bobgrevey.com

In his op-ed in The New York Times today, former ambassador and poet Homero Aridjis sums up nicely the problem with corruption in Mexico.

He basically posits that corruption is so ingrained in the culture of Mexico that it should come as no surprise that a supposedly honest American company would engage in the practice to gain an advantage.

While not yet advocating for complacency, Aridjis wraps the piece up using the words of a former governor of Chihuahua, “If we put everyone who’s corrupt in jail, who will close the door?”

Well said.

So, over the weekend, the New York Times published a report that tore a hole in Walmart de Mexico and its longstanding and continued commitment to bribery in Mexico.

The article surfaced seven years late, as the result of an internal whistle blower whose message was stifled at corporate HQ back in Bentonville in 2005. Though estimates vary, Walmart de Mexico is said to have spent something like $20 million in bribes in a short period of time, a large sum, mostly to secure permits for real estate and construction, in direct violation of the Foreign Corrupt Practices Act (FCPA), then covered up by the C-suite. Right at the top.

Reverberations are running through stock market, and will continue to cut into Walmart for some time. Criminal charges may be brought at the executive level, and some analysts are already predicting trouble ahead, as much of Walmart’s growth strategy depends on expansion abroad. Suffice it to say that issues with FCPA compliance were not written into the last round of P&L projections.

Fast forward to Tuesday, where we find a report on the federal lobbying spending by some household names: Google, Facebook, Amazon and Apple, to name a few. It would appear that Google has grown a target on its back, and has spent slightly more than $5 million on lobbying in D.C. in the first quarter of this year alone.

A large part of the issue in the Walmart de Mexico case is the executive suite’s comfort with ignoring a very serious, potentially damaging and well-documented problem. Surely they should have been more proactive when it was brought to light.

The lack of ethical judgment at the corporate level aside, there is also the issue of bribery itself. Google is spending at a rate that would amount to $20 million this year on federal lobbying activity in our nation’s capital. That money goes toward access, permissions and favorable legislative treatment. It’s a lot of grease, no matter whose palm we’re talking about.

It begs the question, when it comes to the FCPA, Walmart, or any other business operating abroad, is bribery considered illegal activity simply because it’s happening outside of U.S. borders? Or conversely, does the DOJ consider bribery legitimate when the transaction is contained domestically?

Bravo to the Times for consistently excellent reporting. It’s a vaguely satisfying, visceral reaction when we see a corporation like Walmart take a PR ding. However, the FCPA, as written, and now enforced with increasing zeal, is going to create a significant burden, even a competitive disadvantage, for U.S. companies doing business abroad, especially in countries where bribes are the norm.

I found this to be a particularly nice piece of prose from this Rolling Stone dispatch by Matt Taibbi:

“Bank of America should have gone out of business back in 2008. Just as the mortgage market was crashing, it made an inconceivably stupid investment in subprime mortgages, acquiring Countrywide and the billions in potential lawsuits that came with it. ‘They tried to catch a falling knife and lost their hand and foot in the process,’ says Joshua Rosner, a noted financial analyst. It then spent $50 billion buying a firm, Merrill Lynch, that was rife with billions in debts. With those two anchors on its balance sheet, Hugh McColl’s bicoastal dream bank should have gone the way of the dinosaur.

But it didn’t. Instead, in the midst of the crash, the government forked over $45 billion in aid to Bank of America – $20 billion as an incentive to bring its cross-eyed bride Merrill Lynch to the altar, and another $25 billion as part of the overall TARP bailout. In addition, the government agreed to guarantee $118 billion in Bank of America debt.”

Touché.