For more than a decade, Walmart used middlemen to make dubious payments to governments around the globe in order to open new locations, U.S. prosecutors and securities regulators said in a settlement agreement Thursday. But even as employees frequently raised alarm, the company’s top leaders did little to prevent Walmart from being involved in bribery and corruption schemes.
That lack of internal control led to a seven-year inquiry that culminated Thursday with Walmart’s Brazilian subsidiary pleading guilty to a federal crime. The guilty plea, and the $282 million in fines that Walmart has agreed to pay, capped one of the biggest investigations ever under the Foreign Corrupt Practices Act.
The investigation, which was conducted by the Department of Justice and the Securities and Exchange Commission, came after The New York Times revealed in 2012 that Walmart had made suspicious payments to officials in Mexico and then tried to conceal them from top executives at the company’s headquarters in Bentonville, Arkansas. And even when the issues reached the main office, an internal investigation essentially went nowhere.
Regulators said on Thursday it was not only Walmart’s drive to grow quickly but its “low-cost philosophy” that led to poor internal controls.
The plea agreement, which was technically related to the company’s improper record-keeping, also showed that problems went far beyond its operations in Mexico.
Federal regulators said Walmart looked the other way as subsidiaries on three continents paid millions of dollars to middlemen who helped the company obtain permits and other government approvals from July 2000 to April 2011.
In Brazil, many payments flowed through the “sorceress,” an otherwise unidentified individual who was also nicknamed the “genie” for sorting “things out like magic,” according to court documents.
This person charged roughly $400,000 to help smooth the process of getting building permits. Walmart employees in Brazil raised alarms that the “sorceress” may have been a government employee, but those concerns went unheeded.
The questionable payments made in India were often recorded on the company’s books with vague descriptions like “professional fees” and “incidental.” As late as July 2011, Walmart received an anonymous tip that an employee in India was involved in a scheme to make improper payments to government officials, but the company never looked into it.
In a statement, Walmart said federal regulators had acknowledged the steps the company had taken to improve its anti-corruption measures since the investigations began seven years ago.