• Textbook Corruption Saga at Walmart Mexico

    Wal-Mart-de-Mexico-Bribery-Scandal

    This incredible report in the New York Times details how the company has systematically developed, and then covered, a full network of corruption supporting the growth of its activities in Mexico.

    In September 2005, a senior Wal-Mart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country.
    The former executive gave names, dates and bribe amounts. He knew so much, he explained, because for years he had been the lawyer in charge of obtaining construction permits for Wal-Mart de Mexico.
    Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark. In a confidential report to his superiors, Wal-Mart’s lead investigator, a former F.B.I. special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated.”
    The lead investigator recommended that Wal-Mart expand the investigation.
    Instead, an examination by The New York Times found, Wal-Mart’s leaders shut it down.
    Neither American nor Mexican law enforcement officials were notified. None of Wal-Mart de Mexico’s leaders were disciplined. Indeed, its chief executive, Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Wal-Mart in 2008. Until this article, the allegations and Wal-Mart’s investigation had never been publicly disclosed.

    The story has all the ingredients you usually find in such cases, from the intricate internal organization to the use of “gestores”, the supposed allegiance to a “local culture of corruption”, and the (until now successful) efforts to cover it up. No doubt it’s meant to become a classic reference, a bit like the saga of Montesinos in Peru. Let’s only hope that the data base with the full story of bribe payments is one day made public for someone to analyze the story the way John McMillan and Pablo Zoido did in the Peruvian case, showing which persons and institutions are more sensitive or more costly, and how corrupt payments are distributed across the full network of powers. Meanwhile, I am curious to see how the case evolves over the next few months in the US.

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