CORRECT: House Democrats Probe Alleged Bribery At Wal-Mart
First Published Monday, 23rd April 2012 09:48 pm - © 2012 Dow Jones
("House Democrats Launch Probe Of Alleged Bribery At Wal-Mart," at 1723 EDT, misspelled Rep. Cummings' name, in the second paragraph. The correct version follows:)
By Andrew Ackerman and Amy Guthrie
Of Dow Jones NEWSWIRES
WASHINGTON -(Dow Jones)- A pair of top House Democrats disclosed Monday they are investigating allegations that Wal-Mart Stores Inc.'s (WMT) Mexican subsidiary paid bribes to speed permits for new-store openings.
Reps. Elijah Cummings (D., Md.) and Henry Waxman (D., Calif.) are seeking an in-person meeting with company officials this week to address the allegations that employees of Wal-Mart de Mexico SAB (WALMEX.MX) made a series of illicit payments to local government officials in Mexico prior to 2006.
Executives at both Wal-Mart and its Mexico unit learned of the allegations as early as 2005 but rebuked internal investigators in an attempt to prevent the matter from impeding the company's aggressive growth strategy, according to an article published in the New York Times
"The allegations that Wal-Mart officials in Mexico may have broken U.S. laws by bribing officials to get their stores built faster raise serious concerns," Cummings said in a statement. "But I am even more alarmed by reports that top company executives in the U.S. tried to cover up these abuses. We need to ensure that U.S. corporations comply fully with the law, and we need to determine the full scope of these alleged abuses."
Cummings and Waxman are the top Democrats, respectively, on the House Oversight and Government Reform and House Energy and Commerce committees.
Wal-Mart didn't respond to a request for comment on the lawmakers' investigation. As members of the minority party, Cummings and Waxman need the support of Republicans to hold a hearing or to subpoena Wal-Mart.
Spokesmen for Rep. Darrell Issa (R., Calif.), chairman of the House Oversight Committee, and Rep. Fred Upton (R., Mich.), chairman of the House Energy and Commerce Committee, didn't immediately respond to requests for comment.
It is still to be seen whether there will be an official backlash against Walmex, the leading Mexican retailer. Mexican Finance Minister Jose Antonio Meade told reporters over the weekend that there isn't sufficient information at the moment to launch an investigation, but that the government will decide how best to proceed once it has more details.
Walmex said Saturday that it is cooperating with an investigation by its parent company.
Walmex opened 95 new Mexican units among its various business formats during 2005 in what was, at the time, a record number of store additions for the company. Last year, Walmex opened 365 new outlets in Mexico; the company also runs restaurants.
Mexican financial-markets regulator CNBV had no immediate comment on whether it is considering fining Walmex for lack of disclosure.
Walmex said in a statement Monday that, while it can't predict the full impact of the investigation, based on information currently available it doesn't believe the issue will produce "adverse effects" for its business, financial situation, results or cash flow.
The response from analysts who cover the company was more forgiving than that of the market. Credit Suisse acknowledged that, while the news is cause for concern, especially given that Walmex "has been typically regarded as a company operating in accordance with the highest ethical standards," the alleged illicit payments occurred many years ago.
"As of now," Credit Suisse said, "the investigation refers to alleged bribery cases taking place before 2006, i.e. there is no basis at this point to claim that Walmex is currently engaging in potential bribery cases."
A survey conducted by Transparency International indicated that Mexican households paid bribes to secure one out of every 10 public services solicited during 2010 for an estimated cost of $2.5 billion. The director of the Mexican office of Transparency International has called on the government to investigate the Walmex case.
-By Andrew Ackerman and Amy Guthrie, Dow Jones Newswires; 202-569-8390; email@example.com.