Is Wal-Mart Discreetly Cleaning House?

Is Wal-Mart Discreetly Cleaning House?

Former Wal-Mart Stores, Inc. (NYSE:WMT) CEO H. Lee Scott Jr. will retire from the company’s board later this month, continuing what appears to be a pattern of high level executives involved in the retailer’s international division slowly taking their leave in the wake of a major corruption scandal, reports Elizabeth A. Harris for The New York Times.

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Wal-Mart allegedly bribed Mexican officials for years

In 2012 The New York Times reported that Wal-Mart Stores, Inc. (NYSE:WMT) had repeatedly bribed Mexican officials to make it easier to expand operations there, in violation of the Foreign Corrupt Practices Act, and that executives at corporate headquarters had been aware that a problem existed since at least 2005. The article alleged that corporate leaders had decided to end an internal investigation instead of reporting the violations.

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Since the story broke, eight senior executives that were potentially involved in the corruption scandal have left the company including former chief administrative officer Thomas A. Mars and the general counsel for Wal-Mart Stores, Inc.’s (NYSE:WMT) Mexican division, José Luis Rodríguezmacedo Rivera. Wal-Mart has said that Scott’s departure just follows the company’s standing policy not to have more than one ex-CEO on the board and that slot is now being taken by Michael Duke, who recently stepped down as CEO.

Wal-Mart may be trying to curry favor with DOJ

Wal-Mart Stores, Inc. (NYSE:WMT) has also beefed up its compliance unit with 30% more staff, a significantly larger budget, and new rules that are meant to hold executives accountable for dealing with future allegations of corruption. Specifically, the board has to be made aware of any potential incident of foreign corruption, making it impossible for board members to claim ignorance in the future. Taken together, legal experts speculate that this is all part of private negotiations between Wal-Mart and the Justice department.

“The more proactive you can be in terms of setting up good compliance program, the more favorably the Department of Justice will look on it when you’re sitting across the table,” said criminal defense lawyer David Schertler. “One thing you can be pretty much assured of is that they’re letting the Department of Justice know, even if they’re not making it public.”

If the negotiations are taking place we probably won’t hear about them until they have concluded and a settlement has been reached, but that won’t stop investors from pushing for more information at Wal-Mart Stores, Inc.’s (NYSE:WMT) annual shareholder meeting taking place at the end of this week.

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Michael has a Bachelor's Degree in mathematics and physics from Boston University and Master's Degree in physics from University of California, San Diego. He has worked as an editor and writer for several magazines. Prior to his career in journalism, Michael Worked in the Peace Corps teaching math and science in South Africa.
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