The Impact of the New York Times Report on Wal-Mart’s Bribery Scandal

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The New York Times report on Wal-Mart’s handling of bribery allegation has shaken the anti-corruption community.  The New York Times’ description of what occurred inside of Wal-Mart, if true, is devastating.  Here is a link to the article: http://www.nytimes.com/2012/04/22/business/at-wal-mart-in-mexico-a-bribe-inquiry-silenced.html

The impact of this bombshell report will slow business attempts to reform the FCPA and sends an important reminder to every company, even those large companies with state-of-the-art compliance programs, that even they can fall from their pedestal. 

The New York Times’ depiction of events underscores several significant points.  No matter how much we write, how much we advise companies, and how much we think we are guiding our clients, there is no guarantee that companies will comply, will investigate themselves, and address illegal conduct unless the company is fully committed to compliance.   

The Wal-Mart story is an important reminder that no matter how good you anti-corruption compliance program, a company’s commitment to its program, with the support of the board and senior management, is critical to the effectiveness of a compliance program.  For large companies that frequently tout their “Cadillac” compliance programs, this is an important reminder of the problems that can easily develop and frustrate compliance efforts.  Every large company, no matter how effective they believe their compliance programs are, needs to review, audit and confirm the operation of their compliance program.  They need to make sure their compliance program is working effectively.

 At its core, the New York Times report demonstrates two significant failures in a compliance program.  First, the New York Times report shows the danger to compliance when senior management and the board are not committed to compliance — in fact, the report suggests that senior management sought to prevent a full and fair investigation of the actions in Mexico. 

Second, the report shows how important it is for senior management to appoint and support an independent investigation.  The machinations surrounding the conduct of the internal investigation shows how such an investigation can be easily derailed.  Instead, as reported, senior management supported instances to cover-up the allegations or make sure sure they never saw the light of day.

I am sure the shock of the New York Times report will reverberate for months.  Congressional support for reform is likely to fade in response to this report.  The New York Times’ investigative report will be a “poster child” for why anti-corruption enforcement is critical to our national interest — if true, the report shows that corruption can undermine fair competition in foreign markets to the detriment of consumer welfare and the public interest.

The Department of Justice now faces an important test.  They cannot just simply rely on a law firm conducted internal investigation to unearth the truth.  With allegations stretching to the highest levels of Wal-Mart, the Justice Department has to conduct its own investigation and not rely on an internal investigation conducted by Wal-Mart’s counsel. 

I am sure the Justice Department is up to the test — this is where it operates with professionalism and dedication.  Everyone will be watching — especially Congress.  It should be interesting.

Published In: Antitrust & Trade Regulation Updates, Criminal Law Updates, Finance & Banking Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Group Law Firm | Attorney Advertising

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