Walmart Is Now Under Investigation in Mexican “Bribery Aisle” Scandal

JUAN GONZÁLEZ: We turn now to a New York Times exposé on the massive bribery scandal behind Wal-Mart’s expansion into Mexico, where the corporate giant now operates in one of five of its stores.

NARRATOR: In Mexico, an elaborate tale of bribery by one of the world’s largest corporations, Wal-Mart.

LOCAL RESIDENT: [translated] I never imagined I was opposing such a superpower.

NARRATOR: In April, the New York Times revealed how Wal-Mart’s leaders hushed up evidence of widespread bribery by their largest foreign subsidiary, Wal-Mart de México. Now, the Times examines the relentless campaign of bribes behind Wal-Mart’s most controversial store in Mexico, a Bodega Aurrera supermarket built in the shadow of a revered cultural landmark, the ancient pyramids of Teotihuacán. Residents would fight for months to stop the store’s construction. At protests and hunger strikes, they pleaded with Wal-Mart not to desecrate their heritage.

LOCAL RESIDENT: [translated] I said, “We have to stop them because no one can conquer Teotihuacán.”

NARRATOR: But evidence unearthed by the Times shows Wal-Mart de México conquered Teotihuacán with more than $200,000 in bribes. Payoffs were authorized to buy an altered zoning map and a compliant mayor. Meanwhile, when Wal-Mart’s leaders in the United States were confronted with credible evidence of serial bribes in Teotihuacán, they did nothing to alert authorities.

S. ROBSON WALTON: Let me be clear: Acting with integrity is not a negotiable part of this business.

JUAN GONZÁLEZ: The New York Times report comes after Wal-Mart executives in the United States failed to fully investigate the corruption after it was brought to their attention. Now the U.S. Justice Department is considering whether Wal-Mart violated the Foreign Corrupt Practices Act, which makes it a crime for American corporations to bribe foreign officials.

AMY GOODMAN: For more, we’re joined by the Pulitzer Prize-winning New York Times reporter who broke the story, David Barstow, who first detailed in April how Wal-Mart hushed up a vast Mexican bribery case. Now, his latest piece picks up where Wal-Mart’s limited investigation dropped off. The Times visited dozens of Mexican towns and cities to document the payoffs the company used to get its way.

David Barstow, welcome to Democracy Now! Just lay out the story for us from April, when you wrote your first piece.

DAVID BARSTOW: The first piece that we—that I wrote examined the conduct, especially, of the leaders of Wal-Mart in Bentonville, when they were confronted in—

AMY GOODMAN: In Arkansas.

DAVID BARSTOW: In Arkansas, in Bentonville, Arkansas, when they were confronted in late 2005. Someone who had been a lawyer for their operations in Mexico, the lawyer who had been in charge of getting all permits to build new Wal-Marts in Mexico, came forward, approached the company and laid out this really extraordinary story about how Wal-Mart de México, which is Wal-Mart’s largest foreign subsidiary, had been routinely resorting to bribery in order to basically speed up and to obtain permits, licenses, zoning approvals, on a fairly massive scale all across the country, and with a very specific strategic purpose, which was to accelerate Wal-Mart’s growth in Mexico. And for those who don’t know, Wal-Mart 20 years ago was not much of a presence in Mexico. Today, it’s really hard to overstate just how thoroughly they dominate commerce in Mexico. It’s more than just the Sam’s Clubs and the Wal-Marts that you see in the United States. It’s department stores. It’s restaurants. It’s banks. And they tend to typically—

AMY GOODMAN: It’s one in five stores in Mexico and the largest private employer in Mexico.

DAVID BARSTOW: Two hundred and—

AMY GOODMAN: One in five stores of Wal-Mart’s anywhere worldwide are in Mexico.

DAVID BARSTOW: Anywhere in the world is in Mexico, yes, over 221,000 employees. And they’ve done this in a remarkably brief period of time. And so, when this lawyer stepped forward and started laying out this information to Wal-Mart’s top executives and lawyers in Bentonville, Arkansas, in 2005, Wal-Mart kind of initially took the sort of traditional steps you would expect from a major corporation confronted with allegations of this sort. They immediately called for an internal investigation. They sent investigators to Mexico City. They began digging through the—you know, the auditing trail and the internal sort of pay records to see whether or not what this man had told them had merit or not. And before too long, the investigators came back and said, “You know what? It looks like there’s something here.” In fact, they wrote in a report that was sent to the very top Wal-Mart executives, “There is reasonable suspicion to believe that laws have been violated in Mexico and in the United States.” And what they were really referring to was the Foreign Corrupt Practices Act, which is the federal law that makes it a crime for U.S. companies to pay bribes to officials in foreign countries.

But that’s where the story starts getting unusual, and that’s what we focused on in April. Rather than acting on the advice of their investigators, some of whom were basically former veteran FBI agents, they instead took the really unusual step of taking the internal investigation away from these experienced veteran criminal investigators in the United States, and they handed it off to the man who at the time was the general counsel of Wal-Mart de México. And the reason why that was so extraordinary is because that same gentleman had been identified as being one of the key participants and overseers of this bribery scheme. So you’re basically handing the case to investigate the case to someone who was one of your prime suspects. That man then very quickly wrote a report exonerating all of Wal-Mart de México, and that was the end of the internal investigation.

