The Securities and Exchange Commission charged Walmart with violating the Foreign Corrupt Practices Act (FCPA) by failing to operate a sufficient anti-corruption compliance program for more than a decade. Walmart agreed to pay more than $144m to settle the SEC’s charges and approximately $138m to resolve parallel criminal charges by the US Department of Justice (DoJ) for a combined total of more than $282m.
According to the SEC’s order, Walmart failed to sufficiently investigate or mitigate certain anti-corruption risks and allowed subsidiaries in Brazil, China, India, and Mexico to employ third-party intermediaries (TPIs) who made payments to foreign government officials without reasonable assurances that they complied with the FCPA.
The SEC’s order details several instances when Walmart planned to implement proper compliance and training only to put those plans on hold or otherwise allow deficient internal accounting controls to persist even in the face of red flags and corruption allegations.
In the DoJ case Walmart and its wholly owned Brazilian subsidiary, WMT Brasilia,have agreed to pay a combined criminal penalty to resolve the US government’s investigation into violations of the FCPA. WMT Brasilia pleaded guilty in connection with the resolution.
“Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption,” said Assistant Attorney General Benczkowski. “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 US criminal laws. As today’s resolution shows, even the largest of US companies operating abroad are bound by US laws, and the Department of Justice will continue to aggressively investigate and prosecute foreign corruption.”
In a number of instances, insufficiencies in Walmart’s anti-corruption-related internal accounting controls in these foreign subsidiaries were reported to senior Walmart employees and executives. The internal control failures allowed the foreign subsidiaries in Mexico, India, Brazil and China to open stores faster than they would have with sufficient internal accounting controls related to anti-corruption. Consequently, Walmart earned additional profits through these subsidiaries by opening some of its stores faster.
Walmart has entered into a three-year non-prosecution agreement and agreed to retain an independent corporate compliance monitor for two years.
The company fully cooperated with the investigation in Brazil, China and India. Walmart cooperated with the investigation in Mexico, but did not timely provide documents and information to the government and did not de-conflict with the government’s request to interview one witness before Walmart interviewed that witness. Walmart did not voluntarily disclose the conduct in Mexico and only disclosed the conduct in Brazil, China and India after the government had already begun investigating the Mexico conduct.