Are Wal-Mart de Mexico’s Troubles Spreading to the U.S.?
Wal-Mart’s (NYSE:WMT) troubles are growing as more information comes to light surrounding the retailer’s Mexican chain and its history of bribing public officials to help open more stores in short amounts of time.
In 2003, Wal-Mart (NYSE:WMT) officials are said to have put pressure on Wal-Mart de Mexico to speed up expansion. However, a combination of this pressure and insufficient oversight — U.S. executives may not have conducted any full audits of Wal-Mart de Mexico between 1988 and 2005 — are thought to have paved the way for a rampant bribery scheme.
In 2005, bribery allegations reached the ears of Wal-Mart executives in the U.S., and that’s when an audit was order that found nearly $13 million in suspicious payments during a 3-year period that started in 2003. The payments were entered on the company’s balance sheet as contributions or donations.
It’s suspected that a large number of these payments were made to facilitate the establishment of new Wal-Mart stores in Mexico. Wal-Mart de Mexico even managed to get approval for a store near Mexico’s famous pyramids in Teohtihuacan through a suspected $109,000 in bribes to local officials and regulators…
Many of the bribery accusations come from one man, Sergio Cicero Zapata, who pointed towards Graco Ramirez Garrido Abreu as the man who negotiated the questionable payments. Ramirez is now a governor in Mexico and has denied Cicero’s claims.
Though there is still uncertainty as to the validity of bribery accusations, the auditors that went to Mexico found some 441 questionable payments to consultants. A year earlier, the information on the irregular payments to consultants had been brought to the attention of Wal-Mart de Mexico’s then-COO Eduardo Castro-Wright, and was also known to an Eduardo Juarez Rodriguez, who had overseen the 2004 internal audit, but that information was not shared with U.S. executives.
Now, both Wal-Mart de Mexico and Wal-Mart in America are under fire. Investors have lambasted Wal-Mart’s lack of oversight of its Mexican unit and have filed a lawsuit against the company. A report released by Congress in mid-January prompted much of the commotion.