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Who’s Responsible for the Walmart Mexico Scandal?

• Ben W. Heineman, Jr.

After a close evaluation of the company’s new compliance report, we still don’t know.

The Walmart bribery scandal is one of the most closely-watched cases of alleged malfeasance by  a global company. It broke into the open  in April, 2012, when  the New York Times published a lengthy investigative piece alleging Walmart bribery in a Mexican subsidiary and a cover-up in its Bentonville, Arkansas, global headquarters. The piece, which won a Pulitzer Prize for reporter David Barstow , raised a host of  personal accountability and corporate governance issues for the company.

• Ben W. Heineman, Jr. is former GE General Counsel and is a senior fellow at Harvard University’s schools of law and government. He is author of the new book, The Inside Counsel Revolution: Resolving the Partner-Guardian Tension , as well as High Performance With High Integrity .

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Looking within: How Walmart in Mexico changed everything for an omnichannel future

Six years ago, Walmex—a publicly traded subsidiary of Walmart Inc. and one of Mexico’s largest retailers and employers—was a very different company from the one it is today. Since 2017, Walmex has opened more than 400 new omnichannel stores, with home delivery, drive-through pickup areas, and in-store commercial kiosks where even customers who transact in cash can access online shopping.

Today, Walmex stands strong across metrics. Revenue in 2022 reached more than $40 billion and has grown at 8 percent per annum, with margins that have expanded each year. It has more than 1,000 stores with on-demand capabilities and more than 1,400 with in-store pickup services. The company’s media business, Walmart Connect, which was launched in 2019, offers physical and online advertising space and has become the fourth-largest media player in Mexico, with more than $100 million in revenue. The company’s telco and financial-services businesses have 7.8 million and 5.4 million total users, respectively. 1 Walmart de México y Centroamérica annual report 2022 , Walmart.

Walmex CEO Guilherme Loureiro, chief growth officer Beatriz Núñez, and former COO Cristian Barrientos (who is now CEO of Walmart Chile) say success hinged on a comprehensive transformation that required reimagining not just the company’s omnichannel strategy but also fundamental approaches to hierarchy, teamwork, and leadership. When the transformation began in 2017, Walmex’s more than 200,000 employees worked either in the 2,300-plus brick-and-mortar stores or in online sales, with only a few people dedicated to integrating the two channels. Because millions of customers across Latin America transact purely in cash, these customers were locked out of online shopping, which requires a credit or debit card.

As Loureiro observed digital challengers gradually creeping up on Walmex’s business, he knew the company would need to reinvent itself as an omnichannel enterprise to be ready for the future. But as they analyzed the scope of the challenge and the creativity and agility required to meet it, Loureiro and his fellow executives realized a cultural transformation had to happen first.

Before 2017, the company operated in silos, with a traditional hierarchical structure. The leadership style across these silos might best be described as “command and control,” Loureiro said. Digital talent and knowledge that developed within one silo tended to stay there, instead of permeating other parts of the company. To make the most of innovative people and ideas, the executive team sought to reorganize silos into entrepreneurial “squads” that could collaborate with one another. In some cases, fresh talent steeped in digital solutions needed to take the reins from longtime leaders whose expertise was old-fashioned retailing. Across the company, mentoring and coaching were deployed to help people assimilate the changes into how they worked.

Leading a cultural and operational transformation—while simultaneously pursuing results from the existing structure—demands courage, creativity, and flexibility from those in charge, as Loureiro, Núñez, and Barrientos can attest. They say the result—a delayered and customer-centric organization offering an omnichannel shopping experience—has been worth the deep and sometimes humbling introspection required. The three executives spoke with the McKinsey Quarterly to reflect on how they themselves had to transform in order to pursue this mission, providing a candid look at how a company reinvented itself.

The Quarterly : What shape was the company in at the start of the transformation journey?

Beatriz Núñez: I arrived at Walmex as chief digital officer in August 2018. The company had begun this profound transformation process in 2017, in line with Walmart’s global corporate strategy to make the company digitally enabled. With little understanding of what this could mean, Guilherme—or Gui, as we call him—began a process of discovery. He read books, dedicated himself to understanding the digitally born, and the executive committee reached out to other companies and organizations to gain a full understanding of what we needed to do.

Cristian Barrientos: It was a very successful company, with a strong track record of delivering results year after year. We went through a difficult patch in 2012, but the company began to make changes from 2013 onward, including big changes at the management level. We recognized that, as our customers were changing rapidly, we needed to transform and add different avenues of growth to be able to connect with our customers.

Guilherme Loureiro: When we started the transformation, the company was doing well in relation to the market. On the surface, it was difficult to grasp that we needed to change. However, a dear mentor taught me that in everything you do, you have to think ten, 15 years ahead. I have used this methodology in both my professional and private life. But merely recognizing this was not enough—I had to be prepared, and I had to change. The shift required a move away from the normal leadership model of command and control. I had to listen to people and let them participate. I couldn’t do it alone. So, I called a coach and told him I was clear about what had to be done but needed him to help me convince my team. This coach told me, “Just because you know where you want to go doesn’t mean you’re ready.” The work began with me and that was very hard.

A dear mentor taught me that in everything you do, you have to think ten, 15 years ahead. Guilherme Loureiro

The Quarterly : How did the new focus on agile ways of working play out?

