June 20, 2019–In an indication of the prevalence of bribery in international business, Walmart, the world’s largest retailer, has agreed to pay the U.S. government $282 million to settle charges that it failed to instill anti-corruption practices for over a decade.
The U.S. Securities and Exchange Commission charged Walmart with with violating the Foreign Corrupt Practices Act (FCPA). According to the SEC, Walmart did not sufficiently investigate or mitigate corrupt payments its subsidiaries and third-party intermediaries made to foreign governments in Brazil, China, India and Mexico.
“Walmart valued international growth and cost-cutting over compliance,” said Charles Cain, Chief of the SEC Enforcement Division’s unit on foreign corruption. “The company could have avoided many of these problems, but instead Walmart repeatedly failed to take red flags seriously and delayed the implementation of appropriate internal accounting controls.”
Walmart agreed to pay the SEC $144 million to settle the agency’s charges against it. Furthermore, Walmart and its subsidiary WMT Brasilia S.a.r.l. agreed to pay the U.S. Justice Department a combined criminal penalty of $137 million.
Global Growth Gone Bad?
With a revenue of $500 billion a year and 11,700 stores around the world, Walmart is the world’s largest retailer. In the last 10 years, Walmart’s stock more than doubled, from $48 in 2009 to $110 today. The company typically earns between 2 to 3 percent a year.
Now, government officials say the company’s growth has come at a cost of illegal business practices.
“For more than a decade, Walmart experienced exponential international growth but failed to create safeguards to protect against corruption risks in various countries,” said U.S. Attorney G. Zachary Terwilliger.
The multi-year corruption investigation by the U.S. government found that Walmart’s subsidiaries hired intermediaries to interact with governments in Mexico, India, Brazil and China. Neither the company nor the subsidiaries put practices in place to prevent those consultants from making improper payments to government officials. In return for the payments, Walmart’s subsidiaries were able to obtain store permits and licenses and operate sooner than they otherwise would have been able to open.
Justice Department officials said senior Walmart employees knew what was happening and, in effect, allowed it.
“Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption,” said Assistant Attorney General Brian A. Benczkowski.
Issue ‘Resolved’
According to Walmart, the company spent over $900 million over the past seven years to cooperate with the government’s investigation and to invest in anti-corruption compliance programs.
“We’re pleased to resolve this matter,” said Walmart President and CEO, Doug McMillon. “Walmart is committed to doing business the right way, and that means acting ethically everywhere we operate.”
As part of the resolution, the government agreed it won’t prosecute the company if it meets its obligations for the next three years under the SEC’s administrative order.
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For more details
The Securities and Exchange Commission’s statement is available here. The Justice Department’s statement is available here.
