The Securities and Exchange Commission on Thursday charged Walmart Inc. with violating the Foreign Corrupt Practices Act by failing to operate a sufficient anticorruption compliance program for more than a decade during the time that the retailer was rapidly growing its international operations.
Walmart agreed to pay more than $144 million to settle the SEC’s charges and approximately $138 million to resolve parallel criminal charges by the U.S. Department of Justice, a total of more than $282 million.
Investigations into Walmart Inc.’s international business and possible violations of the Foreign Corrupt Practices Act have cost the retailer more than $900 million for FCPA inquiries and investigations, its global compliance program and organizational enhancements.
The retailer on Thursday said its agreement to the global resolution ends all FCPA-related investigations or inquiries into Walmart and its subsidiaries by the Department of Justice and the SEC.
According to the SEC’s order, Walmart failed to sufficiently investigate or mitigate certain anticorruption risks and allowed its subsidiaries in Brazil, China, India and Mexico to employ third-party intermediaries who made payments to foreign government officials without reasonable assurances that they were in compliance with FCPA regulations.
In several instances, Walmart planned to implement proper compliance and training, but ended up putting those plans on hold or otherwise allowed deficient internal accounting controls to continue in the face of red flags and corruption allegations, SEC’s order said.
“Walmart valued international growth and cost-cutting over compliance,” said Charles Cain, chief of the SEC’s Enforcement Division’s FCPA unit. “The company could have avoided many of these problems, but instead, Walmart repeatedly failed to take red flags seriously and delayed the implementation of appropriate internal accounting controls.”
Walmart consented to the SEC’s order finding that it violated the books and records and internal accounting controls provisions of the Securities Exchange Act of 1934.
The agreements relate to Walmart’s anticorruption internal controls in Brazil, Mexico, India and China prior to April 2011, Walmart said. Under the direction of its Audit Committee, Walmart said it conducted a thorough internal investigation, cooperated with the DOJ and the SEC, and took extensive steps that have established its strong Global Anti-Corruption Compliance Program.
“We’re pleased to resolve this matter,” said Doug McMillon, president and chief executive officer of Walmart Inc. McMillon has tried to distance himself from the scandal and recast the company as a good corporate citizen concerned with protecting the environment and raising employee wages. “Walmart is committed to doing business the right way, and that means acting ethically everywhere we operate. We’ve enhanced our policies, procedures and systems and invested tremendous resources globally into ethics and compliance. We now have a strong Global Anti-Corruption Compliance Program. We want to be the most trusted retailer, and a key to this is maintaining our culture of integrity.”
As part of the resolution, Walmart entered into a non-prosecution agreement with the DOJ, which will not prosecute the company for three years, if Walmart meets its obligations per the agreement. The retailer also agreed to an administrative order with the SEC to resolve findings connected to violations of the FPCA’s books and records and internal controls provisions.
Walmart agreed to oversight by an independent compliance monitor with a limited scope for two years, and will report to the SEC on its Anti-Corruption Compliance Program for two years.
Walmart Brasilia Srl, an indirect, wholly-owned subsidiary of Walmart Inc., entered a guilty plea in the U.S. District Court for the Eastern District of Virginia as part of the agreement with the DOJ for causing a books and records violation of the FCPA.
A long investigation by the U.S. government was spurred by allegations that Walmart de Mexico paid millions of dollars in bribes to Mexican officials to speed up the permitting and licensing process, thus hastening the retailer’s expansion. The retailer in 2011 started an internal investigation into possible violations of the FCPA at a variety of overseas businesses, including Mexico, China, Brazil, South Africa and India.
Walmart in 2012 was accused of hushing up the earlier inquiry into the business practices of Walmart de Mexico.