Because of that decision in 2006 by Wal-Mart, which meant they never notified the Justice Department, they never notified Mexican authorities, basic questions about the nature of what they were doing on the ground in Mexico, the extent, the impact, those questions were never asked, never answered. So what we’ve done, for the most of this year, is we’ve tried to basically pick up and try to answer those questions. And that’s involved traveling broadly throughout Mexico, obtaining tens of thousands of pages of records about every permit that Wal-Mart obtained in Mexico for a number of stores that we focused on, and it’s involved basically penetrating inside Wal-Mart and obtaining hundreds and hundreds of documents of their own internal investigation, their own financial records. And the story that we published this week, finally, is our attempt to answer this fundamental question: Was this a company that was effectively ensnared in a corrupt culture, where the only way they could build stores was to pay bribes? Or was this something else?” And what—

JUAN GONZÁLEZ: I wanted to—I wanted to ask you specifically about that, in this particular story, because I found it fascinating. I don’t—I mean, sometimes the New York Times investigations are extremely long; this one was extremely long, but I could say I read the whole thing, because it was such a fascinating story. And the—what amazed me in this particular story is how you were able to identify fraud that occurred that all of the local—even some of the local government officials were not aware had occurred. For instance, in the rezoning of this particular—this alfalfa field that—where Wal-Mart wanted to build a new store right outside of the Teotihuacán and that even the—

AMY GOODMAN: The City of Gods.

JUAN GONZÁLEZ: The City of Gods with the amazing pyramids—and that you discovered that even the local officials were not aware how last-minute changes were made in what they thought—the zoning plan they had approved versus what was actually filed, again, because of bribes passed to key officials.

DAVID BARSTOW: I mean, it’s certainly a tragedy in Mexico that government investigations often don’t go very deep. And in this store that we focused on this week, which, as you described, was in this—really barely a mile from this revered cultural landmark, the wonderful, beautiful pyramids that have been there really since the time of Christ. And the amazing thing about this was that this community, this town, had spent a couple of years really seriously going through and trying to figure out what’s the correct zoning scheme for our town, much like, you know, any town we’re all familiar with in the United States, zoning schemes and zoning plans and zoning meetings. And this community had gone through this process.

And they had set a couple of like basic goals for themselves. And one was, they wanted to protect the area around the pyramids from development, because that’s sort of the thing that draws tourists to their community. And they also have a lot of feeling for the pyramids themselves. They also wanted to protect the main entrance to town, which is chronically congested with traffic. They wanted to try to do something about that, as well. And so, they adopted this zoning map that specifically said that this alfalfa field, that Wal-Mart had already targeted as this place that they wanted to put a supermarket—they specifically adopted a map that said, “No, only houses can be built here. You cannot do any commercial development here.”

And what we discovered, through months and months of work in the archives of various government agencies in Mexico, was we found the evidence that supported the internal documents we already had in our hands from Wal-Mart that showed that that map, that field, Wal-Mart’s solution was to pay a bribe to have a man go in and change the zoning for just that field—nowhere else—so that after that change was made, suddenly they were allowed to build a supermarket. And it’s that kind of thing—and that’s the kind of thing that we saw over and over and over again in Mexico. There was a kind of brazenness and creativity and aggressiveness to what Wal-Mart was doing in order to build stores.

AMY GOODMAN: You write, David Barstow, “None of Wal-Mart de Mexico’s leaders were disciplined. Indeed, its chief executive, Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Wal-Mart in 2008.” And until your article, “the allegations and Wal-Mart’s investigation had never been publicly disclosed.”

DAVID BARSTOW: That’s true. That’s true. Yeah, the man who—this man named Eduardo Castro-Wright, who had been brought into Mexico—you know, one of the things that’s important to sort of step back a moment and think about in this case, in this period of time—2004, 2005—Wal-Mart had been hitting kind of a plateau in the United States. It was having a difficult time achieving the kind of unbelievable growth it had seen in decades prior. It pointed an awful lot of time—you know, when it would talk to Wall Street, it frequently pointed to Mexico as this is an example of where our future lies, in growth in foreign markets. Mexico was Wal-Mart’s first foreign market. Today they’re in 27 foreign markets, including Brazil; India, they just entered; China and a number of other countries around the world. And they’ve focused, in terms of their growth strategy—

AMY GOODMAN: We have 10 seconds for this part of the conversation.

DAVID BARSTOW: They’ve focused—they’ve focused mainly on growth in foreign markets. And so, Mexico was central to Wal-Mart’s story about its own growth.

AMY GOODMAN: David Barstow, this is part one. We’ll do part two after the show and post it at democracynow.org and play it on Democracy Now! David Barstow, Pulitzer Prize-winning journalist for the New York Times.