Is the Mexican government involved in corruption schemes? Nooooo this must be a mistake… it never happens in Latin America!
According to a recent article at the NYTimes, one of the world’s most successful and respected companies, Walmart, has just been caught in a massive bribery scandal in Mexico that extends to the highest levels of the organization.
Here is the summary (via Business Insider):
- Walmart de Mexico, a highly successful business for Walmart (1/5th of Walmart’s stores worldwide are in Mexico), systematically bribed Mexican government officials for years.
- The bribes, which may have totaled more than $24 million, were paid to win permission to open new stories vastly more quickly than would have been possible had the company adhered to Mexican laws.
- The bribes were initially hidden from Walmart’s global headquarters in Bentonville, Arkansas, by disguising them as normal legal bills (a.k.a., accounting fraud).
- One of the key executives in charge of the bribery payments quit the company in 2005 after being passed over for promotion. He then detailed his behavior to some of Walmart’s lawyers, implicating many senior Walmart executives in the process. This executive, Sergio Cicero Zapata, conducted 15 hours of on-the-record interviews with the New York Times.
- Walmart’s global headquarters immediately launched an investigation of the practice. But, despite finding much evidence of at least suspicious behavior (and, at worst, clear violations of Mexican and US laws), Walmart effectively shut the investigation down.
- The CEO of Walmart de Mexico during the period of the bribery scandal, Eduardo Castro-Wright, is said to have personally approved of the bribes. Soon thereafter, Castro-Wright was praised by Walmart’s senior team for his astonishing success in Mexico and promoted to run the company’s US business. Castro-Wright is currently the vice-chairman of Walmart. He declined comment for the NYT’s article.
- Documents show that Walmart’s senior executives were terrified about what the bribery scandal would do to Walmart’s reputation for high ethical standards if it were ever made public. Instead of hiring an outside legal firm to perform a detailed investigation, the firm assigned the investigation to Walmart de Mexico (!) and then quickly discontinued it.
- Walmart’s then-CEO, H. Lee Scott, Jr., was briefed on the investigation. He reportedly rebuked the company’s investigators for being too aggressive.
- Walmart’s current CEO, Michael Duke, was chairman of Walmart International at the time of the scandal. He received frequent briefings about the bribery allegations and progress of the investigation.