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Harry Cassin Publisher and Editor

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Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

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FCPA Blog Daily News

« Two convicted for Haiti FCPA offenses | Main | Former Interpol chief admits taking $2 million in bribes »
Thursday
Jun202019

Walmart pays $282 million for FCPA resolution

Walmart Inc. agreed Thursday to pay the DOJ and SEC $282 million to settle allegations that it violated the Foreign Corrupt Practices by paying an intermediary in Brazil for help obtaining construction permits and having weak anti-corruption internal controls in Brazil, China, India, and Mexico.

In the criminal action, Walmart paid penalties of $138 million. Its Brazil subsidiary, WMT Brasilia S.a.r.l., agreed to plead guilty to violating the FCPA's accounting standards.

Walmart entered into a three-year non-prosecution agreement (pdf) with the DOJ and agreed to retain an independent corporate compliance monitor for two years.

In the SEC's civil action, Walmart paid $144.7 million in disgorgement and prejudgment interest. The SEC settled the action through an internal administrative order and didn't go to court.

From 2000 through 2011, Walmart’s subsidiaries in Brazil, China, India, and Mexico "operated without a system of sufficient anti-corruption related internal accounting controls," the SEC said.

As a result,

. . . during this time period, those Walmart subsidiaries paid certain third-party intermediaries without reasonable assurances that certain transactions were consistent with their stated purpose or consistent with the prohibition against making improper payments to government officials.

Walmart also failed to sufficiently investigate or mitigate known corruption risks and allegations, the SEC said.

The company first disclosed the FCPA investigation in December 2011.

In Thursday's action, the SEC said in China Walmart failed to provide "immediate widespread anti-corruption training" or a detailed FCPA policy covering third-party intermediaries and joint venture partners, despite a request for them from the China subsidiary.

In Mexico, an internal investigation found in 2005 that $4 million was paid to an intermediary who a lawyer for the Mexican subsidiary said was corrupt. But in March 2006, another lawyer for the Mexico subsidiary concluded without other evidence that the corruption allegations were unsubstantiated.

In India, Walmart received anonymous emails alleging improper payments to government officials. Despite the emails and numerous earlier red flags, Walmart didn't begin "to implement and maintain a system of sufficient internal accounting controls related to anti-corruption" until around April 2011, the SEC said.

In Brazil, the local subsidiary in late 2009 was missing an operating license. A Walmart Brazil executive said at an internal meeting that an “extraordinary process” was needed to obtain the license.

That same day, certain members of the Brazil subsidiary's management approved hiring an intermediary to secure the license. Nine days later, the intermediary obtained all governmental approvals for the store.

"The TPI [third-party intermediary] received approximately $127,000, an amount greater than Brazil subsidiary’s other permitting consultants, for the TPI’s efforts with these permits and certain operating permits obtained after the store opened," the SEC said.

Walmart said in November 2017 that it had reserved $283 million for a possible FCPA resolution with the DOJ and SEC.

The Bentonville, Arkansas retailer spent more than $900 million investigating potential FCPA offenses and enhancing its anti-bribery compliance program, according to various SEC filings.

In Thursday's non-prosecution agreement with the DOJ, Walmart acknowledged responsibility for criminal conduct.

In an SEC filing Thursday, Walmart said: "Throughout the investigative process, the Company cooperated with the DOJ and the SEC."

The SEC said it considered Walmart's cooperation and remedial actions.

Walmart hired numerous compliance officers at headquarters and regionally, with separate reporting lines to the board's audit committee.

It enhanced its compliance monitoring and training, implemented "an automated global license management system for obtaining and renewing licenses and permits," and put in place global controls for charitable donations.

The company also stopped doing business with third parties involved in the FCPA violations.

The FBI's Robert Johnson said in a statement Thursday that the "FBI will hold corporations responsible when they turn a blind eye to corruption."

"If there is evidence of violations of the FCPA, we will investigate. No corporation, no matter how large, is above the law," Johnson said.

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Harry Cassin is the publisher and editor of the FCPA Blog.