Walmart de Mexico scandal rocks retail giant

By | April 24th, 2012 | 4 Comments

Will the Walmart de Mexico scandal affect Walmart's plans to open its first Miami location? -- photo by Josh Haner/The New York Times

With Walmart trying to garner local support for a proposed two-story store in Midtown, which would be its first Miami location, the retail giant is dealing with the fallout from a hard-hitting, 8,000-word New York Times story on alleged widespread corruption in Mexico.

Update: “In Los Angeles, a Wal-Mart building permit is getting a once-over. In New York, the City Council is investigating a possible land deal with the retailer’s developer in Brooklyn. A state senator in California is pushing for a formal audit of a proposed Wal-Mart in San Diego. And in Boston and its suburbs, residents are pressuring politicians to disclose whether they have received contributions from the company.” — from “Wal-Mart’s U.S. Expansion Plans Complicated by Bribery Scandal” (NYT, 4/31/12)

The first Times story on the scandal, published on April 22, focused on the allegations of Sergio Cicero, a former executive at Walmart de Mexico, Walmart’s largest foreign subsidiary. Cicero claims that Walmart’s enormous success in Mexico has been fueled by millions of dollars of bribes that were sanctioned by top Walmart de Mexico executives.

In the interviews, Mr. Cicero recounted how he had helped organize years of payoffs. He described personally dispatching two trusted outside lawyers to deliver envelopes of cash to government officials. They targeted mayors and city council members, obscure urban planners, low-level bureaucrats who issued permits — anyone with the power to thwart Wal-Mart’s growth. The bribes, he said, bought zoning approvals, reductions in environmental impact fees and the allegiance of neighborhood leaders. He called it working “the dark side of the moon.”

One of the implicated executives is Walmart de Mexico CEO Eduardo Castro-Wright, who was at one point considered a leading candidate to eventually take over the entire company.

Mr. Cicero said that while bribes were occasionally paid before Mr. Castro-Wright’s arrival, their use soared after Mr. Castro-Wright ascended to the top job in 2002. Mr. Cicero described how Wal-Mart de Mexico’s leaders had set “very aggressive growth goals,” which required opening new stores “in record times.” Wal-Mart de Mexico executives, he said, were under pressure to do “whatever was necessary” to obtain permits.

In an interview with The Times, Mr. Cicero said Mr. Castro-Wright had encouraged the payments for a specific strategic purpose. The idea, he said, was to build hundreds of new stores so fast that competitors would not have time to react. Bribes, he explained, accelerated growth. They got zoning maps changed. They made environmental objections vanish. Permits that typically took months to process magically materialized in days. “What we were buying was time,” he said.

Written by David Barstow, who won the Pulitzer Prize for Investigative Reporting in 2009, the article also chronicles how Walmart executives mishandled the allegations, even though the company’s own investigators found “reasonable suspicion … that Mexican and USA laws have been violated.” In fact, Walmart’s response was to rebuke its investigators, former FBI agents among them, for being too aggressive and to reassign the corruption investigation to an executive who himself had allegedly sanctioned the bribes.

The Times story “has already lopped $10 billion off [Walmart’s] market value,” according to the Columbia Journalism Review. “Rest assured, though, the reverberations from this piece have just begun to be felt in Bentonville,” Walmart’s Arkansas headquarters.

How or if Barstow’s story (which you can read in full on nytimes.com) will affect Walmart’s plan to open in Miami also remains to be seen. Does it change your view of the company and/or its proposed Midtown location? Let us know in the comment section.

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“Fox News zeroing in on Midtown Walmart story”
“Despite setback, Walmart to move forward in Midtown”
“Midtown developer asks city to reject Walmart zoning request”
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“Op-ed: Midtown Walmart will hurt job growth, local businesses”

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4 Comments on “Walmart de Mexico scandal rocks retail giant”

  1. 1 Kaelsie said at 12:00 pm on April 26th, 2012:

    I can’t say I’m suprised. They don’t strike me as having one ethical bone in their corporate body.

  2. 2 michael s said at 2:19 pm on April 30th, 2012:

    Wal-Mart does not even hide their Miami Efforts. They hired Francios Illas, as a lobbyist to “work the city of miami”. Looks like they have utilized their Mexico efforts in Miami. It’s probably very cheap for them. Too bad for Midtown.

  3. 3 jennifer s said at 6:45 pm on April 30th, 2012:

    illas is “very close” to Miami Mayor Tomas Regalado. I guess that’s how Wal_Mart “buys” the city. Pretty neat, unless as Michael and others have pointed out unless you are a resident of Midtown. The Mexico lessons are alive and well in Miami de Mex….

  4. 4 jose l said at 7:07 pm on April 30th, 2012:

    It does seem rather obvious to hire someone close to Mayor Regalado to “expedite Wal-Mart’s approval” in Midtown. Talk about slezzy. Ugh.


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