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Wal-Mart review compliance amidst bribery allegations in Mexico

Following bribery allegations that cost the company over $157m, retail giant reviews compliance operations

Wal-Mart Stores has announced plans to overhaul its compliance operations in the wake of bribery allegations in Mexico. Federal investigations are ongoing to determine if the retailer made use of bribes in exchange for government approval for store openings in Mexico, a violation of the Foreign Corrupt Policies Act (FCPA). The accusations have highlighted the need for a policy review at the company.

As part of the overhaul, the retailer will be bringing its compliance, ethics, investigations and legal departments into a single unit that will answer to the general counsel. There are also plans for senior managers to engage in providing quarterly reports on the implementation of the reviewed corporate compliance operations, including standards and controls, training and monitoring, according to a proxy statement by Wal-Mart. In late 2012, the company also announced the creation of the role of global chief compliance officer, currently held by Jay Jorgensen, a former law clerk at the US Supreme Court.

The overhaul has been prompted by the serious allegations made by the American federal authorities over irregularities in its Mexico operations. Wal-Mart has revealed that is incurred “$157m of professional fees and expenses” in the last fiscal year, relating directly to the investigation by the Justice Department, the Securities and Exchange Commission and Mexican authorities. It was reported last year that the company had intentionally suppressed an internal probe into the alleged bribery of Mexican officials, before the federal investigation was launched.

“Wal-Mart could have avoided many of these costs by implementing a few basic FCPA compliance processes,” Alexandra Wrage, president of TRACE, a membership association that works with companies to raise their anti-bribery compliance standards. “Ensuring a proper tone from the top, conducting proper due diligence on all third parties, and carefully monitoring foreign subsidiary compliance with ant bribery laws.”

The retail giant has also revealed its audit committee can cut or eliminate cash incentives for executives over the next financial year, if the progress in the implementation of the new corporate compliance programme is not satisfactory. Currently executive compensation is only based on factors like sales, operating incomes and return on investment.
Wal-Mart maintains that it is cooperating fully with ongoing investigations over the bribery allegations and that it is probably that the company will likely continue to suffer financial losses during the process.



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