Yesterday I expressed my disappointment in the DOJ for their Deferred Prosecution Agreement with HSBC bank, for its terrorist-financing, money-laundering activities. Today it looks like the DOJ just might get another chance to prove that it isn’t afraid to crack down on corporate bad guys. Thanks to some impressive investigative reporting at the New York Times, the jaw-dropping scope of Wal-Mart’s Foreign Corrupt Practices Act (“FCPA”) violations in Mexico is beginning to come to light.
We’ve known that Wal-Mart’s Mexican subsidiary has some skeletons in the closet. Last June, I wrote a blog poking fun at Wal-Mart’s bribery and subsequent cover-up scandal. The U.S. Chamber of Commerce, which makes Take Justice Back’s infamous Five Corporate Front Groups list, was trying to convince lawmakers and regulators that the FCPA should be loosened. Was trying, that is, until Wal-Mart’s scandal came to light and put a temporary hold on the Chamber’s plans (its’ difficult to argue that the FCPA is no longer necessary when one of our country’s biggest companies is caught fostering corruption in foreign countries). But the NY Times reveals the staggering details of Wal-Mart’s activities, and they are ugly.
The article identified 19 store sites within Mexico where Wal-Mart used bribes to build its stores. This included bribing to avoid environmental regulations, archeological protection regulations, health and safety regulations, and building without construction permits. For example:
“Thanks to eight bribe payments totaling $341,000, … Wal-Mart built a Sam’s Club in one of Mexico City’s most densely populated neighborhoods, near the Basílica de Guadalupe, without a construction license, or an environmental permit, or an urban impact assessment, or even a traffic permit. Thanks to nine bribe payments totaling $765,000, Wal-Mart built a vast refrigerated distribution center in an environmentally fragile flood basin north of Mexico City, in an area where electricity was so scarce that many smaller developers were turned away.”
The article largely focuses on a single store, and Wal-Mart’s corrupted efforts to ride roughshod over the processes and regulations Mexico had in place to protect Teotihuacán, a highly important archeological site, in its single-minded quest to build a grocery store. The details are astounding and show the offensive arrogance Wal-Mart brought to its work. Wal-Mart did not blink at subverting Mexico’s local and national regulations, bribing officials when necessary and flat-out ignoring regulations at other times. Wal-Mart built its store on top of what could have been, and could still be, an archeological treasure trove – at least if anything is left after Wal-Mart finished smashing and hauling away bags of artifacts.
Essentially, Wal-Mart felt entitled to ignore two countries’ laws. Was it the same type of corporate arrogance that led HSBC bank to violate U.S. money-laundering and anti-terrorism laws? At some point, people in both these companies decided it was ok to violate the law. Whether it was a lot of people taking many incremental steps in the wrong direction, or a single executive who suggested that profit was more important than anything else: it doesn’t matter. This type of criminal wrongdoing by corporate America cannot be allowed to go unpunished.
This is why I say to the DOJ and SEC: please prosecute Wal-Mart. This is your chance. HSBC bank was let off with little more than a “slap on the wrist.” This is the government’s chance to redeem itself, to show that large companies cannot, in fact, flagrantly violate the law and get away with it. Because until the DOJ starts prosecuting, companies are not going to change their behavior.