In Mexico, Walmart’s many bribes made the illegal legal
Retail • In shadow of pyramids, retailer got its way with bribes.
Published: December 22, 2012 10:42PM
Updated: April 8, 2013 11:33PM
Trevor Snapp/Bloomberg News Through confidential Walmart documents, The Times identified 19 store sites across Mexico that were the target of Walmart de Mexico’s bribes.

San Juan Teotihuacan, Mexico • Walmart longed to build in Elda Pineda’s alfalfa field. It was an ideal location, just off this town’s bustling main entrance and barely a mile from its ancient pyramids, which draw tourists from around the world. With its usual precision, Walmart calculated it would attract 250 customers an hour if only it could put a store in Pineda’s field.

One major obstacle stood in Walmart’s way.

After years of study, the town’s elected leaders had just approved a new zoning map. They wanted to limit growth near the pyramids, and they considered the town’s main entrance too congested already. As a result, the 2003 zoning map prohibited commercial development on Pineda’s field, seemingly dooming Walmart’s hopes.

But 30 miles away in Mexico City, at the headquarters of Walmart de Mexico, executives were not about to be thwarted by an unfavorable zoning decision. Instead, records and interviews show, they decided to undo the damage with one well-placed $52,000 bribe.

The plan was simple. The zoning map would not become law until it was published in a government newspaper. So Walmart de Mexico arranged to bribe an official to change the map before it was sent to the newspaper, records and interviews show. Sure enough, when the map was published, the zoning for Pineda’s field was redrawn to allow Walmart’s store.

Problem solved.

Walmart de Mexico broke ground months later, provoking fierce opposition. Protesters decried the very idea of a Walmart so close to a cultural treasure. They contended the town’s traditional public markets would be decimated, its traffic mess made worse. Months of hunger strikes and sit-ins consumed Mexico’s news media. Yet for all the scrutiny, the story of the altered map remained a secret. The store opened for Christmas 2004, affirming Walmart’s emerging dominance in Mexico.

The secret held even after a former Walmart de Mexico lawyer contacted Walmart executives in Bentonville, Ark., and told them how Walmart de Mexico routinely resorted to bribery, citing the altered map as but one example. His detailed account — he had been in charge of getting building permits throughout Mexico — raised alarms at the highest levels of Walmart and prompted an internal investigation.

But as The New York Times revealed in April, Walmart’s leaders shut down the investigation in 2006. They did so even though their investigators had found a wealth of evidence supporting the lawyer’s allegations. The decision meant authorities were not notified. It also meant basic questions about the nature, extent and impact of Walmart de Mexico’s conduct were never asked, much less answered.

The Times has now picked up where Walmart’s internal investigation was cut off, traveling to dozens of towns and cities in Mexico, gathering tens of thousands of documents related to Walmart de Mexico permits, and interviewing scores of government officials and Walmart employees, including 15 hours of interviews with the former lawyer, Sergio Cicero Zapata.

Creative corrupter • The Times’ examination reveals that Walmart de Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of doing business. Nor did it pay bribes merely to speed up routine approvals. Rather, Walmart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance — public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.

Through confidential Walmart documents, The Times identified 19 store sites across Mexico that were the target of Walmart de Mexico’s bribes. The Times then matched information about specific bribes against permit records for each site. Clear patterns emerged. Over and over, for example, the dates of bribe payments coincided with dates when critical permits were issued. Again and again, the strictly forbidden became miraculously attainable.

Thanks to eight bribe payments totaling $341,000, for example, Walmart built a Sam’s Club in one of Mexico City’s most densely populated neighborhoods, near the Basilica de Guadalupe, without a construction license, or an environmental permit, or an urban impact assessment, or even a traffic permit. Thanks to nine bribe payments totaling $765,000, Walmart built a vast refrigerated distribution center in an environmentally fragile flood basin north of Mexico City, in an area where electricity was so scarce that many smaller developers were turned away.

But there is no better example of Walmart de Mexico’s methods than its conquest of Pineda’s alfalfa field. In Teotihuacan, The Times found that Walmart de Mexico executives approved at least four different bribe payments — more than $200,000 in all — to build just a medium-size supermarket. Without those payoffs, records and interviews show, Walmart almost surely would not have been allowed to build in Pineda’s field.

The Teotihuacan case also raises new questions about the way Walmart’s leaders in the United States responded to evidence of widespread corruption in their largest foreign subsidiary.

Aware of protests • Walmart’s leadership was well aware of the protests here in 2004. (The controversy was covered by several news outlets in the United States, including The Times.) From the start, protest leaders insisted that corruption surely played a role in the store’s permits. Although woefully short on specifics, their complaints prompted multiple investigations by Mexican authorities. One of those investigations was still under way when Walmart’s top executives first learned of Cicero’s account of bribes in Teotihuacan (pronounced Tay-o-tea-wah-KHAN).

But Walmart’s leaders did not tell Mexican authorities about his allegations, not even after their own investigators concluded there was “reasonable suspicion” to believe laws had been violated, records and interviews show. Unaware of this new evidence, Mexican investigators said they could find no wrongdoing in Teotihuacan.

Walmart has been under growing scrutiny since The Times disclosed its corruption problems in Mexico, where it is the largest private employer, with 221,000 people working in 2,275 stores, supermarkets and restaurants.

In the United States, the Justice Department and the Securities and Exchange Commission are investigating possible violations of the Foreign Corrupt Practices Act, the federal law that makes it a crime for U.S. corporations or their subsidiaries to bribe foreign officials. Mexican authorities and congressional Democrats have also begun investigations, and Walmart has been hit by shareholder lawsuits from several major pension funds.

Walmart declined to discuss its conduct in Teotihuacan while it is continuing its own investigation. The company has hired hundreds of lawyers, investigators and forensic accountants who are examining all 27 of its foreign markets. It has already found potentially serious wrongdoing, including indications of bribery in China, Brazil and India. Several top executives in Mexico and India have been suspended or forced to resign in recent months.

Walmart has also tightened oversight of its internal investigations. It has created high-level positions to help root out corruption. It is spending millions on anticorruption training and background checks of the lawyers and lobbyists who represent Walmart before foreign governments. The company has spent more than $100 million on investigative costs this year.

“We are committed to having a strong and effective global anti-corruption program everywhere we operate and taking appropriate action for any instance of noncompliance,” said David Tovar, a Walmart spokesman.

In Mexico, a major focus of Walmart’s investigation is none other than the boxy, brown supermarket in Pineda’s alfalfa field.

Eight years later, it remains the most controversial Walmart in Mexico, a powerful symbol of globalism’s impact on Mexican culture and commerce.

As it turns out, the store also took on symbolic importance within Walmart de Mexico, Cicero said in an interview. Executives, he said, came to believe that by outmuscling protesters and building in the shadow of a revered national treasure, they would send a message to the entire country. If we can build here, we can build anywhere.