Last week, retail giant Wal-Mart disclosed that it had alerted the Securities and Exchange Commission of possible FCPA violations, retained an outside law firm to conduct an internal investigation into the same, and began that inquiry. The impetus for the investigation and the locale both raise interesting considerations about the company and how and where it is doing business.
The New York Times story reporting Wal-Mart’s disclosure in its latest SEC filing noted that the company had “begun an internal investigation into whether certain matters, including permitting, licensing and inspections, were in compliance with the U.S. Foreign Corrupt Practices Act." The company stated that the investigation was the result of a voluntary internal review of its global anticorruption practices this year along with information “from other sources.”
The identification of its genesis being “a voluntary review of its global anti-corruption practices this year” seems significant. It strongly implies two things: that the company has an FCPA-oriented audit program in place, and that its checks occur on a regular basis in given years, if not annually.
The implementation and maintenance of that practice would be characteristic of the robust compliance program to which every organization is purported to aspire under the U. S. Sentencing Guidelines. Further, it would be expected to entitle Wal-Mart to sentencing credits, were the Department of Justice to pick up this ball and run with it as a criminal prosecution somewhere down the road. On top of that, the retailer would garner kudos from Tom Fox, Howard Sklar, Mike Volkov, and others who have long beaten the drum for proactive and regular FCPA compliance audits just like those hinted at here.
Unsurprisingly, Wal-Mart did not disclose the foreign country to which its investigation pertained, or whether practices in more than one country were involved. The Times noted that international business made up about 30% of Wal-Mart’s sales in the most recent quarter and was the fastest-growing part of the company. Indeed, overseas sales increased 20% from the same quarter a year earlier. The biggest jumps in sales came in China, Mexico, and Argentina, thereby suggesting those countries as possible inquiry sites.
While Chine, Mexico and Argentina are seemingly good possibilities given their rankings at 75, 100, and 100, respectively, on the Corruption Perceptions Index 2011, equal consideration probably ought to be given to India. Its $250 billion retail market has been a priority for Wal-Mart since at least 2005, according to a CNN Money article that described the nation then as “a huge organic growth opportunity” for the company.
Good feeling between the retailer and the populace are not mutual, however, as India has recently pushed back against Wal-Mart’s incursion into its marketplace. As chronicled by the Los Angeles Times on its World Now blog, less than two weeks after India announced it would let foreign companies enter the county, the government bowed to mounting political opposition, reversed course, and suspended the move on December 7, 2011. This turnaround is opined to be the latest sign of weak leadership and a lack of direction by India's Congress Party-led government, which is beset by corruption scandals - India is indexed at 95 by Transparency International - an increasingly ineffective prime minister, and rebellious allies.
All of this and impending elections next year surely would make a suitable incubator for permitting, licensing, and inspections irregularities that have given rise to Wal-Mart’s current internal FCPA investigation. Only time will tell if India is the place – or one among a number of them – but it seems a decent bet.
