Wal-Mart Faces Potential Violation of Foreign Corrupt Practices Act

Late last year, Wal-Mart disclosed in an SEC filing that it was conducting an investigation into a violation of foreign-bribery law in Mexico.  The New York Times recently released an article stating that Wal-Mart officials knew of bribery claims in Mexico as long ago as 2005.  Federal authorities have now asked that Wal-Mart involve outside experts in addition to internal teams to investigate the bribery allegations.  The general counsel in Mexico for Wal-Mart has already been removed.  Wal-Mart executives could face criminal charges if federal investigators find any evidence of a cover-up.  If Wal-Mart violated the Foreign Corrupt Practices Act, the justice department will levy a fine based on the competitive edge the company gained from the illegal actions.

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  1. PILR recently published an article by Clinton R. Long (accessible at http://digitalcommons.pace.edu/pilronline/29/) in its March 2012 Online Companion on an issue similar to this. Provocatively titled, “When ‘Not Getting Caught’ Is Not Enough: Preventing Foreign Corrupt Practices Act Violations and Liability in International Project Finance,” Mr. Long’s article discusses the structure and effectiveness of FCPA enforcement, and proposes methods for the prevention of FCPA violations.

    What strikes me most about Wal-Mart’s alleged violations of the FCPA is the lack of deterrent effect in simply ‘getting caught.’ Mr. Long’s article begins by recounting the Siemens A.G. corruption scheme whereby Siemens executives participated in a large-scale bribery of foreign officials in violation of both U.S. and German law. Even though Siemens spent over 2.6 billion dollars in fines to the U.S. and Germany, former Siemens accountant Reinhardt Siekaczek expresses little optimism that this penalty will have any deterrent affect on future corrupt acts. Siekaczek states, “[p]eople will only say about Siemens that they were unlucky and that they broke the 11th commandment. The 11th commandment is: ‘Don’t get caught.’”

    Do Mr. Siekaczek’s words ring true in light of the accusations against Wal-Mart? Mr. Long acknowledges that “many American businesspeople and companies who understand the realities of doing business in foreign countries would likely agree with Siekaczek’s lamentation.” However, Mr. Long adopts a cautious optimism: “‘not getting caught’ . . . is becoming increasingly difficult” as the Department of Justice in recent years has ramped up its investigation and enforcement of FCPA violations.

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