Wal-Mart Allegations Of Mexico Bribe Hinders Growth

Retailer Wal-Mart Stores Inc has been named in a recent Mexico bribe investigation and those concerns could hinder its plans to grow. The bribe reports has reduced the retailer of about $10 billion of its market value on Monday. In a sign that the problem was widening for the world’s largest retailer, two U.S. lawmakers said they were launching their own investigation into allegations in a recent New York Times article.

The article suggests that Wal-Mart de Mexico had engaged in a multi-year campaign of bribery to build its business. In Mexico, the front-running presidential candidate, Enrique Pena Nieto, and lawmakers also called on local authorities to investigate.

If the allegations are true, Wal-Mart may have violated the U.S. Foreign Corrupt Practices Act (FCPA), which forbids bribes to foreign government officials, as well as run afoul of Sarbanes-Oxley rules that require corporate gatekeepers to report material violations of securities laws.

Legal and retail experts also raised concerns about Wal-Mart Chief Executive Mike Duke and former CEO Lee Scott, who were among senior executives allegedly aware of the situation, according to the Times. Scott still sits on the company’s board.

Two Democratic U.S. lawmakers, Elijah Cummings and Henry Waxman, said they were launching an investigation into the matter and sent a letter to Duke requesting a meeting.

The Times report “raises significant questions about the actions of top company officials in the United States who reportedly tried to disregard substantial evidence of abuse,” Cummings and Waxman said in a statement.

Shares of Wal-Mart de Mexico, which is 69 percent-owned by Wal-Mart and known as Walmex, fell 12 percent to 37.89 pesos ($2.88). The drop wiped out a 12 percent year-to-date gain in the second-most-weighted stock on Mexico’s IPC index.

Shares of Wal-Mart fell 4.7 percent to $59.54, wiping some $10 billion off their market value and more than erasing this year’s gains. The stock is a component of the Dow Jones industrials index, which ended 0.8 percent lower.

The news raised concerns that Wal-Mart, the world’s largest retailer, may have trouble expanding into new markets.




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