Wal-Mart appoints anti-bribery watchdog
By Brad Dorfman--Wal-Mart Stores Inc. said on Tuesday it has appointed a global officer to oversee compliance with a U.S. law that forbids bribes to foreign officials as it grapples with a bribery scandal that has led to more than US$10 billion being cut from its market value.
The move is one of the steps the world's largest retailer has taken in the past year to manage issues related to the U.S. Foreign Corrupt Practices Act (FCPA), a 1970s law that forbids bribing foreign officials.
Wal-Mart shares closed 3-percent lower, adding to declines from Monday that wiped US$10 billion from the company's market value.
Wal-Mart spokesman David Tovar declined to say when the post was created or who was named to fill it. The person appointed will report to the general counsel for Wal-Mart's international unit.
On Saturday, the New York Times reported that a senior Wal-Mart lawyer received an email from a former executive at Wal-Mart de Mexico in September 2005 that described how the Mexican affiliate, known as Walmex, had paid bribes to obtain permits to build stores in the country.
According to the Times, Wal-Mart sent investigators to Mexico City and found a paper trail of suspect payments totaling more than US$24 million. But the company's leaders shut down the probe and did not notify U.S. or Mexican law enforcement officials until after the newspaper informed Wal-Mart it was looking into the issue, the Times reported.
The lawyer also identified Eduardo Castro-Wright as the driving force behind years of bribery. Castro-Wright became CEO of Walmex in 2003 and moved on to other senior roles with the company. He is set to retire on July 1.
On Tuesday, MetLife Inc., the largest U.S. life insurer, said Castro-Wright had resigned from that company's board.
“Over the past weekend, I notified you of recent events that will require my immediate and personal attention,” Castro-Wright said in a letter to MetLife CEO Steve Kandarian, a copy of which was filed with securities regulators.
Castro-Wright could not be reached for comment.
The Times said Wal-Mart knew about its reporting last year, so the timing of when the new global compliance post was created and other steps were taken raises the question of whether they were done in response to the Times story.
Wal-Mart said the global compliance officer will oversee five FCPA directors in international markets, including a compliance director in Mexico.
Wal-Mart has said it began an investigation into its FCPA compliance last fall. It said it disclosed the probe to the U.S. Department of Justice and the Securities and Exchange Commission and declined to give any more details or to make executives available for comment.
A source familiar with the matter said the Justice Department has been conducting a criminal investigation into the bribery for months.
Wal-Mart shares have been hit over the past two days, both because of concerns about the cost of the company's own investigation and defense and potential substantial fines if the allegations are found to be true, as well as concerns that further violations could be found.
“What's impacting the stock is ... the risk of potential fines and penalties resulting if the accusations prove to be true, and then, on top of that, any increased risk of contagion to other geographies,” UBS analyst Robert Carroll said.
Analysts have also said the allegations could make it more difficult for Wal-Mart to expand abroad and even at home.
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