Wal-Mart Stores Inc said on Tuesday it has appointed a global officer to oversee compliance with a US law that forbids bribes to foreign officials as it grapples with a bribery scandal that has led to more than $10 billion being cut from its market value.
The move is one of the steps the world's largest retailer has taken in the past year to manage issues related to the US Foreign Corrupt Practices Act (FCPA), a 1970s law that forbids bribing foreign officials.
Wal-Mart shares closed 3 percent lower, adding to declines from Monday that wiped $10 billion from the company's market value.
Wal-Mart spokesman David Tovar declined to say when the post was created or who was named to fill it. The person appointed will report to the general counsel for Wal-Mart's international unit.
On Saturday, the New York Times reported that a senior Wal-Mart lawyer received an email from a former executive at Wal-Mart de Mexico in September 2005 that described how the Mexican affiliate, known as Walmex, had paid bribes to obtain permits to build stores in the country.
According to the Times, Wal-Mart sent investigators to Mexico City and found a paper trail of suspect payments totaling more than $24 million. But the company's leaders shut down the probe and did not notify US or Mexican law enforcement officials until after the newspaper informed Wal-Mart it was looking into the issue, the Times reported.
The lawyer also identified Eduardo Castro-Wright as the driving force behind years of bribery. Castro-Wright became CEO of Walmex in 2003 and moved on to other senior roles with the company. He is set to retire on July 1.
On Tuesday, MetLife Inc, the largest US life insurer, said Castro-Wright had resigned from that company's board.
“Over the past weekend, I notified you of recent events that will require my immediate and personal attention,” Castro-Wright said in a letter to MetLife CEO Steve Kandarian, a copy of which was filed with securities regulators.
“Accordingly, I now must focus my energy in spending personal time with my family and in protecting my good name and business reputation,” he added at the end of the letter.
Castro-Wright could not be reached for comment.
The Times said Wal-Mart knew about its reporting last year, so the timing of when the new global compliance post was created and other steps were taken raises the question of whether they were done in response to the Times story.
Wal-Mart said the global compliance officer will oversee five FCPA directors in international markets, including a compliance director in Mexico.
Wal-Mart has said it began an investigation into its FCPA compliance last fall. It said it disclosed the probe to the US Department of Justice and the Securities and Exchange Commission and declined to give any more details or to make executives available for comment.
A source familiar with the matter said the Justice Department has been conducting a criminal investigation into the bribery for months.
Wal-Mart shares have been hit over the past two days, both because of concerns about the cost of the company's own investigation and defense and potential substantial fines if the allegations are found to be true, as well as concerns that further violations could be found.
“What's impacting the stock is ... the risk of potential fines and penalties resulting if the accusations prove to be true, and then, on top of that, any increased risk of contagion to other geographies,” UBS analyst Robert Carroll said.
Analysts have also said the allegations could make it more difficult for Wal-Mart to expand abroad and even at home.
In New York on Tuesday, a group of 35 or so people, including members of a coalition called Walmart Free NYC and union activists, protested at City Hall, joined by politicians who said the scandal proved Wal-Mart was unworthy of operating stores in New York.
“This is not how we roll in New York,” Manhattan Borough President Scott Stringer told Reuters before the protest began. “Before anything happens at all in New York, I would like to see the outcome of the investigation in Mexico.”
The decision to appoint a global compliance officer could factor into whether the Department of Justice forces the company to hire DoJ-approved FCPA monitor down the road, or how long the company would need to keep the monitor, said Paul Pelletier, a former supervisor in the Justice Department's Fraud Section, which prosecutes FCPA cases. He is now at the law firm Mintz Levin.
Also on Tuesday, credit rating agency Moody's Investors Service earlier on Tuesday said that Wal-Mart's disclosure that it was investigating its FCPA compliance would have no immediate impact on the “Aa2” or “stable” ratings outlook, though it said it could revisit the rating and outlook depending on the result of the investigation.
Wal-Mart shares closed $1.78, or 3 percent, lower at $57.77 on Tuesday on the New York Stock Exchange. That follows a 4.7 percent drop on Monday that more than erased the stock's gains for the year. Walmex shares were down 1.82 pesos, or 4.8 percent, at 36.07. That stock fell 12 percent on Monday, wiping out its year-to-date gains. - Reuters