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Are Mexican Money Launderers Running Wal-Mart?

by on August 20, 2012

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While Wal-Mart’s employees have been busy rolling back prices all summer, the corporation’s executives may have been busy rolling something else – wads of laundered cash. This week, the world’s largest retail company landed itself in hot water with Congress when the ranking members of the Oversight and Energy Committees accused Wal-Mart of stonewalling an investigation into alleged corruption. Though no official charges have been filed against the superstore yet, this latest move seems to suggest that it’s only a matter of time.

The congressional investigation began last April after the New York Times ran a story about how Wal-Mart had bribed its way into Mexico. According the Times, Wal-Mart allegedly paid out more than $24 million in bribes to Mexican officials in order to bypass zoning laws, allowing the company to open stores pretty much wherever it wished. One of these outlets, a 72,000-square-foot superstore located within the boundaries of the 2,000-year-old city of Teotihuacán, opened in 2004, to the anger of the gods.

If those allegations aren’t disturbing enough, the investigation team, lead by Elijah Cummings (D-MD) and Henry Waxman (D-CA), soon discovered that the bribes aren’t limited to Mexico. Evidence suggests that the company has bribed officials in India, South Africa, Brazil and China in exchange for lenience on zoning regulations.

And bribes are just the tip of the iceberg. In a letter to Wal-Mart’s CEO, Michael Duke, Cummings and Waxman cite examples of “questionable financial behavior” and provide evidence suggesting that Wal-Mart has been laundering money and evading taxes through its Mexican branch, known as Walmex.

Early last December, Wal-Mart apparently ran its own internal investigation into these allegations. The findings of that investigation were never made public, and no public action was taken against the accused executives. Congressional investigators are now demanding to see the notes from this investigation, but Wal-Mart is taking its time.

In their letter, Reps. Cummings and Waxman state: “To date, however, you have not produced a single document we have requested. You have refused to provide Committee staff with copies of any internal reports of specific information about the findings and recommendations of your worldwide assessment […] Indeed, you have not allowed us to speak to any Wal-Mart employees responsible for compliance with the Foreign Corrupt Practices Act.”

That last bit is the important part. Violating the Foreign Corrupt Practices Act is pretty serious stuff. In the past, convictions have brought fines as high $800 million and even a few years in jail, an unheard-of punishment in the world of corner-office white-collar crime.

The total impact of this investigation – and Wal-Mart’s attempts to derail it – remains to be seen. At the moment, news of the infractions and a possible impending fine has caused stockholders to start dumping their shares in the hopes of avoiding a loss. This Wednesday, the trading price of Walmex dropped 5.1 percent, down to 36.23 pesos, or $2.75. It’s hard to say whether or not these allegations will lead to further losses, but we’ll keep you updated as the story develops.

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