Wal-Mart’s Mexican subsidiary, that country’s largest private employers, allegedly built its blockbuster business there by massively bribing Mexican officials, the NYTimes reports. Excerpt:
Michael T. Duke, Wal-Mart’s current chief executive, was also kept informed. At the time, Mr. Duke had just been put in charge of Wal-Mart International, making him responsible for all foreign subsidiaries. “You’ll want to read this,” a top Wal-Mart lawyer wrote in an Oct. 15, 2005, e-mail to Mr. Duke that gave a detailed description of the former executive’s allegations.
The Times examination included more than 15 hours of interviews with the former executive, Sergio Cicero Zapata, who resigned from Wal-Mart de Mexico in 2004 after nearly a decade in the company’s real estate department.
In the interviews, Mr. Cicero recounted how he had helped organize years of payoffs. He described personally dispatching two trusted outside lawyers to deliver envelopes of cash to government officials. They targeted mayors and city council members, obscure urban planners, low-level bureaucrats who issued permits — anyone with the power to thwart Wal-Mart’s growth. The bribes, he said, bought zoning approvals, reductions in environmental impact fees and the allegiance of neighborhood leaders.
He called it working “the dark side of the moon.”
The Times also reviewed thousands of government documents related to permit requests for stores across Mexico. The examination found many instances where permits were given within weeks or even days of Wal-Mart de Mexico’s payments to the two lawyers. Again and again, The Times found, legal and bureaucratic obstacles melted away after payments were made.
Read the whole thing. The key thing is that when Wal-Mart HQ was made aware of the scandal, and of Wal-Mart de Mexico’s strategy of concealing all this from HQ, the company sent its own investigators to Mexico to get to the bottom of it. And then:
In a confidential report to his superiors, Wal-Mart’s lead investigator, a former F.B.I. special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated.”
The lead investigator recommended that Wal-Mart expand the investigation.
Instead, an examination by The New York Times found, Wal-Mart’s leaders shut it down.
Neither American nor Mexican law enforcement officials were notified. None of Wal-Mart de Mexico’s leaders were disciplined.
This is not capitalism, folks. This is cronyism, and criminality. I hope the feds nail Wal-Mart’s butt to the wall. Here is why everyone who believes in capitalism should want Wal-Mart to pay a severe penalty for this, if the company’s guilt can be established in court:
In an interview with The Times, Mr. Cicero said Mr. Castro-Wright [Wal-Mart de Mexico's former head] had encouraged the payments for a specific strategic purpose. The idea, he said, was to build hundreds of new stores so fast that competitors would not have time to react. Bribes, he explained, accelerated growth. [Emphasis mine -- RD] They got zoning maps changed. They made environmental objections vanish. Permits that typically took months to process magically materialized in days. “What we were buying was time,” he said.