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Wal-Mart’s FCPA Scrutiny DID NOT Begin With The April 2012 NY Times Article


If you follow media reporting (and certain FCPA commentators) you probably heard the narrative before: Wal-Mart’s Foreign Corrupt Practices Act began with the April 2012 New York Times article.

However, this is false.

Set forth below is the chronology of Wal-Mart’s FCPA scrutiny – as even reported by the New York Times – and based on other information in the public domain.

While the April 2012 New York Times article generated the most attention, a November 2012 New York Times article provided additional context to Wal-Mart’s FCPA scrutiny. This article was frequently overlooked, but not at FCPA Professor which began highlighting Wal-Mart’s FCPA scrutiny in December 2011 when Wal-Mart first disclosed its FCPA scrutiny.

As reported in the November 2012 New York Times article:

The investigation “began in spring 2011 as a relatively routine audit of how well its foreign subsidiaries were complying with its anticorruption policies. […] The review was initiated by Jeffrey J. Gearhart, Wal-Mart’s general counsel, who had seen news reports about how Tyson Foods had been charged with relatively minor violations of the Foreign Corrupt Practices Act. He decided it made sense to test Wal-Mart’s internal defenses against corruption. The audit began in Mexico, China and Brazil, the countries Wal-Mart executives considered the most likely source of problems. Wal-Mart hired the accounting firm KPMG and the law firm Greenberg Traurig to conduct the audit. The firms conducted interviews and spot checks of record systems to check whether Wal-Mart’s subsidiaries were carrying out required compliance procedures. For example, Wal-Mart’s anticorruption policy requires background checks on all third-party agents — lawyers, lobbyists — who represent the company before government agencies. The firms checked whether background checks were in fact being done. By July 2011, the firms had identified significant weaknesses in all three subsidiaries. “It was clear they were not executing,” a Wal-Mart official with knowledge of the audits said. The problems were enough to persuade Wal-Mart to expand the audit to all 26 of its foreign subsidiaries. This work began in autumn 2011. The outside firms dispatched “compliance teams” of lawyers and accountants all over the world. The teams attributed many of the problems they identified to a lack of training. Senior Wal-Mart executives were concerned by the findings, but not overly alarmed. The audit was uncovering the kinds of problems and oversights that plague many global corporations.”

As highlighted in this FCPA Professor post, the Tyson enforcement action was in February 2011.

Thus, according to the New York Times, it is fair to conclude that Wal-Mart’s FCPA internal review began in February or March of 2011 – well over a year prior to the April 2012 New York Times article and significantly expanded in autumn 2011 about 7 months prior to the April 2012 New York Times article.

Moreover, according to the New York Times “in late 2011, Wal-Mart learned that The Times was examining Wal-Mart’s response in 2005 to serious and specific accusations of widespread bribery by Wal-Mart de Mexico, the company’s largest foreign subsidiary.”

Thus, according to the New York Times, it is fair to conclude that Wal-Mart’s FCPA internal review began approximately 9-10 months prior, and indeed expanded, prior to learning of the New York Times investigation.

Notwithstanding the above timeline – based largely on the New York Times own reporting – the narrative persists that Wal-Mart’s FCPA scrutiny began with the April 2012 New York Times.

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