Today we celebrate Fu Manchu. No not the facial accouterments but the fictional character who was introduced to the world in a series of novels by British author Sax Rohmer during the first half of the 20th century. He has become an archetype of the evil criminal genius while also lending his moniker to the Fu Manchu moustache. I thought of Fu Manchu and his infamous drip, drip, drip water torture when I read the latest news about the ongoing Wal-Mart Foreign Corrupt Practices Act (FCPA) investigation.

Yesterday, I read three articles about the most recent revelations in Wal-Mart’s ongoing PR nightmare. Renee Dudley, reporting in Bloomberg, in an article entitled “Wal-Mart CEO Knew of Mexico Bribery, Congressmen Say”, wrote that “Democratic Representatives Henry Waxman of California and Elijah Cummings of Maryland said today in a statement that documents obtained by their staffs show that Duke and senior Wal-Mart officials were informed about allegations of corruption regarding a store in Teotihuacan.” The documents referenced were emails, which Waxman and Cummings said contradicted “the company’s earlier statements that senior executives had no knowledge of the bribery allegations”.

I.                   The Emails

One of the emails, from the then General Counsel (GC) of Wal-Mart International, Maritza Munich, sent to the Chief Executive Officer (CEO) Michael Duke and other senior Wal-Mart officials in November 2005 was “about specific bribes paid for permits and accelerated openings for stores in Teotihuacan and other locations, according to the correspondence released by the congressmen.” Aruna Viswanatha and Jessica Wohl, reporting in Reuters, in an article entitled “Lawmakers: Wal-Mart CEO knew of Mexico bribe claim”, went even further writing that in one email from Wal-Mart GC Thomas Mars in October 2005, sent to CEO Duke, said “You’ll want to read this. I’m available to discuss next steps.” This email also allegedly attached an email which summarized the bribery allegations for the CEO.

If you look closely at the quoted emails, they provide some tantalizing information. In the Munich email, the information appears provocatively close to the analysis done set out by New York Times (NYT) in its second article on the Wal-Mart FCPA matter where the reporters matched up the specific bribe payments for permits and permit granting’s. Munich seems to have matched up the specific bribes and accelerated store openings. The Mars GC email is also quite interesting. If he indeed did summarize the bribery allegations as of the date listed in the story of October, 2005, either the CEO had actual knowledge or decided it would be better if he ignored the advice of his GC that you will “want to read this.”

II.                Comments of Waxman and Cummings

As you might guess, Democratic Representatives Waxman and Cummings did not have many complimentary things to say about these latest allegations regarding Wal-Mart. Shelly Banjo, reporting in the Wall Street Journal (WSJ), in an article entitled “Lawmakers Claim Wal-Mart Knew of Bribery Allegations in 2005”, quoted from a letter released by Waxman and Cummings which said, in part, “It would be a serious matter if the CEO of one of our nation’s largest companies failed to address allegations of a bribery scheme.” Quoting further from the letter, reporter Dudley wrote that the e-mails “cast a new and unfavorable light on Wal-Mart’s continued unwillingness to provide our investigators with access to Ms. Munich, who appears to be a key witness who would know about your knowledge of the Teotihuacan bribes.”

III.             Wal-Mart Response

Wal-Mart basically said that the hoo-ha was much ado about nothing. Dudley reported that Brooke Buchanan, a Wal-Mart spokesperson, emailed a statement regarding this information. Dudley quoted from the statement as follows, “This information has been part of the company’s ongoing investigation of potential violations of the U.S. Foreign Corrupt Practices Act for more than a year and has been the subject of two New York Times articles,” she said.” As to the charge that Wal-Mart had earlier wrongfully said that its CEO was not made aware of these allegations of bribery involving the company’s Mexico subsidiary, Banjo reported that “Wal-Mart quickly rebutted the claim, saying that the lawmakers misinterpreted its prior remarks.” Oops.

IV.              Between Scylla and Charybdis?

Representatives Waxman and Cummings complained that Wal-Mart was frustrating their investigation by not fully cooperating with them. They specifically pointed to Wal-Mart’s failure to make the former GC of Wal-Mart International, Maritza Munich, available to them for an interview. Dudley reported that “Wal-Mart attorneys told the members in June that they were “working through a protocol” that would allow Munich to speak to government investigators” but such interview has not yet been forthcoming. Dudley also quoted from the email by Wal-Mart spokesperson Buchanan who said, “We have provided extensive documentation to the Department of Justice and the Securities and Exchange Commission, including the documents released today, as part of our ongoing cooperation with the appropriate law enforcement agencies on this matter. We want to provide Members of Congress with whatever appropriate information we can to help them and we have already provided committee staff with multiple briefings.”

Wal-Mart seems to be stuck between a rock and a very hard place. Or perhaps, to mix fictional references they are trying to navigate between Scylla and Charybdis. The company certainly needs to perform a thorough investigation and share those results with the Department of Justice (DOJ) but I am also certain that it desires to cooperate with the Waxman and Cummings investigation. However, to do so, it may be quite difficult and it may not allow Wal-Mart the flexibility that it needs with the variety of legal obligations that it has in this matter.

One unusual aspect of this matter is the release of information during the ongoing internal investigation. It is not release of information from the internal investigation but from investigations running in parallel, the Times investigative reporting and the Waxman and Cummings investigation. Typically during the pendency of any US public company FCPA internal investigation the only information released appears in a 10K or other mandated release of information. However, in the Wal-Mart matter, there have been at least these two other sources to release information to the public. This is certainly requiring Wal-Mart to fight a protracted PR battle and it is providing lots of fodder for critics of the company. I think that Fu Manchu would be smiling for all the torture…