Retailer probes Mexico license issue

Wal-Mart Stores Inc. says it’s investigating how it got a license for a store in Mexico after The New York Times reported Monday night that the retailer’s local unit bribed an official to change a zoning map.

Wal-Mart de Mexico gave $52,000 to an official to redraw a 2003 zoning map that would have prohibited commercial development on a field less than a mile from the pyramids of Teotihuacan, according to the Times report. A former lawyer of the company known as Walmex cited the incident as he told Wal-Mart executives of how the unit used bribery, the newspaper reported.

“The allegations contained in The New York Times article surrounding events in 2003-2004 involving the permitting and licensing process for a Walmart de Mexico store in Teotihuacan, Mexico, have been part of the company’s ongoing investigation of potential violations of the U.S. Foreign Corrupt Practices Act we began more than ayear ago,” Wal-Mart said in a statement Monday night.

Separately, in a message to employees, Chief Executive Officer Mike Duke said, “We take these allegations very seriously because, as you know, we do not accept ethical violations.”

Wal-Mart last month said it was investigating possible Foreign Corrupt PracticesAct violations in Brazil, India and China, in addition to the bribery probe in Mexico. The inquiries come as growth for Wal-Mart’s international sales slowed to 2.4 percent in the three months ended October, the slowest quarterly pace in three years, according to data compiled by Bloomberg.

Walmex shares fell 1.3percent to $33.34 in Tuesday trading in Mexico City. The shares had gained 13 percent this year through Monday. Wal-Mart shares closed Tuesday at $69.50, up 30 cents or 0.4 percent.

Wal-Mart shut its investigation of the former Walmex lawyer’s bribery account in 2006 even as the company’s investigators found evidence to support his allegations, the Times reported.

“The Audit Committee of the board, comprised entirely of independent directors, is overseeing the investigation” it initiated more than a year ago, Bentonville-based Wal-Mart said. “We are also continuing to cooperate with theDepartment of Justice and the Securities and Exchange Commission on this matter.”

Walmex had used bribes to skirt regulations on unsafe construction, the Times reported, citing its investigation, which it said used confidential Wal-Mart documents.

The newspaper reported 19 store sites in Mexico were targets of Walmex’s bribes. Eight bribes totaling $341,000 were paid in relation to the building of a Sam’s Club in Mexico City without a construction license, environmental permit or urban-impact assessment, the Times reported.

The newspaper identified nine bribes amounting to $765,000 related to the construction of a refrigerated distribution center in a flood basin north of Mexico City. The store in Teotihuacan involved more than $200,000 of bribes, it said.

“As leaders, we are measured by our weakest moment, so we can’t have a weak moment in the area of integrity,” Duke said in the message to employees. “We can have a bad sales day and a good sales day and hope they average out, but we can’t average integrity. The only way our company can grow and thrive is for every Walmart associate to do the right thing 24 by 7 in every country that we operate in.”

The company has spent more than $35 million on new processes and procedures, Wal-Mart said in its statement.

“We are committed to having a strong and effective global anti-corruption program everywhere we operateand taking appropriate action for any instance of non-compliance,” Wal-Mart said. “We recognize that our effort to date is a work in progress and there is more to be done as we continue building a world-class [Foreign Corrupt Practices Act] compliance program.” Information for this article was contributed by Suresh Seshadri of Bloomberg News

Business, Pages 19 on 12/19/2012

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