Wal-Mart stores Inc. might be dealing with a potential legal nightmare over bribery allegations at its Mexican subsidiary, but analysts and observers seem to be giving it a pass — at least for now.

This story first appeared in the May 21, 2012 issue of WWD. Subscribe Today.

The world’s largest retailer admitted in a filing with the Securities and Exchange Commission last Thursday that it was widening its internal probe into potential violations of the Foreign Corrupt Practices Act, hinting it may be looking at its practices in other countries as well as in Mexico. Wal-Mart did not provide details, and analysts remained more focused on its stronger-than-expected first-quarter results than the bribery allegations.

Wal-Mart shares on Friday closed up 14 cents to $62.57 on the New York Stock Exchange.

RELATED STORY: Wal-Mart Surges Ahead in First Quarter >>

“In terms of the relative impact, the way you do business in a lot of these countries is not bribes as we would classify them, but you do have to pay middlemen,” said Steve Kernkraut, a retail analyst at Durban Capital’s Berman Capital. “It’s not so surprising that they did this in Mexico.”

If senior executives were found guilty of the alleged crimes and had to resign, it wouldn’t be so disruptive because “Wal-Mart usually has a deep management bench,” he added. “The vice chairman, Eduardo Castro-Wright [who oversaw the Mexico unit at one stage], is scheduled to retire over the next two months anyway. Could he be the scapegoat? There may be a sacrificial lamb.”

Kernkraut said the bottom line is that Wal-Mart is “a huge company and it’s doing well. If it turns out there was a series of these kinds of payoffs in Mexico, China, England and every other country they do business in, it could go a little further. That may mean the fines will be a little deeper and they will be more likely to get rid of some senior managers. I don’t think it will impact their business. It will it make it more problematic if they want to open stores in, say, Argentina, because they’ll be under a microscope.”

A partner at a law firm that specializes in defending firms involved in large-scale investigations in connection with the Foreign Corrupt Practices Act, who also spoke anonymously, said the spread of corruption within an international organization “depends on whether the bad actors are located in one subsidiary in one country. Do the corporate heads have the right business practices? If not, they’re likely to have problems in multiple countries.

“There are a lot of countries where corruption is an issue,” he added. “One tool a lot of firms use to assess levels of corruption is Transparency International’s Corruption Perceptions Index.” On a scale of 0 to 10, where 0 is the most corrupt and 10 is the cleanest, the 2011 index listed Nicaragua, 2.5; Guatemala, 2.7; Mexico, 3; India, 3.1, and China, 3.6.

“Thanks to social media and the Internet, memories are short — stories hit hard, but they also go away fast,” said Carol Spieckerman, president of Newmarketbuilders. “Therefore, it is in Wal-Mart’s best interest to do whatever it can to ensure that the story does not get protracted. Fortunately, Wal-Mart appears to be committed to full transparency, and its recent positive performance is the top story.”

“We believe the recent developments underscore the interests of Wal-Mart’s long-term shareholders in asserting the company’s legal rights,” said Michael Sicilia, a spokesman for the California State Teachers Retirement System, which holds more than 5.3 million Wal-Mart shares and has filed a derivative lawsuit against the retailer. “There’s been wrongful conduct, and if it’s found that those individuals, and, in fact, the company directors and executives were involved, that would uphold our claims. Our concern in our suit is not so much the activity, which is egregious, but concealing the information when it first came to light.”

At Wal-Mart’s annual meeting on June 1, CalSTRS intends to withhold votes from directors it believes “breached their fiduciary responsibilities,” Sicilia said.

The attorney said there’s no ceiling on fines for violations under the Foreign Corrupt Practices Act. “The maximum statutory penalty is twice the gross gain derived from the offense,” he said. “Whatever benefit the company obtained, the criminal penalty would be twice that, and the SEC can impose civil statutory penalties, but those aren’t typically so big. What gets big on the civil side is disgorgement of profits. A company can end up paying as much as three times the benefit it obtained through the bribery.”

The largest penalty ever assessed in a Foreign Corrupt Practices Act case was in 2008 when Siemens AG paid $850 million in combined penalties to settle a wide-ranging investigation by the U.S. Department of Justice and the SEC.

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