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« James McGrath and the Internal Investigations Blog | Main | China Corruption Blotter (January 18, 2013) »
Friday
Jan182013

Is Wal-Mart Armstronging America?

To "Armstrong" is defined in a prior post on the FCPA Blog as cheating and misleading your teammates and the public.

After Lance Armstrong’s act of public confession, dismissed by leading ethicists as a sham, “Armstronging” now also includes appearing to apologetically come clean while still not disclosing nor accounting for what happened, i.e., failed transparency.

Is Wal-Mart "Armstronging" the public? On one hand, it is conducting a worldwide investigation of compliance violations and making changes to its compliance program. On the other hand it has declined to explain anything from its factual record, including revelations of bribery globally, citing ongoing investigations by itself and the DOJ and SEC.

Wal-Mart has been accused of frustrating Congress by refusing to allow a key officer to talk to Congressional investigators. Of particular note for compliance professionals, that officer was the General Counsel for Wal-Mart International, who resigned in 2006 when top management reportedly shut down the compliance investigation of bribery in Mexico, which she championed. She appears to have fought hard for years for tough compliance policies and real compliance professionalism, until her resignation. Other companies have worked out ways for former legal officers to cooperate and testify. No doubt Congress would like to know why she resigned.

What happened during the five years after the alleged cover up in 2006, as Wal-Mart opened new stores  around the globe on its way to becoming the world’s biggest retailer? Five years is a long time. Was bribery used internationally, as it was allegedly used in Mexico, to fuel such rapid growth? Top senior executives from Wal-Mart Mexico were not disciplined in 2006. Some were promoted and rose to oversee the international expansion. The CEO of the Mexican subsidiary in 2005 later became a Vice Chair of Wal-Mart. The current head of Wal-Mart, Michael Duke, allegedly received emails and detailed reports about the bribery in Mexico. The Congressional Committees are asking him to explain what he knew and what he did about it. Was there a second cover up outside Mexico from 2006 to 2011 during the international expansion?

Wal-Mart and any executives who may be prosecuted are entitled to due process, including the presumption of innocence. The public is entitled to voice its concerns about the scope or delays in the investigation, to engage in free speech with a free press and to have an enforcement of applicable laws after fact-finding and prosecution, including extraordinary sanctions to vindicate the public interest or to remediate for losses.

Wal-Mart might become the worst scandal involving an American company in the history of the FCPA. Whatever the final outcome, compliance lessons will need to be drawn, among them, should the head of compliance report directly to the Board, rather than to the office of the General Counsel? The new DOJ-SEC Guidance says it should, but Wal-Mart has not followed the Guidance even after its restructuring. Why not?

Congress put a January 24 deadline on its request to hear directly from Wal-Mart’s former General Counsel. For that to happen, the company would have to give consent by waiving its attorney-client privilege.

During the federal investigation of the many allegations about overseas bribery that have surfaced, full transparency should be expected from Wal-Mart.  It hasn’t happened yet. Until it does, federal investigators and the public will wonder if they’re being “Armstronged” yet again.

_______________

Michael Scher is a contributing editor of the FCPA Blog.

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