million in bribes to secure construction permits throughout Mexico.
The Times said its investigation included 15 hours of interviews with former Walmart executive Sergio Cicero Zapata, who said he had personally facilitated many of the alleged payoffs, which bought zoning approvals and cleared bureaucratic hurdles.
Cicero allegedly pointed to Eduardo Castro-Wright, who was CEO of Walmart de Mexico from 2003-2005, as one of the main proponents behind the payoffs. Castro-Wright has not been disciplined and his role remains unclear, according to the Times.
Castro-Wright was a popular figure within Walmart, and hailed for his success at Walmart de Mexico, according to the Times. Under his leadership, Walmart de Mexico's net sales grew by 25%, according to a 2005 annual report. Castro-Wright was promoted to chief operating officer of Walmart USA in 2004, quickly moving up to become CEO of the U.S. division a year later. In 2008, he was promoted to vice chairman.
According to the Times, Walmart acted on the information by swiftly conducting its own investigation -- and then just as swiftly moving to conceal it from U.S. and Mexican authorities.
"We are working hard to understand what occurred in Bentonville more than six years ago and are committed to conducting a complete investigation before forming conclusions," said David Tovar, Walmart's vice president of corporate communications.
He added that Walmart has already met with the U.S. Department of Justice and the Securities and Exchange Commission, and that it disclosed the investigation to shareholders in a regulatory filing in December.
Tovar said the company initiated a review of its worldwide anti-corruption practices and policies a year ago.
"We are committed to getting to the bottom of this matter," he said, adding that Walmart has taken a number of steps in Mexico to strengthen its compliance with the U.S. Foreign Corrupt Practices Act.
Along with its joint venture partner, Walmart owns 2,099 stores in Mexico, including 213 Walmart Supercenters and 126 Sam's Clubs. Walmart employs nearly 190,000 associates in the country, according to its website.
Walmart shares closed Friday at $62.45 each. The stock has risen about 4.5% so far this year, lagging discount store competitors such as Target (TGT, Fortune 500), Sears Holdings (SHLD, Fortune 500) and Costco (COST, Fortune 500).
The statement came in response to a New York Times article published online Saturday alleging that top executives in Walmart (WMT, Fortune 500) Mexican division attempted to conceal a widespread bribery scheme from the company's headquarters in Bentonville, Ark.
The Times story alleges that executives at Walmart headquarters -- including former CEO H. Lee Scott -- were more concerned with damage control from the matter than with correcting the situation.
The allegations date back to 2005, when a former Walmart de Mexico executive supposedly e-mailed one of Walmart's senior lawyers, spelling out how the company had paid more than $24 million in bribes to secure construction permits throughout Mexico.
The Times said its investigation included 15 hours of interviews with former Walmart executive Sergio Cicero Zapata, who said he had personally facilitated many of the alleged payoffs, which bought zoning approvals and cleared bureaucratic hurdles.
Cicero allegedly pointed to Eduardo Castro-Wright, who was CEO of Walmart de Mexico from 2003-2005, as one of the main proponents behind the payoffs. Castro-Wright has not been disciplined and his role remains unclear, according to the Times.
Castro-Wright was a popular figure within Walmart, and hailed for his success at Walmart de Mexico, according to the Times. Under his leadership, Walmart de Mexico's net sales grew by 25%, according to a 2005 annual report. Castro-Wright was promoted to chief operating officer of Walmart USA in 2004, quickly moving up to become CEO of the U.S. division a year later. In 2008, he was promoted to vice chairman.
According to the Times, Walmart acted on the information by swiftly conducting its own investigation -- and then just as swiftly moving to conceal it from U.S. and Mexican authorities.
"We are working hard to understand what occurred in Bentonville more than six years ago and are committed to conducting a complete investigation before forming conclusions," said David Tovar, Walmart's vice president of corporate communications.
He added that Walmart has already met with the U.S. Department of Justice and the Securities and Exchange Commission, and that it disclosed the investigation to shareholders in a regulatory filing in December.
Tovar said the company initiated a review of its worldwide anti-corruption practices and policies a year ago.
"We are committed to getting to the bottom of this matter," he said, adding that Walmart has taken a number of steps in Mexico to strengthen its compliance with the U.S. Foreign Corrupt Practices Act.
Along with its joint venture partner, Walmart owns 2,099 stores in Mexico, including 213 Walmart Supercenters and 126 Sam's Clubs. Walmart employs nearly 190,000 associates in the country, according to its website.
Walmart shares closed Friday at $62.45 each. The stock has risen about 4.5% so far this year, lagging discount store competitors such as Target (TGT, Fortune 500), Sears Holdings (SHLD, Fortune 500) and Costco (COST, Fortune 500).
