Walmart to Pay $282 Million for FCPA Violations

By Richard Montes De Oca* and Priscila Bandeira**
 
On June 20, 2019, Walmart Inc. agreed to pay $282 million to settle a long-lasting probe for violation of the Foreign Corrupt Practices Act (FCPA) by failing to ensure its subsidiaries in Brazil, China, India and Mexico had adequate anti-corruption programs. The probe started by investigating a reported bribery scheme involving Walmart’s subsidiaries in Mexico.
Walmart has been under extensive investigation by the U.S. Department of Justice (DOJ), the U.S. Securities and Exchange Commission (SEC) and Mexican authorities since 2011 for violations of the FCPA taking place for over 10 years, from 2000 to 2011. In Mexico, Walmart’s employees paid alleged bribes to government officials in order to obtain permits to build Walmart stores. Walmart was informed about the possible misconduct in Mexico by a special investigator and internal audit employees; however, the company refused to follow their recommendations.
In addition to the violations in Mexico, Walmart was also charged for bribes allegedly paid by the company’s subsidiaries to government officials in Brazil, China and India.
It is important to highlight that the main charge by the DOJ and the SEC concerns Walmart’s failure to have adequate anti-corruption controls in place, while its employees, including high level executives, allegedly knew about the bribes. Accordingly, the probe also pointed to Walmart’s hiring of a contractor in Brazil despite clear “red flags”, something that could have been avoided with an effective compliance program. The payment to the Brazilian contractor, who worked as an intermediary to obtain permits more quickly, was also falsely recorded as a payment to construction companies, further violating the FCPA’s books and records provisions. It was not until 2011 that Walmart started to bolster its compliance program.
Since the commencement of the investigation, Walmart has fired its General Counsel in Mexico and spent over $870 million dollars in legal fees and global compliance upgrades.
During the probe, the DOJ did not officially comment on the penalty sought against Walmart, which first prompted some experts to estimate that the fine would be in the range of $600 million to $1 billion. However, Walmart disclosed in its SEC filings in 2018 that it would probably reach a settlement for approximately $283 million as a result of the various remedial measures taken by the company. Some of the remedial measures taken into account by the federal authorities were (i) the enhancement of Walmart’s anti-corruption compliance program and internal accounting controls; (ii) hiring of global and local Compliance Officers; and (iii) according to the Non-Prosecution Agreement between the DOJ and Walmart, “conducting, across each of Walmart’s markets, enhanced monthly and quarterly anti-corruption monitoring by dedicated Company Financial Controls and Continuous Improvement Teams (who monitor at store-level), with results tracked in a centralized, real-time automated monitoring system.”
DOJ Criminal Division Chief Brian Benczkowski said in a statement, “In numerous instances, senior Walmart employees knew of failures of its anti-corruption-related internal controls involving foreign subsidiaries, and yet Walmart failed for years to implement sufficient controls comporting with U.S. criminal laws. As today’s resolution shows, even the largest of U.S. companies operating abroad are bound by U.S. laws, and the Department of Justice will continue to aggressively investigate and prosecute foreign corruption.”

With increasingly aggressive enforcement efforts and record-setting fines by the DOJ and SEC, MDO Partners encourages companies to establish strong Anti-Corruption Compliance Programs to mitigate the risk of FCPA violations. In fact, recent reports reflect that nearly 500 enforcement actions were initiated and $4 billion in fines were levied by the DOJ and SEC in 2018, boosted in large part by foreign corruption cases. MDO Partners advises companies on global compliance programs; our attorneys and advisors have extensive experience advising clients on the FCPA and effective Anti-Corruption Compliance Programs in over 30 countries.

*Richard Montes De Oca is Managing Partner at MDO Partners, a boutique law firm that focuses on Corporate, International, and Real Estate Law, as well as Global Compliance and Business Ethics.
 
**Priscila Bandeira is a Global Compliance and Corporate Law Associate Counsel at MDO Partners, where she assists clients with corporate governance documentation, corporate formation, and international transactions. A graduate of the J.D./L.LM Joint Program at the University of Miami, Ms. Bandeira is also registered with the Brazilian Bar.