LITTLE ROCK — The Justice Department is conducting a criminal investigation of Wal-Mart regarding allegations of systematic bribery in Mexico, two people familiar with the matter told The Washington Post on Monday.
Wal-Mart said over the weekend that it has been meeting voluntarily with government officials at the Justice Department and the Securities and Exchange Commission as the giant retailer runs its own inquiry into charges it bribed foreign officials to gain business for Wal-Mart de Mexico. The allegations were first brought to light Saturday by The New York Times.
The Times’ reporters found that Wal-Mart de Mexico paid more than $24 million in bribes to win construction permits. When a whistle-blower alerted top Wal-Mart executives in 2005, they opened an investigation that found evidence of the bribery, but then shut down the inquiry. The company also failed to report any of the information to law enforcement at the time, according to the Times story.
Shares of Wal-Mart de Mexico fell $4.31, or 13.1 percent, to close Monday at $28.66. Wal-Mart Stores Inc. shares dropped $2.91, or 4.7 percent, to close at $59.54 on the New York Stock Exchange.
The U.S. Foreign Corrupt Practices Act, passed in 1977, bans companies from bribing foreign officials to win business. Officials in recent years have stepped up their enforcement, although trade groups including the U.S. Chamber of Commerce have complained that the law is being enforced too broadly.
“We take compliance with the U.S. Foreign Corrupt Practices Act very seriously and are committed to having a strong and effective global anti-corruption program in every country in which we operate,” said David Tovar, Wal-Mart’s vice president of corporate communications, in a statement Saturday. “Many of the alleged activities in The New York Times article are more than six years old. 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.”
A spokesman for the Justice Department declined to comment.
Wal-Mart faced more questions on Monday about how much company leaders knew about the allegations and why they didn’t tell authorities.
On Monday, Rep. Elijah Cummings, D-Md., and Rep. Henry Waxman, D-Calif., sent a letter to Wal-Mart Chief Executive Michael Duke to request a meeting about the bribery allegations.
Labor critics again raised alarms about the company’s practices.
“Wal-Mart has spent millions of dollars to rehabilitate its image and buy the support of key allies in an effort to break into new markets while making promises about the benefits of its business model,” said Joe Hansen, international president of the United Food and Commercial Workers International Union. “But by pursuing a relentless strategy in the U.S. and abroad of ‘growth at any cost’ in pursuit of profits, Wal-Mart’s senior management has proven that it is willing to trample on worker rights, discriminate against women, damage small businesses and the environment, and now potentially violate laws in the U.S., Mexico and other countries.”
Wal-Mart has hired auditing firm KPMG and law firm Greenberg Traurig LLP for a compliance review of its global operations, and law firm Jones Day to investigate its Mexican operations, said a person familiar with the matter.
The expansion of Wal-Mart de Mexico, mainly in the last decade, left the world’s largest retailer with about 20 percent of its stores in Mexico, out of more than 10,000 worldwide. Wal-Mart de Mexico is the company’s largest foreign subsidiary.
Wal-Mart de Mexico on Monday reported a 4.5 percent gain in first-quarter profit after opening more stores.
Net income rose to $357 million from $341 million a year ago, the company said ina statement. Sales climbed 14 percent to $7.3 billion, missing the average estimate of $7.6 billion of five analysts polled by Bloomberg.
Wal-Mart de Mexico doesn’t expect the investigation to adversely affect earnings or cash flow, the company said in a statement before its earnings release.
Wal-Mart de Mexico Chief Executive Officer Scot Rank and Chief Financial Officer Rafael Matute didn’t mention the investigation during a seven-minute conference call Monday to discuss first quarter results. As usual, the company didn’t take questions from analysts or investors.
Information for this article was contributed by Jia Lynn Yang of The Washington Post, David Welch, Thom Weidlich and Crayton Harrison of Bloomberg News and David Smith of the Arkansas Democrat-Gazette.
Front Section, Pages 1 on 04/24/2012