Wal-Mart bribery woes in Mexico won't go away

Wal-Mart (WMT) wasn't getting any good PR from Mexico Tuesday. The New York Times charged that the retail giant systematically bribed local officials to get its stores into prime locations in the country.

One location is within sight of the great Aztec pyramid complex at Teotihuacán, which draws tourists from around the world. Wal-Mart reportedly paid more than $200,000 in four different bribes to secure the necessary permits for a store that opened in 2004.

The incident was, The Times said bluntly, routine for Wal-Mart de Mexico, the company's Mexican subsidiary.

Wal-Mart de Mexico was "an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited," The Times said. "It used bribes to subvert democratic governance -- public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals."

But investors didn't seem to mind Tuesday. Wal-Mart shares rose 30 cents to close at $69.50 as the stock market surged for a second straight day. The Dow Jones industrials ($INDU), of which Wal-Mart is a component, were up 126 points to 13,351. The blue-chip index is up 9.3% for the year and 2.5% for the month. Wal-Mart shares are up 16.3% for the year, but down 3.5% on the month, mostly on worries that the holiday shopping season will disappoint.

Wal-Mart is Mexico's largest private employer. The company has 221,000 employes working in people working in 2,275 stores, supermarkets and restaurants.

The Times first reported on Wal-Mart's Mexican issues in April, charging that in 2006, the company buried an internal investigation probing alleged widespread bribery in Mexico. At the time, there were suggestions that the bribery was initiated by Mexican officials. But the report prompted new probes by the company as well as investigations by U.S. and Mexican officials.

The Times article on Tuesday said confidential documents suggest Wal-Mart officials used bribery to secure at least 19 different store locations in Mexico.

Wal-Mart paid eight bribes totaling $341,000 to be able to build a Sam's Club in one of Mexico City’s most densely populated neighborhoods, near the Basílica de Guadalupe, without a construction license, an environmental permit, an urban impact assessment or even a traffic permit.

An additional $765,000, paid in nine separate bribes, allowed Wal-Mart to build a vast refrigerated distribution center in an environmentally fragile flood basin north of Mexico City. Electricity in the area was so scarce that many smaller developers were turned away.

It took a bit more than $200,000 to secure the permits to take over an alfalfa field near Teotihuacán, The Times said. The battle over the store's location was extensively covered as it went on. The proposal was the subject of intense protests.

Critics at the time said the resulting store could not have happened without bribery. But they had little proof. The Times investigation of documents and interviews with officials painted a clearer picture.

One bribe -- $52,000 -- produced a zoning map change that permitted the store to be built in an area where local zoning rules would have prohibited the store. Another $25,900 secured the approval of local traffic authorities.

A third -- for $81,000 -- won the approval of the Mexican authority in charge of protecting cultural landmarks. Wal-Mart de Mexico offered a "donation" of up to $45,000 and a "personal gift" of up to $36,000 in exchange for the permit, The Times said.

Lastly, Wal-Mart de Mexico executives agreed to pay $114,000 in bribes to guarantee the support of Teotihuacán’s mayor and his allies on the municipal council, records and interviews show.

The Justice Department and the Securities and Exchange Commission are investigating possible violations of the Foreign Corrupt Practices Act, the federal law that makes it a crime for American corporations or their subsidiaries to bribe foreign officials.

Wal-Mart declined to discuss its conduct in Teotihuacán while it is continuing its own investigation, The Times said.

The company has hired hundreds of lawyers, investigators and forensic accountants to examine all 27 of its foreign markets. It has already found potentially serious wrongdoing, including indications of bribery in China, Brazil and India. A number of executives in Mexico and India have been suspended or forced to resign in recent months.

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