Ehics and Governance Report 2022

Running Head: EHICS AND GOVERNANCE
EHICS AND GOVERNANCE
Name of the Student
Name of the University
Author Note

1EHICS AND GOVERNANCE
Walmart to pay 282 million dollars for resolving FCPA, DOJ and SEC
Charges
Walmart Inc. is the largest retail chain in the world. It is an American Company with
its headquarters in Bentonville, Arkansas. Sam Walton founded the company in the year
1962. The company was incorporated in the year 1969. Today Walmart more than 11000
stores operating in 27 countries across the globe. The products ranges from Electric
Equipment, Furniture, Apparels, Footwear, and Kitchen appliances to small parts and
components. Sometimes it is told that products, which are not available in Walmart, does not
exist at all. One of its specialty is that it also focuses on local homegrown products, which are
only found in those locations. Therefore, the global acceptance is also very high in this
respect. The expansion path of Walmart, from the point of view of the consumers has been
quite smooth. However, the problem is that throughout a decade, the company has used
unfair means to acquire the locations outside United States of America, which had recently
come into notice.
According to the Foreign Corruption Practices Act (FCPA), Walmart has been alleged
with violation of internal accounting of the books and records. Moreover, Walmart has
entered a non-prosecution agreement for a period of 3 years and has agreed to perform
imposition of being monitored compliantly for a period of 2 years. Department of Justice has
imposed an amount of $ 137 million for criminal charges and an additional amount of $144
million for violating civic rights accused by Securities and Exchange Commission. On the
other hand, Walmart’s Brazilian branches has been accused and found guilty of having
connections with the same violation.
Walmart has been accused for a period of 12 years from 2000 to 2011 by the
department of Justice and Securities and Exchange Board of USA. It has been found that

2EHICS AND GOVERNANCE
Walmart has made illegal payments to government officials, which were hidden, from the
internal accounting system of the company. However, the people concerned were aware of
the payments made to ease out business operations but they were not included in the
accounting books. Walmart’s global operations concerning India, Brazil, China and Mexico,
Walmart made illegal payments to the government officials of those countries to acquire
licenses and permits to open outlets in those countries. For the purpose, Walmart hired a third
party organization to do the dirty works on its behalf. It is stated that these problems of
internal accounting were reported to Walmart’s senior officials, but they took no steps. The
main purpose of these bribes were to fasten the licensing tenure against which they opened
the outlets in the cities of these foreign countries faster than the original time. This helped the
organization to incur improper and illegal profits, which was found later.
As stated by the Department of Justice, the above stated violations can be considered
as attributes, at least partially which helped Walmart to rapidly expand in the international
markets of the above-mentioned countries. According to Assistant General A. Benczkowski,
Walmart has made huge profits by rapidly expanding in these countries but undertook no
steps to avoid corruption. Therefore, the total cost of the investigation including a huge
number of lawsuits, legal fees and other expenses amounts to nearly $1 billion. This
corruption related activities were found out of investigation for almost eight long years. An
additional amount of $ 282 million had to be paid for settlement purposes. According to the
calculation, Walmart spent more than $ 269 million in the fiscal year 2018 for compliance
enhancement and investigations.
According to the department of Justice and Securities and Exchange Commission the
organization’s personnel were well aware of the corruption going inside the organization but
did not opt for correction due to the involvement of huge risks involved in the process.
Instead of clearing such corruptive issues the company chose to hire third party entities who

3EHICS AND GOVERNANCE
would fasten up the process to gain comparative advantage in the foreign markets of China,
India, Brazil and Mexico. These payments were made to achieve or fasten up the process to
acquire the required permits and licenses for opening outlets. Despite the process attained by
the company were both illegal in those foreign countries and the Department of Justice, USA,
Walmart chose to hide them from its internal books of accounting. On the other hand, instead
of complying with the rules and regulations, it chose to delay the normal process and proceed
with the illegal activities.
According to the Department of Justice, if the Company attained control in the
internal accounting they could have insured that among the other issues:
i) All third party companies that Walmart deals with has regulated strongly to
avoid illegal activities.
ii) All illegal payments made by the third party organizations working on behalf
of Walmart by maintaining the right internal accounting books.
iii) Proof of payment made by the third party companies before Walmart had paid
them their fees.
iv) The clauses and agreement between the third party organizations and Walmart
v) The money transferred to the government officials were made for the legal
purposes and not for personal use.
vi) The non-financial benefits, which were provided by the Government officials,
were actually legal payments made for fees required for opening stores and
conducting business.
The senior officials of Walmart knew these above charges were being
executed from the initial time but chose to continue the illegal process to
increase the profit of the company. The company continued the process of
corruption until it attracted the sight of the DOJ in the year 2011.

