Today we celebrate Fu Manchu. No not the facial accouterments but
the fictional character who was introduced to the world in a series of novels
by British author Sax Rohmer during the first half of the 20th century. He has
become an archetype of the evil criminal genius while also lending his moniker
to the Fu Manchu moustache. I thought of Fu Manchu and his infamous drip,
drip, drip water torture when I read the latest news about the ongoing
Wal-Mart Foreign Corrupt Practices Act (FCPA) investigation.
Yesterday, I read three articles about the most recent
revelations in Wal-Mart's ongoing PR nightmare. Renee Dudley, reporting in Bloomberg,
in an article entitled "Wal-Mart
CEO Knew of Mexico Bribery, Congressmen Say", wrote that "Democratic
Representatives Henry Waxman of California and Elijah Cummings of Maryland said
today in a statement that documents obtained by their staffs show that Duke and
senior Wal-Mart officials were informed about allegations of corruption
regarding a store in Teotihuacan." The documents referenced were emails, which
Waxman and Cummings said contradicted "the company's earlier statements that
senior executives had no knowledge of the bribery allegations".
I.
The Emails
One of the emails, from the then General Counsel (GC) of
Wal-Mart International, Maritza Munich, sent to the Chief Executive Officer
(CEO) Michael Duke and other senior Wal-Mart officials in November 2005 was
"about specific bribes paid for permits and accelerated openings for stores in
Teotihuacan and other locations, according to the correspondence released by
the congressmen." Aruna Viswanatha and Jessica Wohl, reporting in Reuters,
in an article entitled "Lawmakers:
Wal-Mart CEO knew of Mexico bribe claim", went even further writing
that in one email from Wal-Mart GC Thomas Mars in October 2005, sent to CEO
Duke, said "You'll want to read this. I'm available to discuss next steps."
This email also allegedly attached an email which summarized the bribery
allegations for the CEO.
If you look closely at the quoted emails, they provide
some tantalizing information. In the Munich email, the information appears
provocatively close to the analysis done set out by New York Times (NYT) in its
second article on the Wal-Mart FCPA matter where the reporters matched up the
specific bribe payments for permits and permit granting's. Munich seems to have
matched up the specific bribes and accelerated store openings. The Mars GC
email is also quite interesting. If he indeed did summarize the bribery
allegations as of the date listed in the story of October, 2005, either the CEO
had actual knowledge or decided it would be better if he ignored the advice of
his GC that you will "want to read this."
II.
Comments of Waxman and Cummings
As you might guess, Democratic Representatives Waxman and
Cummings did not have many complimentary things to say about these latest
allegations regarding Wal-Mart. Shelly Banjo, reporting in the Wall Street
Journal (WSJ), in an article entitled "Lawmakers
Claim Wal-Mart Knew of Bribery Allegations in 2005", quoted from a
letter released by Waxman and Cummings which said, in part, "It would be a
serious matter if the CEO of one of our nation's largest companies failed to
address allegations of a bribery scheme." Quoting further from the letter,
reporter Dudley wrote that the e-mails "cast a new and unfavorable light on
Wal-Mart's continued unwillingness to provide our investigators with access to
Ms. Munich, who appears to be a key witness who would know about your knowledge
of the Teotihuacan bribes."
III.
Wal-Mart Response
Wal-Mart basically said that the hoo-ha was much ado
about nothing. Dudley reported that Brooke Buchanan, a Wal-Mart spokesperson,
emailed a statement regarding this information. Dudley quoted from the
statement as follows, "This information has been part of the company's ongoing
investigation of potential violations of the U.S. Foreign Corrupt Practices Act
for more than a year and has been the subject of two New York Times articles,"
she said." As to the charge that Wal-Mart had earlier wrongfully said that its
CEO was not made aware of these allegations of bribery involving the company's
Mexico subsidiary, Banjo reported that "Wal-Mart quickly rebutted the claim,
saying that the lawmakers misinterpreted its prior remarks." Oops.
IV.
Between Scylla and Charybdis?
Representatives Waxman and Cummings complained that
Wal-Mart was frustrating their investigation by not fully cooperating with
them. They specifically pointed to Wal-Mart's failure to make the former GC of
Wal-Mart International, Maritza Munich, available to them for an interview.
Dudley reported that "Wal-Mart attorneys told the members in June that they
were "working through a protocol" that would allow Munich to speak to
government investigators" but such interview has not yet been forthcoming.
Dudley also quoted from the email by Wal-Mart spokesperson Buchanan who said,
"We have provided extensive documentation to the Department of Justice and the
Securities and Exchange Commission, including the documents released today, as
part of our ongoing cooperation with the appropriate law enforcement agencies
on this matter. We want to provide Members of Congress with whatever
appropriate information we can to help them and we have already provided committee
staff with multiple briefings."
Wal-Mart seems to be stuck between a rock and a very hard
place. Or perhaps, to mix fictional references they are trying to navigate
between Scylla and Charybdis. The company certainly needs to perform a thorough
investigation and share those results with the Department of Justice (DOJ) but
I am also certain that it desires to cooperate with the Waxman and Cummings
investigation. However, to do so, it may be quite difficult and it may not
allow Wal-Mart the flexibility that it needs with the variety of legal
obligations that it has in this matter.
One unusual aspect of this matter is the release of
information during the ongoing internal investigation. It is not release of
information from the internal investigation but from investigations running in
parallel, the Times investigative reporting and the Waxman and Cummings
investigation. Typically during the pendency of any US public company FCPA
internal investigation the only information released appears in a 10K or other
mandated release of information. However, in the Wal-Mart matter, there have
been at least these two other sources to release information to the public.
This is certainly requiring Wal-Mart to fight a protracted PR battle and it is
providing lots of fodder for critics of the company. I think that Fu Manchu
would be smiling for all the torture...
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
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© Thomas R. Fox, 2013
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