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« Cooperation and competition among enforcing countries | Main | China Corruption Blotter (January 25, 2013) »

Wal-Mart and the Un-American Way

Inauguration Day has come and gone and America has again installed the new President peacefully and in accordance with the laws. That is the American Way, a tradition we are rightly proud of.

Other countries admire this American Way and wish their elections were free of corruption and violence. They also wish they were free from “overseas corruption” of the kind prohibited by the FCPA since 1977 and unthinkable in the United States.

For over three decades, it has been un-American for an American company to interfere in another country by bribing foreign officials. The DOJ-SEC Guidance (page 2, fn. 2) reminds us of this fundamental principle: “Congress enacted the FCPA in 1977 in response to revelations of widespread bribery of foreign officials by U.S. companies. …The payment of bribes to influence [foreign officials] is unethical. It is counter to the moral expectations and values of the American public.”

The Wal-Mart scandals continue to unfold. You can read 15 pages of the actual emails and detailed reports in 2005 by the General Counsel who resigned after the top executives allegedly read the reports of bribery in Mexico at the City of the Gods (Teotihuacan) and stopped the investigation (available here in pdf). They were released by two Congressional Committees frustrated by Wal-Mart’s lack of disclosure and non-cooperation.  Mexico has stepped up its investigation of regulators charged with protecting ancient relics at the City of the Gods. There are alleged new details of a similar pattern in India.


To most Americans, it is unthinkable that “overseas corruption” could happen in the United States, i.e., a foreign company would reverse a vote by bribing American public officials.

Here is a Wal-Mart inspired thought-exercise to help us comprehend why Congress banned overseas corruption as un-American and contrary to Americans’ moral expectations:

The Everglades, an American treasure unique in the world, exists alongside the city of Miami, a metropolis of over two million people. The Urban Boundary, that sets the limit of Miami’s growth into the Everglades, is hotly debated. Do we want another shopping center or more water to preserve the Everglades?

After two years of public hearings, with compromises by developers and environmentalists, the Mayor and the City Council approve a zoning map. But, when the zoning map is published, the community is shocked to see it allows development over the Urban Boundary in the Everglades at a place called City of the River Gods, an ancient Native American burial ground. As the shopping center goes up, a firestorm of media coverage and protests erupt. A new Mayor and Council back away and refuse to act.  The developer from China, GoShop Inc, with a Miami subsidiary, refuses to stop building and denies all charges of bribery of Florida regulators and Miami political officials. Harassed and threatened by local toughs, the protestors give up and the media coverage dies out.

For six years, GoShop builds new shopping centers, banks and other developments all over Florida at an unprecedented pace, overcoming environmental and zoning restrictions at record speed. GoShop also builds developments in India, Brazil and parts of Europe, becoming the worlds biggest developer with annual revenues over $400 billion.

Then all Miami is shocked to read in The New Peking Times that the City of the River Gods development and many others in Florida were built by GoShop after a massive campaign of creative bribery. Worse, they learn that GoShop’s compliance professionals uncovered the bribery in Florida and demanded an investigation, but the top officers of GoShop shut it down. Those officers were not disciplined. They were promoted to senior positions, as high up a Vice Chair or even to CEO. The scandal was covered up for six years.

The citizens of Miami and other Florida towns ask: Will GoShop be prosecuted in China for overseas corruption in America? Will GoShop be required to undo the harm to the Everglades and to the democratic processes of American citizens? Over a year after GoShop began investigating, the citizens in America are still waiting for an answer.

                                                            *     *    *

If it is true that Wal-Mart ignored the letter and spirit of the FCPA, it may be the worst scandal involving an American company in the history of the FCPA. Extraordinary sanctions will be required to show citizens around the world that we still believe that overseas corruption is illegal and not the American Way.


Michael Scher is a contributing editor of the FCPA Blog.

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