News for Credit Professionals       NACM-SE



Walmart Bribery Case Puts Spotlight on FCPA

Earlier this week, the U.S. Department of Justice (DOJ) announced that it would investigate Wal-Mart Stores, Inc.'s Mexican subsidiary for violations of the Foreign Corrupt Practices Act (FCPA). Specifically, company officials allegedly spent millions of dollars bribing government officials in order to secure building permits.

A New York Times article originally detailed the company's Mexican business practices. According to a recent letter to Wal-Mart CEO Michael Duke from Reps. Elijah Cummings (D-MD) and Henry Waxman (D-CA), "The Times reported that investigators in the company's Corporate Investigations Unit uncovered evidence of more than $24 million in bribes allegedly used to facilitate the process of obtaining permits to assist with Wal-Mart's rapid expansion in Mexico. According to the article, Wal-Mart's lead investigator concluded: 'There is reasonable suspicion to believe that Mexican and USA laws have been violated.'"

In addition to possibly ensnaring Wal-Mart, the world's largest retailer, in a web of potential fines and years of increased regulatory scrutiny, the DOJ's investigation has already put a spotlight on the FCPA, a frequently overlooked bit of law that can have major consequences for exporters. Debate about the law has been stirred up in recent years regarding its anti-bribery provisions, which forbid the use of "any means of instrumentality of interstate commerce in order to influence [a] foreign official in his or her official capacity."

Proponents of FCPA reform have argued that the law should be amended to tighten its application, recommending a defense for companies whose employees engage in corruption and bribery without the company's knowledge. Similar to the Federal Trade Commission's Red Flags Regulations, the existence of a sound, thorough company policy on the subject would protect the company from extensive prosecution and penalties.

However, the Wal-Mart case, depending on how it ends, could sound the death knell for any hope of reform, as Wal-Mart actually did have an exemplary anti-bribery policy in place, complete with procedures for how to handle such activity on the part of a rogue company official. According to the Times article, Wal-Mart seemed more concerned with damage control than actually righting the illegal activity of the official in question.

No matter the outcome of the case, companies exporting in every country should be mindful of their business practices and aware of their customers' positions in foreign governments. More information on the FCPA can be found in NACM's Resource Library.

Jacob Barron, CICP, NACM staff writer