Daily Maverick

What’s that in my taco? Walmart scandal burns in Mexico

In one of those newspaper moments that hark back to the 1970s, the New York Times blew the lid off a massive and systematic bribery scandal involving Walmart’s all-important Mexico division. Payments were made to officials and Walmart stores flourished throughout the land. Makes you think, doesn’t it? By RICHARD POPLAK.

They love their Walmex’s in Mexico. And if they don’t, it sure looks that way. The world’s largest retailing company has stores all over that vast country, and no wonder. With a burgeoning middle class and a population of 80 million, Mexico is nothing less than a major market for the folks from Bentonville, Arkansas.

South Africans know a thing or two about Walmart, mostly because the juggernaut turned its attention on us in the mid-zeroes, zoning in on Massmart in order to make a major play for the South African market. We know that Walmart is the world’s biggest retailer and the largest public company when ranked by revenue. We know it has about 8,500 stores and operates in 14 African countries. We know it bombed in Germany, but hey, you can’t win ‘em all.

Walmart most certainly won in Mexico. And herein lies the problem. First thing Sunday morning, the New York Times unleashed a comprehensive, excellently researched investigative piece on Walmart’s behaviour in America’s southern neighbour.

And Walmart was indeed being neighbourly. How’s this for helping out with milk and sugar:

“Walmart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24-million. They also found documents showing that Walmart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Walmart’s headquarters in Bentonville, Ark. In a confidential report to his superiors, Walmart’s lead investigator, a former FBI special agent, summed up their initial findings this way: ‘There is reasonable suspicion to believe that Mexican and USA laws have been violated.’”

Indeed they may have been. But Walmart was shown to have simply kiboshed any further investigation of the bribes and shoved the whole thing under the table. The problem – and it’s a big one – is that the head of Walmart de Mexico, the very man accused of approving $24-million in baksheesh, is Eduardo Castro-Wright, now the company’s vice chairman.

It doesn’t behoove a publicly traded company to employ a vice president who is more used to brown paper envelopes than stock options. Nor does it look good on an organisation that is so upstanding, and so darned family conscious, that it refuses to sell music or movies it considers to be offensive. In its rush to be a cultural arbiter, Walmart forgot to obey the laws of two fairly sizeable countries.

Oh boy, and was the company scared. “In one meeting where the bribery case was discussed, H Lee Scott Jr, then Walmart’s chief executive, rebuked internal investigators for being overly aggressive. Days later, records show, Walmart’s top lawyer arranged to ship the internal investigators’ files on the case to Mexico City. Primary responsibility for the investigation was then given to the general counsel of Walmart de Mexico – a remarkable choice since the same general counsel was alleged to have authorised bribes.”

Take a flyer on what happened next. You guessed it: the general counsel exonerated, um, themselves. Ah, the scales of justice!

Let’s be clear about something: Walmart has not been accused, nor has any evidence been uncovered, of any wrongdoing in their take-over of Massmart. The Mexico scandal was about speeding the building of new stores, bribing minor officials for permits and, basically, engaging in business as usual in that country.

Thing is, publicly traded companies can’t behave that way. It’s very, very illegal. And if we’ve seen the moral worth of the organisation finally uncovered, one wonders how they have behaved in Africa in the past, and how they will behave in the future. The majority of South Africans did not want Walmart in the country. Regardless of the pros and cons of a retailer with a supply chain that vast – and the competitive prices that are the result of their multinational reach – it made us very uncomfortable.

The scandal in Mexico is only going to increase our unease.

This is a huge blow for the giant. It won’t be fatal, but it could prove the beginning of the end. Strong-arming mom-and-pop shops in India and middle America is one thing. Screwing with the Feds is another. Heads will roll.

Walmart is Mexico’s largest employer, with over 200,000 people on the rolls. It is a fixture in the country. It’s a pity it didn’t see fit to play by the rules. One hopes that it’ll be under serious scrutiny when – sorry – if it starts handing out brown envelopes in South Africa. DM

Read more:

Photo: A customer pays for merchandise at a Wal-Mart store in Mexico City. REUTERS/Henry Romero.

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