Wal-Mart Lobbies Changes to Bribery Law

Wal-Mart, America's largest employer, now under investigation for allegations of bribery in Mexico, may also have been an influential voice in efforts to reform the Foreign Corrupt Practices Act (FCPA), the international law protecting against such things as bribing foreign companies in order to hurdle regulatory restrictions in garnering building and/or zoning permits. As the Washington Post reports, the Institute for Legal Reform, a branch of the Chamber of Commerce, has sought to "clarify" the law in a push for amendments. These efforts have gone largely unnoticed in the public eye, but there have been battles raging in Congress and the White House on this issue.

The Chamber seeks reforms to the 1977 Watergate-era law in limiting a company's liability for the actions of its subsidiaries and a clearer definition of who qualifies as a "foreign official." The push for these changes comes in response to an increase in enforcement by federal authorities. However, according to Paul Pelletier, a former supervisor in the FCPA unit, the increased scrutiny came because it had found more and more violations of the law. "The more we lifted up rocks, the more we saw of it."

This case illustrates perfectly the legitimacy and necessity of federal regulation when regulators in charge are doing what they are appointed to do. This isn't a case of bureaucratic overreach, or intrusive government meddling in business and free market affairs, as it seems the Chamber (and likely anti-government legislators in the House and Senate) would want you to think. It is clear that the law is working and the people in charge of enforcing it are competent. This suggests the need for stricter regulations to broaden the effectiveness of the department.

What I see here in the ILR and the Chamber's efforts is an attempt to "clarify" the law so that they can figure out new ways around it, work some loophole so that bribes are technically no longer illegal. By narrowing the definition of a "foreign official," Wal-Mart, or any other international corporation, could then simply tip-toe around this definition. As assistant U.S. attorney general Lanny A. Breuer, notes, "This is precisely the wrong moment in history to weaken the FCPA. There is no argument for becoming more permissive when it comes to corruption." Wal-Mart didn't like the law, so they didn't abide by it, and even when it was brought to the attention of their then-CEO, they brushed the internal investigation beneath the rug and failed to alert authorities in the U.S. It has also been reported that their current CEO knew of these allegations back when they were first divulged to company executives in 2005. Even if the ILR, the Chamber, and Wal-Mart succeed in reforming the law and company liability, it doesn't seem their top executives could still escape scrutiny since they were complicit in the cover-up.

Wal-Mart Bribe Scandal: Company Shifts to PR Focus

The Wal-Mart bribe scandal uncovered by the New York Times on Saturday is causing some headaches for the world's largest employer. The Times revealed a massive investigation into $24 million in bribes paid to local officials in Mexico to secure building and construction permits reported to top management in both the Mexican and American offices, but Wal-Mart's top brass attempted instead to cover-up the bribes and never alerted authorities. It's highly likely Wal-Mart violated the Foreign Corrupt Practices Act, adopted in 1977 to help hinder and hold accountable bribery in foreign markets.

Predictably, on Sunday, Wal-Mart went into damage-control and released a statement and uploaded a video to YouTube. The company's VP of corporate communications, David Tovar, says Wal-Mart "voluntarily" approached the Department of Justice, but cannot yet discuss what happened "in Bentonville more than six years ago."

Of course, this "voluntary" approach to the DoJ was only after the Times informed them of the bribery investigation it was conducting. Also, this "more than six years ago" bit seems a feigned attempt to excuse themselves if maybe they 'don't remember everything because it was so long ago'. And this is the whole problem in the first place. Wal-Mart not only didn't follow through on the allegations coming from their Mexico headquarters, but top officials in America explicitly told internal investigators not to be "aggressive" in their search.

New York Times Uncovers Wal-Mart Bribery Scandal

A thorough investigation by the New York Times reveals top executives at Wal-Mart de Mexico's corporate headquarters used bribes to illegally obtain building permits in nearly every corner of Mexico. Not only are top officials in Wal-Mart's largest foreign subsidiary named, but the allegations show widespread corruption and a cover-up attempt by top executives at the American offices as well, including then-CEO H. Lee Scott Jr, and current CEO Michael Duke.

Wal-Mart has been conducting an internal investigation into the bribes and the alleged cover-up for the past 6 months, but only began to do so when they were informed of the Times investigation.

As the world's largest employer, and with 1 in 5 Wal-Mart stores in Mexico, this could prove a devastating blow to the company. We can only hope so...