For more than a decade, Walmart used middlemen to make dubious payments to governments around the globe in order to open new locations, United States prosecutors and securities regulators said in a settlement agreement on Thursday. But even as employees frequently raised alarm, the company’s top leaders did little to prevent Walmart from being involved in bribery and corruption schemes.
That lack of internal control led to a seven-year inquiry that culminated on Thursday with Walmart’s Brazilian subsidiary pleading guilty to a federal crime. The guilty plea, and the $282 million in fines that Walmart has agreed to pay, capped one of the biggest investigations ever under the Foreign Corrupt Practices Act, which makes it illegal for American corporations to bribe overseas officials.
“Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption,” Brian A. Benczkowski, an assistant attorney general, said in a statement.The investigation, which was conducted by the Department of Justice and the Securities and Exchange Commission, came after The New York Times revealed in 2012 that Walmart had made suspicious payments to officials in Mexico and then tried to conceal them from top executives at the company’s headquarters in Bentonville, Ark. And even when the issues reached the main office, an internal investigation essentially went nowhere.
The remarkable story of how the road to Walmart’s international expansion was paved by bribes is fascinating, and perhaps especially so to me, as I have long identified and inveiged against the coercive and unethical technique among businesses, governments and law firms that I call the “Mission Impossible Directive.” You recall the way “Jim Phelps” (and before him, “Dan Briggs”) got his marching orders for his Impossible Missions Force, don’t you?
Your mission should you choose to accept it is to [………….]. As always, should you or any of your IM Force be caught or killed, the Secretary will disavow any knowledge of your actions. This tape will self-destruct in five/ten seconds.
In the business version, the “mission” is to meet impossible markers of financial success, with the penalty for failing being dismissal or demotion. The goals are impossible, that is, unless corners are cut and laws are broken.
In more international markets than not, bribery is an accepted way of doing business. [I once taught an ethics course at the World Bank in which a questioner insisted that bribery was not unethical in countries where it wasn’t illegal. I explained that bribery is always unethical, always cheating, always dishonest. If it were not, then it would be transparent. The fact that a nation’s corruption is shameless doesn’t mean it is right. “I have paid bribes in situation where it was the only way to move a business arrangement forward,” he said. “Are you saying that this was corrupt no matter where I was or what the customs of the country were?” “That’s exactly what I’m saying,” I answered.] This places American businesses at a distinct competitive disadvantage because of the the Foreign Corrupt Practices Act, which holds U.S. companies to U.S. laws even in their dealings abroad.
To get around this, big corporations and smaller ones play an unethical game, putting the pressure on mid-level employees to meet goals that executives know can only be met by defying the Foreign Corrupt Practices Act. When the international bribing has the desired effect, the corporate leadership accepst the benefits no questions asked. When there are signs that the middlemen are breaking the law, the executives engage in contrived ignorance, and look the other way for as long as they can.
And when the pressured cheaters are caught, their bosses tell authorities, “Why, we never would have told an employee to engage in corrupt practices! No one asked or received our approval! We’re shocked and horrified!”
…the Secretary will disavow any knowledge of your actions.
This practice will continue until the fines for doing business this way exceed the profits—they never do—and the executives who use the “Mission Impossible Directive” go to prison.
That, however, appears to be a mission impossible.