(NEW YORK) MintPress — Retailing giant Wal-mart could find itself in more hot water after two Congressmen sent a letter this week to chief executive Mike Duke threatening to release an “investigative report” on the company.
Congress, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) are all investigating allegations that Wal-Mart bribed local officials in Mexico to fuel its rapid expansion there. Bribing foreign officials is illegal under the Foreign Corrupt Practices Act (FCPA).
So far, the company has not responded to three letters from two congressional committees, the House Committee on Oversight and Government Reform and the House Committee on Energy and Commerce, requesting that Wal-Mart provide relevant documents and witnesses.
So Rep. Elijah Cummings (D-Md.) and Rep. Henry Waxman (D-Calif.), who serve as ranking members on the committees, are taking things one step further, offering Wal-Mart a “final opportunity” to comply by Aug. 28.
If it does not, say the congressmen, they will release internal audit reports and documents on Wal-Mart that they have obtained through “other sources,” whom it did not identify.
Wal-Mart claims it is, in fact, cooperating. “We have already provided committee staff with two briefings, and we are exploring ways to make additional information available,” said spokeswoman Brooke Buchanan in a statement. “We are committed to doing whatever we can to appropriately address their requests, consistent with the ongoing federal investigation.”
Scandal grows
In April, the New York Times reported that executives at the company’s headquarters in Bentonville, Ark. had received credible evidence about bribery allegations in 2005 and 2006 in Mexico, but shut down an internal investigation into the issue.
Now, Cummings and Waxman say their internal information suggests that the company may have had compliance issues relating not only to bribery but also to “questionable financial behavior,” including tax evasion and money laundering, in Mexico.
The retailer’s Mexican subsidiary is its biggest foreign operation, opening 431 stores last year.
Charles M. Holley Jr., Wal-Mart’s chief financial officer, told reporters in a phone call on Thursday that Wal-Mart was not aware of any investigations regarding tax evasion or money laundering in Mexico.
Meanwhile, the Mexican government for its part has begun investigations into Wal-Mart’s dealings with local officials. President Felipe Calderon has said that he is “indignant” about the company’s behavior.
Financial fallout
“Wal-Mart is the largest retailer in this country, but the company and its executives are not above the law,” said Barbara Collins, a Wal-Mart employee and a member of labor group OUR Walmart, in a statement Wednesday.
Indeed, since the scandal broke, labor groups and some politicians have stepped up their efforts to prevent Wal-Mart from opening stores in New York and Los Angeles.
But it’s not clear how much power the congressional committees have. “My perspective on this letter is that it’s all politics,” said Mike Koehler, an assistant professor at Southern Illinois University School of Law who writes a blog on the FCPA.
“The congressmen want to know and assess the thoroughness of Wal-Mart’s internal investigation,” he continued. “That’s not the function of a congressional committee.”
In addition, committees usually have to have majority support to issue subpoenas on documents or witnesses, and that is not likely to happen in the Republican-dominated House.
Still, the growing scandal could hit Wal-Mart’s bottom line. CFO Holley acknowledged on Thursday that because of compliance issues with the FCPA and the company’s internal controls, it is delaying some store openings in Mexico by about 90 days to “strengthen our approval process.”
And if more damaging information comes out, it could see a slowdown in store openings elsewhere as well.