How could the world’s largest retailer have known about a massive systematic bribery scandal in its Mexican subsidiary, done nothing to correct or distance itself from the wrongdoer and covered up the matter for seven years?
The New York Times recently reported the alleged payoffs, totaling more than $24 million, helped Wal-Mart de Mexico keep adding new stores. About one-fifth of Wal-Mart’s 10,000 stores worldwide are in Mexico.
The Times reported that the current trouble began in September 2005, when a former executive at Wal-Mart de Mexico said he had handled briberies for the company for years but now wanted to blow the whistle. Wal-Mart found confirmation, but officials suppressed the matter until the newspaper’s expose, according to the Times.
Multiple ongoing investigations will involve top figures in the management of not only the Mexico subsidiary but also present and former leaders in Wal-Mart’s headquarters in Bentonville, Ark. Prosecutions by the U.S. Justice Department and the Securities and Exchange Commission could lead to many millions of dollars in fines and possible jail terms.
Wal-Mart has apologized and neither denies nor excuses the reported misdeeds. It told the SEC in December that it was investigating possible violations of the corrupt practices law, but the Times said the company did so only after being informed that the newspaper was looking into the allegations.
What can the company do to help its reputation? It must engage disinterested outsiders to investigate the case and fire or discipline offenders. Yet even those measures cannot offset government prosecutions.