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Monday, April 23, 2012

Is Wal-Mart Becoming Its Own Worst Enemy?


(Via FrumForum)

There are allegations that the Mexican division of Wal-Mart gave bribes to Mexican government officials and other people connected with Wal-Mart de Mexico’s incredible ability to secure permits quickly. The whole story is so convoluted that is sounds like a mystery soap opera.

In September 2005, a senior lawyer at Wal-Mart received an email from a former executive of Wal-Mart de Mexico. The former executive accused Wal-Mart de Mexico executives of paying bribes to a number of officials to speed up the process of securing permits to open new stores. He stated that he was an attorney for Wal-Mart de Mexico in charge of securing construction permits.

Wal-Mart corporate sent in investigators. They found a paper trail of bribes totaling $24 million. Furthermore, it was found that Wal-Mart de Mexico executives knew about the bribes and made a concerted effort to keep them hidden from corporate. The findings were so unbelievable that Wal-Mart hired a former FBI special agent to validate the findings. After his preliminary findings, he suggested the investigation be expanded. Much to his dismay the investigation was shut down and some of the executives in question were promoted. 

One of the biggest concerns was that Wal-Mart did not call the appropriate authorities to investigate wrongdoing. Some assert this was done because Wal-Mart de Mexico is such a success story.  Approximately 20% of all Wal-Mart stores are in Mexico. Of Wal-Mart’s 2.1 million employees, 209,000 are in Mexico. In fact, Wal-Mart de Mexico is one of the most profitable and the largest foreign subsidiary.

The CEO of Wal-Mart de Mexico, Eduardo Castro-Wright, during the time of the allegations is said to be brilliant. He was seen as the possible successor to CEO corporate.  

However, this story hit the New York Times.  The Times interviewed the former lawyer who originally reported the allegations, Sergio Cicero Zapata.

Mr. Cicero said that before the case was shut down, several parties were brought in to investigate the allegations. Mr. Cicero stated to those investigators that his job was to make payments to lawyers that are called “gestures”.  In turn, those lawyers took the money to the appropriate government officials, environmental inspectors or building code officials as bribes. 

After further investigations, it was found that Mr. Cicero’s wife was a lawyer for one of the gestures. He denied it.

As investigators attempted to dig deeper, they were blocked by the executives being implicated. For some reason, the executives defended themselves adamantly and were allowed to be part of the investigation. As a result, investigators started to resign or were told they were no longer needed.

To this day, it is unclear as to the validity of Mr. Cicero’s allegations. The executives of Wal-Mart de Mexico were finally given the right to take charge of the investigation. They claimed there was no evidence of wrongdoing. They stated that gestures are a legitimate part of doing business in Mexico, especially in real estate. They defended their position and completely discredited Mr. Cicero.

With so much being hidden at such a large monster like Wal-Mart, you have to wonder if their only enemy is themselves. Their success is what can undo them from the inside.   

What do you think? I would love to hear what you think. 

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