The Paradox of Walmart, Google and the FCPA

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.

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