Is the Walmart Case Not Such a Big Deal After All?

Last week I published a post with some conjectures as to why the DOJ’s investigation into alleged Foreign Corrupt Practices Act violations by Walmart – triggered by New York Times reports, published in 2012, of widespread bribes paid by Walmart’s Mexican subsidiary, Wal-Mex – might be taking a long time to resolve. I noted that there was as yet no evidence of an especially lengthy investigation, compared to the norm in big FCPA cases, but I nevertheless speculated that perhaps the case might take a long time because the seriousness of the misconduct, coupled with Walmart’s failure to disclose (or even to conduct a reasonable internal investigation), meant that the DOJ was going to insist on particularly severe penalties (which Walmart’s lawyers might be resisting). But I may have been completely wrong about that: According to a report in this past Sunday’s Wall Street Journal, the Walmart investigation is likely to be wrapped up soon, and the fine may be much smaller than expected, in part because (at least according to the sources for WSJ report) the bribery violations in Mexico were not as extensive as many (myself included) had thought.

It’s important to emphasize that the WSJ report has not been confirmed by the Justice Department, Walmart, or any other source. It may well turn out to be inaccurate. But let’s suppose for the moment that it’s (mostly) right. Suppose we see a Walmart settlement within the next few months in which the extent of (admitted) violations, and/or the severity of the penalties, are much lower than expected. What to make of this? A few thoughts:

  • First, if the case really is wrapped up this year, then the questions people have been asking about the duration of the case will likely flip: Many have wondered why the case is taking so long—though as I pointed out in my last post, since most big FCPA cases take an average of seven years to resolve. And indeed, if the case is resolved any time soon, as the WSJ report suggests it will be, then Walmart will in fact be an unusually fast resolution of a major FCPA investigation. The question people will be asking will not be, “Why is this case taking so long?” but rather “How did they manage to wrap this case up so quickly?”
  • Second, if in the final settlement Walmart admits to only a handful of FCPA violations, rather than the widespread, systematic conspiracy by Wal-Mex (and a cover-up by the Walmart parent), that does not necessarily mean that Walmart/Wal-Mex’s violations were in fact very limited. Oftentimes in FCPA settlement negotiations, the defendant firm and the government negotiate over just how much wrongdoing the company will acknowledge in the settlement. The government won’t always insist on the firm admitting every suspected violation, particularly if the evidence for some of them is not entirely clear-cut, so long as the firm acknowledges some form of wrongdoing and agrees to a negotiated penalty. If that indeed occurs, we may see some “spin” from Walmart, suggesting the violations were not nearly as bad as the NYT made them sound (and indeed, it’s at least possible that the WSJ story may be part of that spin). But even if this is what’s going on, it certainly would be inconsistent with my speculation that the DOJ really wanted to hammer Walmart, to make an example of the company because of its mishandling of the situation.
  • Third, another possibility here—and one to which I alluded in my last post, and which the WSJ story also mentions—is that there may be a statute of limitations problem. Even though (or even if) Wal-Mex did indeed commit extensive FCPA violations back in 2005-2006 or before, and even if Walmart HQ buried its head in the sand (or even knowingly facilitated a cover-up) in 2006, the FCPA has a five-year statute of limitations. Many had assumed that wouldn’t be a problem in this case, because the conspiracy statutes would allow the DOJ to bring charges as long as there was some more recent “overt act” in furtherance of the conspiracy to violate the FCPA. But maybe there wasn’t. Maybe the DOJ looked really hard (or compelled Walmart too look really hard) and couldn’t turn up very much within the last five years that would justify severe punishments. Perhaps Walmart did indeed clean up its act after 2006, notwithstanding how poorly the company seems to have dealt with the reports of wrongdoing in Wal-Mex.
  • Fourth, it may turn out that in fact the reports of Walmart’s misconduct were greatly exaggerated, and that the Pulitzer Prize-winning NYT stories painted a distorted and misleading picture of what actually occurred. I must say, I found the NYT reporting on this quite convincing (and Walmart’s responses to the story not convincing at all), so I’m instinctively resistant to this possibility, but I must acknowledge it certainly could turn out to be the case. If it is, then although this would indicate that Walmart was not as bad an actor as it has been made out to be, it also would suggest that the decision of Walmart HQ not to do a genuine internal investigation in response to preliminary reports of wrongdoing, and to promptly disclose what it found to the DOJ, will seem like an even more foolish move. After all, if Walmart had done a thorough investigation then, and reported to the DOJ what it found, it would have spared itself the extremely expensive internal investigation the DOJ insisted on after the NYT disclosures.

Just like my last post, all of this is wild speculation, based on a factual premise that may turn out to be completely wrong. I suppose we’ll know soon enough whether the WSJ report proves accurate. To be continued…

1 thought on “Is the Walmart Case Not Such a Big Deal After All?

  1. The statute of limitations issue is an intriguing one. If the average case takes seven years to resolve, a five year limitations period seems rather short. Given that some statutes of limitations may be tolled where fraud or other exceptional circumstances apply, I would be interested to know more about how the statute of limitations operates in an FCPA case, where the conditions are prime for concealment. The Main Justice article linked above notes another exception, that a limitations period may be suspended while a foreign government assembles requested evidence. It would be very interesting to consider how the statute of limitations rules support or hinder the objectives of the FCPA.

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