On Thursday, Walmart Inc announced it would pay $282 million to settle a seven-year-long investigation into some of its overseas units. Their companies in Brazil, Mexico, China, and India were thought to have violated policies of the US Foreign Corrupt Practices Act.
The investigation began after a series of articles were written in 2012 by the New York Times. In these articles, Walmart was accused of bribing government officials and others to expand their businesses and build stores in Mexico.
Therefore, the Justice Department began a long and detailed investigation of the major retailer worldwide.
Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division said, “Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption. He added in an interview on Tuesday, that “in numerous instances, senior Walmart employees knew of failures of its anti-corruption-related internal controls involving foreign subsidiaries, and yet Walmart failed for years to implement sufficient controls comporting with US criminal laws.”
It was found that Walmart’s subsidiaries in India, China, Mexico, and Brazil hired third-party intermediaries to make payments to government officials in those countries to get licenses and permits to build more stores.
In particular, court filings from 2009 to 2010 noted that Walmart Brazil purposefully submitted falsified records to Walmart Inc so that they would be maintained and added to the company’s financial statements. It was recorded that nearly $527,000 was paid by Walmart Brazil for assistance in obtaining building and construction permits.
The intermediary they paid for these permits was apparently so good at “sorting things out like magic” that records indicate they were given the nickname “genie” or “sorceress” by Walmart Brazil employees.
As a result, part of the settlement requires Walmart Brazil to take a guilty plea in the US District Court of the Eastern District of Virginia. The retailer has since also sold a majority of its Brazilian operations to a private equity firm, Advent International.
Information about these actions in China, India, and Brazil was given voluntarily to the Justice Department but only after similar incriminating information had first been found on their subsidiaries in Mexico.
“Walmart valued international growth and cost-cutting over compliance,” says chief of the SEC Enforcement Division’s FCPA Unit Charles Cain.
Walmart’s chief executive has since announced increased development in its “policies, procedures, and systems and invested tremendous resources globally into ethics and compliance.”
Of the $282 million for the settlement, $144 million will pay for charges by the Securities and Exchange Commission, while the other $138 million will forgive the criminal charges named by the US Department of Justice.
Walmart has also noted that it has since paid over $900 million on issues related to this around the globe, including to the FCPA for its investigations, inquiries and compliance program during the past seven years.
In addition, Walmart agreed in October to pay $160 million to investors in a class action who were not happy with the company’s activities and the way they handled the investigation.
The Justice Department as also allowed them to enter into a non-prosecution agreement, in which the US Department of Justice will not prosecute Walmart for its actions, so as it meets specific requirements for a length of three years.