Independence and internal investigations (Part Three): Wal-Mart

The first two posts in this series    gave an overview of the legal landscape regarding independence expectations for internal investigations. Today, I want to draw readers’ attention to a jaw-dropping piece that has just appeared in today’s NY Times about how Wal-Mart allegedly used an utterly un-independent internal investigation to cover-up bribery by its Mexican operation. 

I won’t try to recount all of what’s in the Times piece, which – in my view – every C&E professional should read.  But this excerpt will give a flavor of it:

In one meeting where the bribery case was discussed, H. Lee Scott Jr., then Wal-Mart’s chief executive, rebuked internal investigators for being overly aggressive. Days later, records show, Wal-Mart’s top lawyer arranged to ship the internal investigators’ files on the case to Mexico City. Primary responsibility for the investigation was then given to the general counsel of Wal-Mart de Mexico — a remarkable choice since the same general counsel was alleged to have authorized bribes.  The general counsel promptly exonerated his fellow Wal-Mart de Mexico executives. When Wal-Mart’s director of corporate investigations — a former top F.B.I. official — read the general counsel’s report, his appraisal was scathing. “Truly lacking,” he wrote in an e-mail to his boss. The report was nonetheless accepted by Wal-Mart’s leaders as the last word on the matter.

Rather, I write to make a general point that might otherwise be missed in what I imagine will be a flood of follow-on stories  about Wal-Mart’s woes, but which should be of keen interest to C&E professionals. That is, engaging in sham compliance measures – investigations and other – can itself be considered a crime, at least in some circumstances.  For more on that, see this prior post in the FCPA Blog, about how “I once represented two lawyers who were suspected by a federal prosecutor of having deliberately conducted a half-measure internal investigation for deceptive purposes. No charges were brought (and, from my perspective, none were even close to being warranted). But with the wrong set of facts the result could be different in a case involving compliance program half-measures – especially if, as I believe will happen, there is a generally decreasing tolerance by prosecutors for Potemkin programs.”

In a somewhat related vein, another commentator has asked whether Wal-Mart’s lawyers violated their S-Ox 307 duties.

Wal-Mart’s statement issued in response to the Times piece can be found here.  And, I should emphasize that I am not suggesting that Wal-Mart personnel engaged in a sham investigation.  Rather, like many posts in this blog, I am using the news of the day to provide what is hopefully helpful general COI-related information to C&E professionals.

One Comment
  1. Gary Zeune CPA 6 years ago

    Like the criminal who appologizes in court at his sentencing, it appears that WalMart is serious about FCPA compliance only because they got busted. Good reminder ‘Actions speak louder than words’. In other words you can’t rely on what management says. You have to test it. Same reason auditors don’t take management’s word. Auditors count the inventory. Also a good reminder that C&E and auditors should always ask non-management and non-accounting people what’s really going on.

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