The New York Times reported in April of this year that Wal-mart’s own investigators uncovered credible evidence that its subsidiary, Wal-mart de Mexico, had paid millions of dollars in bribes to support expansion in Mexico. Mexico is Wal-mart’s second largest market and where one in five of its stores worldwide is located. Several former and current Wal-mart executives in Mexico and the United States were implicated in the bribery accusations or were involved in the decision not to alert law enforcement officials.
The New York Times reported that when executives were told of the findings, they shut down the investigation immediately.
An initial thought would be that bribery of Mexican officials occurring on Mexican soil – and any subsequent cover-up – would not be a violation of U.S. laws, as it did not occur within Unites States borders. Unfortunately for Wal-mart, the fallout could be significant and many high-ranking executives could face indictment and time in federal prison due to the Federal Corrupt Practices Act of 1977 (FCPA).
The FCPA was enacted for the purpose of making in unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business abroad. A decade ago, the FCPA was rarely enforced. Today, however, it strikes fear throughout the executive officers of companies with overseas operations. In fact, criminal enforcement of the Act has soared from just two in 2004 to forty-eight in 2010.
The Department of Justice enforces the FCPA through its fraud section and its enforcement section has increased from two to fifteen attorneys in less than a decade.
While the Wal-mart story was being reported, the New York Times also reported that a former Morgan Stanley official pleaded guilty violating the FCPA stemming from real transactions he engaged in in China.
Aside from indictments and subsequent imprisonment of high-level executives, companies face high fines for violations of the Act.
Most likely, the Wal-mart case will serve as another warning to U.S. companies with overseas offices to keep a close watch of its executives and their actions for fear of the FCPA – a once obscure law that the Department of Justice has resurrected and implemented with full force.