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The headline of the NY Times’ Sunday lead, “Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle,” is about a 7,600-word, exclusive exposé by David Barstow which was the byproduct of a lengthy and intensive investigation by the paper’s staff; and it reflects the status of this still-breaking story, at least before it first appeared online late Saturday afternoon, and on the front page of this morning’s edition of the paper.

(Before I get too far into this, I wanted to note that two members of the community have already posted excellent--albeit underappreciated--pieces on it, but from two very distinct angles: “Wal-Mart Bribery Cover-Up: Why This Is Not News, by Tasini; and, “NY Times: Wal-Mart suppressed Mexican corruption inquiry, by Rashaverak.)

First, here’s the lead-in from the NYT:

Vast Mexico Bribery Case Hushed Up by Wal-Mart
After Top-Level Struggle

Confronted with evidence of widespread corruption in Mexico, top Wal-Mart executives focused more on damage control than on rooting out wrongdoing, an examination by The New York Times found.

New York Times (Page 1)
April 22nd, 2012 (Edition)

MEXICO CITY — 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…

And, just as fellow Kossacks Tasini and Rashaverak have both reported and speculated upon this emerging monster of a story from two disparate points-of-view, so have many others in the blogosphere, including yours truly (as you’ll soon read, further down below). The ramifications of it (aside from Tasini’s and Ravershak’s respective takes on it) crossover into all sorts of uncharted territory.

Naked Capitalism’s Yves Smith refers to it as the U.S. version of MurdochGate, but in comparison to the initial press revelations of that travesty, she notes, “…The Times account is far more damning, detailed, and supported by documents and interviews than the initial releases by the Guardian on l’affaire Murdoch… It will reveal a great deal about the state of the rule of law in the US as to what sort of investigations and prosecutions result from these revelations…”

The specific U.S. “law” which Yves references is: The Foreign Corrupt Practices Act, (FCPA). Here’s a LINK to the FCPA blog (which is also tagged: “News and Views About the United States Foreign Corrupt Practices Act”).

And, here’s Yves…

New York Times Details Widespread Bribery in Wal-Mart Mexico and Top Executive Coverup
Yves Smith
Naked Capitalism
April 21, 2012 7:26PM

The Grey Lady has an amazingly detailed, must-read account of corruption at the highest levels of Wal-Mart. In 2005, Sergio Cicero Zapata, a lawyer who had been with WalMart in Mexico for ten years and had resigned in 2004, came forward with a description of his involvement, sanctioned by top executives in Wal-Mart’s Mexican operation, of handing out bribes totaling over $24 million to accelerate the construction of new stores. This activity is a clear violation of the Foreign Corrupt Practices Act.

Even though the Bentonville giant quickly found evidence corroborating the Cicero’s charges, as well as that of a cover-up by the top brass in Mexico, and looked into hiring an outside law firm to conduct an independent investigation, it quickly converted it to a limited review by an internal unit whose main activity was handling shoplifting cases. And lead responsibility for the probe was assigned to the general counsel of Wal-Mart de Mexico, a sure-fire way to assure no tough questions would be asked. Not only was the Mexico CEO who was deeply involved in this program promoted repeatedly after the notification by Cicero, ultimately becoming vice chairman at the parent level, but the current CEO, Michael Duke, had just been installed as the head of WalMart International, was involved in the coverup. The then-current CEO, Lee Scott, criticized the internal investigators for being too aggressive…

…This is a Murdoch-News of the World level scandal involving a company that is extraordinarily powerful in the US. The Times account is far more damning, detailed, and supported by documents and interviews than the initial releases by the Guardian on l’affaire Murdoch. It also indicates it found evidence of bribery in Mexico beyond those relating to the store expansion, namely, kickbacks from construction companies. It will reveal a great deal about the state of the rule of law in the US as to what sort of investigations and prosecutions result from these revelations.

Reuters’ Felix Salmon, who coined the term, “Walmex,” just a few hours ago, covers these additional, quite inconvenient realities: “…that corruption is marbled throughout Walmart’s international operations, not only in Mexico but also in Asia, where reports of bribery were coming in to Bentonville HQ at the rate of five per month just from Asia alone;” as he also notes how Wal-Mart happens to own and operate a quite large—and virtually entirely unregulated, both in Mexico and in the U.S.--Mexican bank with over a million customer accounts: Banco Wal-Mart.
What does the Walmex corruption scandal mean for Banco Walmart?
By Felix Salmon
April 21, 2012

David Barstow’s explosive 7,600-word investigation of corruption at Wal-Mart is required reading this weekend. I’m not going to attempt to summarize the whole thing, but basically Eduardo Castro-Wright, currently Wal-Mart’s vice-chairman, oversaw a culture of bribery when he was CEO of Walmex. And when a key player in that bribery scheme blew the whistle, Walmart in Bentonville buried the investigation, and didn’t report anything to the authorities in either Mexico or the US…

…One name, however, is conspicuous by its absence in Barstow’s report: Banco Wal-Mart, the huge bank which is a wholly-owned subsidiary of Walmex…thanks to a quirk of international banking-regulation protocols, it lacks a lot of the regulation that its competitors have.

