Mike Scher on Walmart: We're talking about the future of the compliance profession
Wednesday, October 21, 2015 at 10:28AM
Michael Scher in Maritza Munich, New York Times, Pulizter Prize, Walmart

The Wall Street Journal reported Monday that the DOJ's three-year investigation of Walmart in Mexico has uncovered little or no evidence of major bribery, and that the case may eventually be resolved without criminal charges and only a fine.

It was a stunning turn-around after a report from the New York Times in September 2012 that alleged that Walmart representatives paid at least $24 million in bribes to Mexican officials to secure permits for new stores, and then spent years covering up the payments.

The New York Times' reporting, which won a Pulitzer Prize, seemed to trace the cover up back to Walmart's headquarters in Bentonville, Arkansas, and deep into the C-suite.

There were also allegations along the way that Walmart executives silenced at least one compliance officer and several in-house investigators.

The DOJ investigation, however, found evidence that contradicted some of those original allegations, the Wall Street Journal said.

The New York Times this week stuck by its reporting. Deputy executive editor Matt Purdy said the original stories “were largely based on internal Walmart documents that described hundreds of suspect payments involving millions of dollars."

The Wall Street Journal said it spoke to multiple sources at the DOJ. The extensive federal investigation and Walmart's own $650 million internal probe found evidence of bribery only in India, the WSJ said, and then only relatively small payments, mostly under $200 each. The WSJ didn't spell it out, but probably most of those were facilitating payments and not actionable under the antibribery provisions of the FCPA. Whether Walmart accurately recorded those payments in its books and records is another issue.

It's an understatement to say the Walmart story is now confusing. The New York Times is a trusted news source. Its Walmart reporting seemed well sourced and solid. Walmart didn't issue any real denials. Instead it launched its own investigation and took remedial measures in its compliance program. The Pulitzer Prize committee recognized the Times for excellence in investigative reporting.

And yet Walmart and its top executives may walk free.

Here's my hope: That if the DOJ decides not to prosecute the company or any individuals, it will tell the public the reasons why. Usually the DOJ is silent and opaque. In this case, it needs to be open and transparent. It needs to answer some questions that many of us have.

Why, for example, did the former Walmart lawyer and compliance officer, Maritza Munich, leave the company? Why hasn't the company allowed her to testify in shareholder suits or to congress?

Was her abrupt resignation itself a red flag ignored by Walmart's board?

What was in the reports from her investigators (former FBI agents), and where are the reports today? Where are the investigators?

In its original story about Walmart in Mexico, the New York Times said:

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.

In a confidential report to his superiors, Wal-Mart’s lead investigator, a former F.B.I. special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated."

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.

No one wants to believe a cover up at Walmart became a cover up at the DOJ. No one wants to believe that protecting America's biggest retailer became more important than prosecuting large-scale overseas bribery and a corporate cover up.

But if the DOJ decides not to prosecute the company or any individuals, and won't explain its reasons, there will always be reasonable suspicions. And those suspicions will weaken both the rule of the law in general and the FCPA in particular.

I also have a larger concern for compliance officers.

Unless the DOJ is transparent in any decision not to prosecute Walmart, compliance officers everywhere will feel the chill. Should they do their jobs and risk their careers? Or should they retreat to the shadows and let those with all the power make the decisions?

Are the biggest corporations really too big to prosecute under the FCPA? If so, what's the future for any compliance officer?

The outcome of the Walmart case is still unknown. But this much is clear: The Walmart case, and the way it's ultimately handled by the DOJ, will be one of the most important events ever for compliance officers everywhere.


Michael Scher is a senior editor of the FCPA Blog. He has over three decades of experience as a senior compliance officer and attorney for international transactions. He can be contacted here.

Article originally appeared on The FCPA Blog (http://www.fcpablog.com/).
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