Walmart fined $383m in bribery plea deal

US retail giant Walmart will pay $383 million in fines as part of the plea agreement. Federal regulators said Walmart looked the other way as subsidiaries on three continents paid millions of dollars to middlemen who helped obtain permits and other g
US retail giant Walmart will pay $383 million in fines as part of the plea agreement. Federal regulators said Walmart looked the other way as subsidiaries on three continents paid millions of dollars to middlemen who helped obtain permits and other government approvals from July 2000 to April 2011.PHOTO: REUTERS

Brazilian unit pleads guilty to federal crime; US regulators say problems span 3 continents

NEW YORK • Inside Walmart's corporate offices in Brazil, one local contact was known as the "sorceress" for the ability to obtain government permits quickly.

In India, concerns about bribery were met with a "wink and a nod" by Walmart's local business partner. In China, money was funnelled to a local landlord for "government relationship consulting services".

And in Mexico, cars and computers were donated to governments in communities where Walmart was planning to build new stores.

For more than a decade, Walmart used middlemen to make dubious payments to governments around the globe in order to open new locations, US prosecutors and securities regulators said in a settlement agreement on Thursday.

But even as employees raised the alarm, the company's top leaders did little to prevent Walmart from being involved in bribery and corruption schemes.

That lack of internal control led to a seven-year inquiry that culminated on Thursday with Walmart's Brazilian subsidiary pleading guilty to a federal crime.

The guilty plea, and the US$282 million (S$383 million) in fines that Walmart has agreed to pay, capped one of the biggest investigations ever under the Foreign Corrupt Practices Act, which makes it illegal for United States corporations to bribe overseas officials.

"Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption," Assistant Attorney-General Brian Benczkowski said in a statement.

The investigation, which was conducted by the Department of Justice and the Securities and Exchange Commission, came after The New York Times revealed in 2012 that Walmart had made suspicious payments to officials in Mexico and then tried to conceal them from top executives at the company's headquarters in Bentonville, Arkansas. And even when the issues reached the main office, an internal investigation essentially went nowhere.

The Times' reporting set off years of legal trouble and executive reshuffling at Walmart. The company has spent about US$900 million on lawyers and investigators to root out the problems, as well as on hiring more people to bolster its compliance systems.

Regulators said on Thursday that it was not only Walmart's drive to grow quickly but also its "low-cost philosophy" that led to poor internal controls.

The fine Walmart will pay is less than the US$600 million that federal prosecutors and regulators had sought earlier. Walmart generated a profit of about US$7 billion in its 2018 fiscal year.

The plea agreement, which was technically related to the company's improper record-keeping, showed that problems went far beyond its operations in Mexico.

Federal regulators said Walmart looked the other way as subsidiaries on three continents paid millions of dollars to middlemen who helped obtain permits and other government approvals from July 2000 to April 2011.

In Brazil, many payments flowed through the "sorceress", an otherwise unidentified individual who was also nicknamed the "genie" for sorting "things out like magic", according to court documents.

This person charged a steep price, roughly US$400,000, to help smooth the process of getting building permits.

The questionable payments made in India were often recorded on the company's books with vague descriptions like "professional fees" and "incidental".

Walmart said federal regulators had acknowledged the steps the firm had taken to improve its anti-corruption measures since the investigations began seven years ago.

"Walmart is committed to doing business the right way, and that means acting ethically everywhere we operate," Walmart's chief executive Doug McMillon said.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on June 22, 2019, with the headline 'Walmart fined $383m in bribery plea deal'. Print Edition | Subscribe