Wal-Mart Spends $230 Million on Mexican Bribery Investigation

by Mark Friedman  on Monday, Jun. 10, 2013 12:00 am  

This is one of Wal-Mart’s locations in Mexico, where the company has come under scrutiny for allegedly paying more than $24 million in bribes so stores could open faster.

In November 2011, Wal-Mart Stores Inc. informed federal agencies that it was conducting an internal investigation into allegations involving a Mexican bribery scandal.

While the internal investigation and its related activities have cost Wal-Mart at least $230 million through April 27 of this year, the move was the right one, according to legal experts who follow Foreign Corrupt Practices Act enforcement.

But what’s not widely known is that the Department of Justice and the Securities & Exchange Commission allow corporations — or, rather, strongly encourage them — to hire their own investigators to look into allegations of violations of the FCPA and other wrongdoing. Some of Wal-Mart’s lucrative investigative work is being done by the Little Rock law firm of Mitchell Williams Selig Gates & Woodyard.

In many cases, the findings of those internal investigations are then handed over to the DOJ and SEC, which can then use the findings as a basis for a possible settlement.

The practice, though, has its critics. “It’s fundamentally an unfair system,” said Russell Mokhiber, editor of the Corporate Crime Reporter, a weekly newspaper headquartered in Washington, D.C.

By conducting their own investigations, corporations are able to dodge prosecution and get off with light fines when individuals might not be given that luxury, he said. Prosecutors take into account the collateral damage that might be done to shareholders when considering charges, Mokhiber said.

“Most Americans are very upset that there hasn’t been one prosecution of a major Wall Street bank or executive from a major Wall Street firm in connection with the 2008 financial fraud-induced collapse,” Mokhiber said.” It undermines equal justice for all. There’s one system for corporations and one for the rest of us.”

Others agree that questions concerning conflict of interest arise when corporations hire attorneys to handle work that federal agents should be doing. “It is a legitimate concern that the government may rely too much on the company’s internal investigation, which could slant the information to protect current management,” Peter Henning, a professor of law at Wayne State University Law School in Detroit, said in an email to Arkansas Business.

The DOJ and the SEC allow the companies to handle the internal investigations because the government doesn’t have the resources to conduct them, said Mike Koehler, an assistant professor at Southern Illinois University School of Law and the founder and editor of the legal blog FCPA Professor. At least 150 companies are facing FCPA scrutiny, Koehler said.

It is difficult to say what the outcome will be for Wal-Mart in the FCPA case, which could drag on for years.

It’s “very, very unlikely for Wal-Mart to be criminally charged in this case,” Koehler said. He said that if Wal-Mart does settle for a fine, it probably won’t even make the top 10 FCPA fines. The record was set in 2008 when Siemens AG, a German firm that is one of the largest electronics and electrical engineering companies in the world, agreed to a settlement of $800 million.

Mokhiber said he thinks the Justice Department might come down hard on Wal-Mart because of the scrutiny the case has received.



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