Everyday Low Prices don’t stop at the Rio Grande. This weekend, the New York Times published an extensive investigative report on an bribery scandal inside Wal-Mart. Wal-Mart de Mexico has long been a darling among everyone’s favorite mega-corporation’s foreign subsidiaries for its high growth and outstanding profits. Currently, one in every five Wal-Mart stores is located in Mexico, and with 209,000 employees, the retailer is the largest private employer in the country.
It seems, however, that its road to dominance was paved with systematic bribery that reached as high as the executive level.
Sergio Ceciro Zapata, a former employee in the company’s real estate department, revealed to reporters how he had organized bribes and payoffs under the direction of Wal-Mart de Mexico executives.
Real estate acquisitions, permit proposals, and other governmental were approved suspiciously quickly after “gift cards” were given to local officials during construction of many of their superstores.
Using “gestores”—essentially, bribery brokers—Wal-Mart side-stepped the typical bureaucracy, known to curb the expansion of multinationals and domestic businesses alike. These individuals submitted invoices with coded or vague language and were booked as legal expenses by Wal-Mart.
Greasing officials wasn’t simply the strategy of rogue employees looking to get fast-tracked, but also encouraged by Chief Executive Eduardo Castro-Wright. According to officials in the company, Wright had put pressure on his employees to do “whatever was necessary” to obtain the permits necessary to meet his high expectations for growth.
While employees actively tried to keep the practice a secret to Wal-Mart’s global headquarters, after internal investigations discovered suspicious paperwork, global management, including CEO Lee Scott, were made aware of potential wrongdoing and violation of the Foreign Corrupt Policy Acts. When faced with the issue, executives turned the investigation over to the General Counsel of Wal-Mart de Mexico, José Luis Rodríguezmacedo Rivera — who happened to be a target of the investigation.
Unsurprisingly, the investigation was concluded promptly under Rodríguezmacedo’s leadership. The final report suggested that Ceciro had embezzled the funds, but there wasn’t a strong enough case to take legal action. No further investigation was recommended, and no other person was singled out for wrongdoing.
Mr. Rodríguezmacedo was reassigned from his role as senior vice president of legal, ethics and compliance this Friday, according to Wal-Mart spokesmen.
The bribery scandal affects us even here. Opposition to Wal-Mart’s constant attempts to enter New York City have seized onto this bribery scandal as yet another reason to keep the giant out of the boroughs. “We plan to use the bribery and cover up scandal to hammer every last nail into the coffin and keep Wal-Mart out of New York City,” said Dan Morris, spokesman for the Retail, Wholesale and Department Store Union.
Wal-Mart stock is down 7.5% since the story broke on Sunday.