Case Study 11.3: Walmart de Mexico In 2018 the OECD Working Group on Bribery completed its Phase 4 evaluation of Mexico's implementation of the convention. According to the report, Mexico needs to "urgently implement" reforms that ensure adequate resources for fighting bribery, such as enacting whistleblower protections for public and private sector workers, nominating a special anti-corruption prosecutor, and appointing more judges. The recommendations follow one of the largest foreign bribery investigations in U.S. history: a 6-year investigation of Walmart in Mexico, China, India, and Brazil. Almost 20% of all Walmart stores are located in Mexico, and the company is the largest private employer in the country. In 2012, the DOJ alleged Walmart de Mexico paid more than $24 million in bribery payments to Mexican officials to expedite construction of stores in the country. A New York Times investigation revealed that Walmart de Mexico was a willing corrupter, paying not only facilitation payments to speed up routine approvals but also bribes to thwart public votes and open debates and circumvent regulatory procedures that safeguard construction sites. For example, as a result of eight bribes totaling $341,000, Walmart de Mexico was able to build a Sam's Club in a densely populated section of Mexico City without a construction permit, an environmental permit, an urban impact assessment, or a traffic permit. According to the New York Times investigation, Walmart executives understood the seriousness of the conduct, and the company's own investigation found documentation of hundreds of suspected payments that showed Walmart de Mexico executives knew about the bribes and had taken steps to hide them from headquarters in Arkansas. Despite its findings, Walmart shut down its own investigation in 2006, and in 2008 the CEO of Walmart de Mexico, who it is alleged was behind much of the bribery schemes, was promoted to vice chairman of Walmart. U.S. prosecutors reached a tentative resolution with the company, including $300 million in fines; however, prosecutors want Walmart to admit to their misconduct. In June 2019, Walmart agreed to pay $282 million to settle FCPA charges brought by both the SEC and the Justice Department. The global settlement ended all FCPA investigations of the company in Mexico, Brazil, China, and India. As part of the settlement, Walmart Brazil pled guilty to FCPA charges.

According to the Wall Street Journal, federal investigators found evidence of FCPA violations by Walmart in India too. Most of the illegal payments were under $200, with some as low as $5, but collectively totaled millions of dollars. Investigators claimed the payments were made to help move goods through customs or to secure real estate deals. Because fines under the FCPA are often tied to how much profit was realized by the bribe, it is unlikely that Walmart will be issued a substantial fine.

Discussion Questions

1. Identify potential motivations and rationalizations of Walmart de Mexico executives in deciding to make bribery payments, and deciding to hide the payments from headquarters in Arkansas. 2. Some have been critical of the $300 million fine as too light of a penalty for Walmart's misconduct. However, Walmart also spent almost $900 million in legal fees, costs associated with its own internal investigation, and a global overhaul of its compliance processes. Should those costs be considered when determining punishment? Why or why not?

PLEASE MENTION SERIAL NUMBER IN YOUR ANSWER LIKE ANSWER 1 ANSWER 2