Wal-Mart's Costs Connected To Mexican Bribery Case Reach $400M

by Mark Friedman  on Monday, Dec. 9, 2013 12:00 am  

Allegations that Wal-Mart’s Mexican division paid brides are at the center of lawsuits that are making their way through the courts.

“So it would be inappropriate to comment further on any of the allegations or for us to come to any conclusions until that investigation is finished,” he said.

In its quarterly filing with the SEC for the second quarter that ended July 31, Wal-Mart said it “is probable that [Wal-Mart] will incur a loss from these matters, given the on-going nature and complexity of the review, inquiries and investigations.”

Wal-Mart said it couldn’t estimate a loss in connection with the investigation.

Bribes Alleged

In SEC filings, Wal-Mart said it told federal agencies in November 2011 about an internal investigation into allegations involving bribery by company officials working in Mexico. But it wasn’t until The New York Times published details of the allegations in April 2012 that the scandal became widely known.

The Times’ article said that Wal-Mart’s Mexican division paid more than $24 million in bribes so stores could be opened faster than if the company had followed normal government procedures.

Wal-Mex “had taken steps to conceal [the payments] from Wal-Mart’s headquarters in Bentonville,” the article said.

The story also said the company learned of the allegations in 2005 but didn’t follow up on them.

Jurisdiction Fights

The article became the basis for several lawsuits filed by shareholders who brought derivative suits against Wal-Mart and its board members. In a derivative lawsuit, shareholders sue on behalf of the company. If investors win, the board members will be responsible for paying the judgment and the money will go to the company, not the plaintiffs. The plaintiffs, though, benefit because the company will have increased in value.

On April 25, 2012, Wal-Mart shareholder John Cottrell of Texas, acting on behalf of Wal-Mart, sued Wal-Mart CEO Michael Duke and other board members over allegations that included breach of fiduciary duty of loyalty, which requires that the board members act in good faith to protect the best interests of Wal-Mart and its shareholders.

The lawsuit also charged that Wal-Mart knew about the alleged illegal practices for years but ignored them and covered them up. The lawsuit said Wal-Mart’s goodwill and corporate image had been damaged.



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