Wednesday, February 21, 2018
Editorials

Bargain-basement ethics at Wal-Mart

As the world's largest retail company, Wal-Mart has long promoted itself as an ethical institution. But ethics took a backseat to growth as the company rushed to expand in Mexico. An investigation by the New York Times' David Barstow revealed that Wal-Mart's own investigators found company officials paid more than $24 million in apparent bribes to local and regional government officials in Mexico to speed up the opening of new stores. The Foreign Corrupt Practices Act prohibits American corporations and their subsidiaries from bribing foreign officials, and the Justice Department should investigate.

Wal-Mart is now the largest private employer in Mexico with more than 200,000 workers and 337 Walmart Supercenters and Sam's Clubs, along with investments in banks and restaurants. As the New York Times reported, in a rush to establish market dominance in Mexico during the early 2000s, Wal-Mart executives based in Mexico paid off local and regional officials to expedite the permitting process without telling the home office. But when Wal-Mart leaders at the company's Arkansas headquarters eventually learned of the payoffs, the company's internal investigation was shut down and law enforcement officials were not notified in this country or in Mexico.

The world's 13th largest economy with a population of 113 million people, Mexico is often regarded as one of the most corrupt nations in which to do business. That culture of graft has limited Mexico's ability to reach its full potential in direct foreign investment, which only amounted to $19.4 billion in 2011. By contrast, Brazil's foreign investment totaled $66.7 billion in 2011.

The case against Wal-Mart could be complicated by the Federal Corrupt Practices Act's five-year statute of limitations. Federal investigators need to determine if the bribery of Mexican officials continued beyond 2005 and when U.S. Wal-Mart officials first learned of the corruption. Still, the public relations damage done to Wal-Mart's image will take even longer to repair.

From its perch atop the Fortune 500 list with $451 billion in revenue, Wal-Mart could have used its corporate clout to set an example in Mexico as it often does in the United States. Instead, the drive to expand and squeeze out competitors took precedence and apparently resulted in a methodical effort to bribe Mexican officials to clear the way. And rather than ferret out the problem, the New York Times reported, Wal-Mart dropped the investigation and the lawyer who authorized the bribes exonerated his colleagues. The company did not inform the Justice Department that it had started an internal investigation until it learned of the newspaper's reporting.

Wal-Mart cannot be trusted to investigate itself. The Justice Department should take its own look and determine if anyone can be prosecuted.

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