Banks like Banco Wal-Mart which are subsidiaries of foreign corporations are meant to be regulated by the bank regulators in the parent’s country. But because regulators in the US have consistently refused to allow Wal-Mart to become a bank here, bank regulators in the US don’t regulate Wal-Mart at all — let alone its Mexican subsidiary…

…Barstow’s report shows that corruption is marbled throughout Walmart’s international operations, not only in Mexico but also in Asia, where reports of bribery were coming in to Bentonville HQ at the rate of five per month just from Asia alone. There’s nothing in the NYT which suggests that Banco Wal-mart was doing anything suspect at all — but at the same time, all parts of Castro-Wright’s empire should be under suspicion now, given the kind of illegal activity which peaked under his leadership. And Banco Wal-mart was one of the jewels in Castro-Wright’s crown.

All US corporations are held to high standards under the FCPA, but banks are even more important, given the way in which they’re regularly used by criminals for money laundering. After reading the NYT this weekend, I have no faith at all that Wal-mart has done an effective job of ensuring that Banco Walmart is corruption-free. And given its regulatory status, I also have no faith at all that if there were corruption at the bank, its regulators would have found it…

Additionally, I wanted to point out a couple of other convenient and potential snafus here: 1.) the statute of limitations, at least as it relates to earlier aspects of this case, may have already run out (funny how that works) on the reported misdeeds of at least a few of the significant, named Wal-Mart senior executives allegedly involved in it; and, 2.) if we’re now living in a world where corporate personhood rules the day, how about looking at the potential prosecution of Wal-Mart, “the person,” for these crimes, too? (Heh…yes, I know…fat chance, but worthy of mention, IMHO.)

Readers should be reminded that much of this story, for all intents and purposes, revolves around the statements of former senior Wal-Mart executive Sergio Cicero Zapata. He resigned from Wal-Mart in 2004.

ProPublica informs us, via its coverage of MurdochGate, that the “…statute of limitations on civil Foreign Corrupt Practices Act charges is five years.”

The FCPA blog, in its coverage of another FCPA-related case (concerning European engineering and construction giant Asea Brown Bovari), discusses the applicable statute of limitations guidance…

O'Shea: Feds Flubbed Statute of Limitations
Monday, August 29, 2011 at 8:28AM

Last week, John O'Shea asked a federal court in Houston to dismiss the FCPA case against him. He said the government didn't indict him within the statute of limitations period.

For FCPA offenses, the deadline to indict a defendant is normally five years from when the offense occurred. But it can be stretched under 18 U.S.C. § 3292 to as much as eight years when the DOJ has to gather evidence from other countries.

In O'Shea's case, the DOJ needed evidence from Mexico and Germany, so it asked the court for an extension of the statute of limitations.

The tolling begins after an official request by the DOJ to the foreign government (and a ruling by the U.S. court on the presence of the foreign evidence). It ends when the foreign authority takes 'final action' on the request.

If the 'final action' by the foreign country occurs before the normal statute of limitations expires (five years), then the suspension period can't be more than six months. If the 'final action' happens after the normal statute of limitations, then the suspension can stretch up to three years…

Now, I’m NOT a lawyer, but as a layman and as the folks over at the FCPA blog have noted it, when individuals are found guilty of violating that law, they’re subject to lengthy jail terms and massive forfeiture requirements. And, if Wal-Mart’s a “person,” in the eyes of the law -- in this age of Citizens United v. Federal Elections Commission -- wouldn’t the company be liable, as well?

(Obviously, the state couldn’t incarcerate a huge corporation—not being a lawyer, I still maintain an I.Q. higher than the temperature on a cold Winter’s day, which is at least high enough to understand that concept--although there are a few corporations I can think of off of the top of my head that might be good candidates for jail time, above and beyond just paying a massive fine. Heh!)

Last but not least, I believe it’s also appropriate to point to the headline of my post and ask the question: If senior Wal-Mart exec’s get off scot-free on this, does that potential end-result mean we then have our first case of “Retail-Too-Big-To-Jail?”

Yeah...this story has quite a few angles...and it's just getting started. Stay tuned!

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