The U.S. Securities And Exchange Commission (SEC) announced on June 20th a settlement agreement to resolve charges that Walmart violated:
"... the Foreign Corrupt Practices Act (FCPA) by failing to operate a sufficient anti-corruption compliance program for more than a decade as the retailer experienced rapid international growth... According to the SEC’s order, Walmart failed to sufficiently investigate or mitigate certain anti-corruption risks and allowed subsidiaries in Brazil, China, India, and Mexico to employ third-party intermediaries who made payments to foreign government officials without reasonable assurances that they complied with the FCPA. The SEC’s order details several instances when Walmart planned to implement proper compliance and training only to put those plans on hold or otherwise allow deficient internal accounting controls to persist even in the face of red flags and corruption allegations."
Walmart agreed to pay more than $144 million to settle the SEC’s charges and about $138 million to resolve parallel criminal charges by the U.S. Department of Justice (DOJ), for a combined total of more than $282 million. The settlements cover activities by the retailer's foreign subsidiaries in Brazil, China, India, and Mexico.
"According to Walmart’s admissions, from 2000 until 2011, certain Walmart personnel responsible for implementing and maintaining the company’s internal accounting controls related to anti-corruption were aware of certain failures involving these controls, including relating to potentially improper payments to government officials in certain Walmart foreign subsidiaries, but nevertheless failed to implement sufficient controls that, among other things, would have ensured: (a) that sufficient anti-corruption-related due diligence was conducted on all third-party intermediaries (TPIs) who interacted with foreign officials; (b) that sufficient anti-corruption-related internal accounting controls concerning payments to TPIs existed; (c) that proof was required that TPIs had performed services before Walmart paid them; (d) that TPIs had written contracts that included anti-corruption clauses; (e) that donations ostensibly made to foreign government agencies were not converted to personal use by foreign officials; and (f) that policies covering gifts, travel and entertainment sufficiently addressed giving things of value to foreign officials and were implemented. Even though senior Walmart personnel responsible for implementing and maintaining the company’s internal accounting controls related to anti-corruption knew of these issues, Walmart did not begin to change its internal accounting controls related to anti-corruption to comply with U.S. criminal laws until 2011... In a number of instances, insufficiencies in Walmart’s anti-corruption-related internal accounting controls in these foreign subsidiaries were reported to senior Walmart employees and executives. The internal control failures allowed the foreign subsidiaries in Mexico, India, Brazil and China to open stores faster than they would have with sufficient internal accounting controls related to anti-corruption. Consequently, Walmart earned additional profits through these subsidiaries by opening some of its stores faster..."
So, to fast-track store openings company executives allegedly made secret payments to "third-party individuals" who passed the money on to specific government officials who approve permits. CBS News reported:
"... the payments to the intermediary were recorded as payments to a construction company, even though there were numerous "red flags" to indicate that the intermediary was actually a government official... The federal agreement does not identify the intermediary, but describes her in some detail: It says she became known inside Walmart Brazil as a "sorceress" or "genie" for her "ability to acquire permits quickly by 'sort(ing) things out like magic.' " The plea agreement also includes a provision barring the Brazilian subsidiary from making public claims or issuing press releases contradicting the facts outlined under the plea agreement."
Walmart is not alone regarding FCPA violations. According to the SEC, several companies agreed to settlement agreements and payments during 2019:
- May 9, 2019: Telefônica Brasil S.A. – $4.125 million
- March 29, 2019: Fresenius Medical Care AG & Co. – $231 million to the SEC and DOJ
- March 6, 2019: Mobile TeleSystems PJSC – $850 million
- February 15, 2019: Cognizant – $25 million
Readers of this blog may remember, Fresenius paid $3.5 million last year to resolve HIPAA violations from 5 small data breaches during 2012. And, last week a whistleblower report discussed Cognizant's content moderation work as a Facebook subcontractor.
Notable companies with SEC settlement agreements and payments during 2018:
- December 26, 2018: Polycom – $16 million; Centrais Elétricas Brasileiras S.A. – $2.5 million penalty
- November 19, 2018: Vantage Drilling International – $5 million
- September, 2018: Stryker Corporation – $7.8 million penalty; Petróleo Brasileiro S.A. – $1.78 billion; United Technologies – $14 million; Sanofi – $25 million
- August 27, 2018: Legg Mason – $34 million
- July 5, 2018: Credit Suisse Group AG – $30 million to the SEC and a $47 million criminal penalty
- April, 2018: Panasonic Corporation – $143 million; The Dun & Bradstreet Corp. – $9 million in disgorgement, interest and a civil penalty