Retail giant Walmart Inc. has agreed to pay the federal government a total of $282M to settle parallel sets of charges by the Securities and Exchange Commission and the U.S. Department of Justice that the company made insufficient efforts to prevent its agents from engaging in bribery overseas.
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According to the SEC, Walmart allowed subsidiaries in a number of countries to employ third-party intermediaries who made payments to foreign government officials in violation of the Foreign Corrupt Practices Act of 1977, in effect turning a blind eye to corrupt practices on the retailer's behalf.
The agency also cited a number of instances when Walmart said it was going to implement compliance and training to thwart corruption by its agents — only to put those plans on hold or otherwise ignore red flags and corruption allegations.
“Walmart valued international growth and cost-cutting over compliance,” Charles Cain, chief of the SEC Enforcement Division’s FCPA Unit, said in a statement. “The company could have avoided many of these problems."
Walmart agreed to pay more than $144M to settle the SEC’s charges of bribery and about $138M to resolve criminal charges filed by the Justice Department.
The Justice Department agreed not to prosecute Walmart as long as it pays its penalty, maintains an anticorruption compliance program and retains an outside compliance monitor for two years, the Wall Street Journal reports.
The settlement winds down an investigation by the Justice Department that began in 2012 after the New York Times reported allegations that Walmart had bribed officials in Mexico to obtain building permits. The government later investigated Walmart's behavior in Brazil, China and India.
An example cited by the SEC involved an unnamed Brazilian third-party intermediary, or TPI.
"In or around 2010, Brazil Subsidiary planned to open two other stores in the same area," the agency stated. "As with the earlier project, Brazil Subsidiary engaged the same TPI at year-end to assist with stores that had been delayed due to licensing problems. The TPI again commanded an unusually high fee for the TPI’s services — approximately $400,000 — and was paid indirectly through Brazil Subsidiary’s contractor...
"The TPI’s ability to obtain licenses and permits quickly earned the TPI the nickname 'sorceress' or 'genie' within Brazil Subsidiary."
U.S. companies bribing foreign officials, political parties or candidates for office in other countries is unlawful under the Foreign Corrupt Practices Act. An investigation by the SEC in the 1970s found more than 400 corporations had paid bribes totaling about $300M to foreigners as a routine part of business, to facilitate favorable action by foreign governments or simply to get bureaucrats to do their jobs.
The fines do not represent an onerous burden for Walmart. The company's global revenue for the quarter ending April 30 was $123.9B, meaning the $282M fines total roughly roughly 0.22% of Q1 revenue. Walmart's net income for the first quarter was about $3.84B, meaning the fines would represent about 7.3% of net income for the single quarter.
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