4EHICS AND GOVERNANCE
Allegations based on facts
In Brazil. Walmart’s senior officials found out the illegal payments
were being executed by the third party company to the government officials
through internal accounting methods. However, due to the smooth flow of
business and huge profits, Walmart renewed the contracts of the third party
companies. Some of the third party intermediaries including a construction
company were found guilty for illegally building two stores in Brazil.
According to the Department of Justice, an intermediary was indirectly hired
by Walmart was an expert in doing illegal tasks that it was nicknames ‘genie’
or ‘sorcerer’, though the area was flagged red according to the law.
In China, the internal audit team of a local subsidiary was able to find
out that there exists severe weakness in the internal accounting book. The
period of wrongdoing was for about 8years from 2003 to 2011. Still Walmart
could not give an answer to defend itself from anti-corruption charges.
In India, the payments made by the retained third party organizations
to the government officials for opening stores were actually recorded in the
books of accounting. They were recorded in Joint Venture books of the
company as Miscellaneous Fees, Professional Fees and Government Fee,
which are false and were easily tracked down by Department of Justice. This
whole process took place for 2 years from 2009 to 2011.
In Mexico, Walmart through third party intermediaries did the same as
in India but the extent of bribery was must more here. It amounted to $ 24
million in the year 2005, according to the New York Times.

5EHICS AND GOVERNANCE
Analysis
Bribery is the main issue for the company, which has been successfully
investigated by the Department of Justice and Securities and Exchange
Commission under the Foreign Corruption Prevention Act’s accounting
provisions. Walmart tactically used third party intermediaries to conduct these
illegal practices so that the nation in which the illegal activities have been
done the blame and penalty will be directed to those companies. The
allegation includes improper payments to government officials of those
foreign countries. Walmart could not be traced down for performing these
illegal activities for such a long time because the pace of expansion in the
foreign developing countries were expected by the Department of Justice and
Securities and Exchange Commission. The two Organizations concerned did
not even have an idea about the method Walmart was using to expand
internationally. The cost incurred by Walmart for the purpose of International
Expansion though exceeded than exceeded but planned to extract the money
from the local economies as quickly as possible. Though the amount charged
by Department of Justice and Securities and Exchange Commission seems
comparatively low as compared to larger settlements like the case of Mobile
Telesystems Public Joint Stock Company, which was fined $ 850 million.
However, the Securities and Exchange Commission alone is charging Walmart
the amount of $ 282 million dollars. Walmart has agreed to pay an amount of
$ 144 million to the Securities and Exchange Board for settling the case of
bribery and an amount of $ 138 million to the Department of Justice for
resolving parallel criminal charges. Though Walmart has addressed that it had

6EHICS AND GOVERNANCE
found out the problems and occurred before 2011 and the cost they incurred to
track down the cases of bribery to acquire the sites for opening outlets
amounts to $ 900 million. The size of the organization is too big to be effected
by these fines. It has a sales revenue of $ 500 billion dollars in a year and a
very deep pocket to be effected by such amounts. On the other hand, people
engaged in the process outside Walmart such as the third party intermediaries
involved in the bribery process such as the ‘genie’ in Brazil and the
government officials involved in the process must be severely punished.
Finally, to conclude the report it has to be understood that the problem
was not only with the organization. Walmart has received the penalty it
deserves. It is to be noted that the Department of Justice and Securities and
Exchange Commission could not trace the wrong doings of the organization
for as long as 10 years. On the other hand, the other culprits in the process i.e.
the government officials and the third party intermediaries involved in
countries like China, India, Brazil and Mexico. Moreover, the accumulated
amount fined by the two concerned organizations merely have an effect in the
business of Walmart due to its deep pockets.

7EHICS AND GOVERNANCE
References
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