Beatriz Núñez: We started by drawing up our own problem statement, which asked how we could transform the company to become more customer centric. Months later, we added associate centric to the strategy, as we recognized we not only had to put the customer at the center but also our associates. We also needed to deliver end-to-end solutions and be data driven to exponentially improve our results. Through this process, we aimed to maintain our double-digit growth rate, while achieving efficiencies beyond our traditional year-over-year gains. In this way, we set our aspiration as a company in February 2019. The executive committee met to examine hypotheses on where we could start this process. We decided to start with the merchandising area, because as the heart of the organization, it could provide lessons that could be scaled to the entire company.

Guilherme Loureiro: Today’s customers are different from those of the past. They are moving toward the online, discount, and club channels, and can more easily compare prices online to ensure they are getting value. If we didn’t make a change, we would be using outmoded tools to serve our customers. To spark the change and become more agile, we needed multidisciplinary teams with autonomy. But we had an organizational structure based on silos. What was gained in silos—a more efficient way of organizing people and functions to provide services across the organization—was lost in the speed and quality of our products or services. So we had to stop working in silos. But if I was going to create multidisciplinary teams with an end-to-end vision, these people required autonomy. Did this mean that as CEO, I had to give up command and control? Yes, and how wonderful that has been! The way we work now is much more fun and far more efficient. A good leader does not need command and control to lead his people.

The Quarterly : How did the executive committee learn the new ways of working, and what changes were personally challenging?

Cristian Barrientos: One of the things we learned was that years of work experience no longer carry the same weight as before. For me, personally, I realized it is necessary to combine experience with disruption, transformation, and adaptation to the real needs the client is showing you. And you must have the humility to incorporate new people with different visions into your day-to-day life.

One of the things we learned was that years of work experience no longer carry the same weight as before. Cristian Barrientos

Guilherme Loureiro: You must perform to transform. Your biggest defense against doubters is to deliver your targets, because if you stop delivering at any point in the transformation process, the people who oppose you will come after you. And there’s a fine line between being a brilliant transformational CEO and being a bungler who took the company out of focus.

We asked ourselves three questions: Do I understand the transformation? Do I want to be part of it? And, can I be part of it? If you don’t answer yes to all three, you can’t be part of the transformation. On the first point, you must constantly communicate what the transformation is all about, so you give everyone a fair shot at understanding the goals. On the second point, I didn’t understand how someone could not want to be part of the change. However, there were people who didn’t want to be part of a more customer-centric, efficient organization, where people had autonomy; some people didn’t want to relinquish command and control. On the third point, there are people who want to be part of the process, and understand it, but for some reason can’t do it. And maybe I was initially one of those.

Personally, I learned a lot about true leadership. We went to visit the CEO of a company that underwent a similar transformation in Europe. He put forward the board, got the approval, and then resigned because he felt he was not the right person to carry it out. This shows that designing the transformation and convincing people does not give you the right to be the leader. You must stop doing the things that once made you successful. You must do things differently.

The Quarterly : How did the executive committee handle the talent changes that were necessary?

Beatriz Núñez: I remember a symbolic moment with the executive committee when we told the merchandising team we were going to start the transformation. We told them how it was going to work, with people from different areas, and that we were going to start from scratch to get the right person in the right role. We had to bring in people from different areas to lead different experiments. For example, what happens if I bring someone from marketing to lead one of the new category teams? What happens if you no longer call yourself vice president and now call yourself tribe leader? What happens if a vice president and a director are now peers from a hierarchical standpoint? Would people feel they had been downgraded or were being exploited because they had to do the same job as a vice president or a director?

We started in April 2019, with a small group of about 15 teams composed of 129 people. The rest of the company knew about this initiative and were watching the results of their work carefully. There was a lot of uncertainty and fear, because agility means being more efficient, and efficiency means fewer people. There wasn’t a place for everyone—only for the best. However, two important things were done in terms of retention and talent. First, we enabled the teams to achieve the skills required for this new organization. We tried to hire outside agility coaches to work with the company, but there were not enough in the market for a company of our size. So we put out a call for agile coaches within the organization. This essentially meant people would have to abandon their careers and sign up for a totally new role. Our big surprise was that 500 people signed up, and we were only looking for 50!

The other thing we did was bring in key people with differentiated talents, who then brought in other key people, with an increased emphasis on tech and digital skills. Roles and titles were changed to reflect this pivot, and the hiring process was also more digital. Work also began—and continues today—on understanding the nuances of differentiated talent management.

Cristian Barrientos: In the operations area, we underwent a profound change of leadership. In some cases, we had to choose new leaders with fresh skills and ideas. That can be painful, but sometimes it’s what must happen to create new ways of working.

Guilherme Loureiro: One important thing was reverse mentoring. I’m not a digitally native guy, but I didn’t need to be one to lead a digital revolution in business. We realized we needed to turn to younger, digitally savvy people to mentor older leaders. And these young people benefited from the experience by spending time with and learning from more senior people.

The literature told us that for a transformation like the one we were seeking, half the people had to leave—which was unfeasible. Contrary to what many people say about tech transformations, I believe that a person with a business background who could go digital would be much better than a digital-only person. I firmly believed that people could be transformed and that it was unfeasible to do what the recipe said. A person who has a lot of business experience, is minimally digital, and can lead a digital team is worth their weight in gold. This combination is worth much more than being solely digital. I think having to continue with people and transform them gives us a serious advantage. We now have people who are very expert in business who are also capable of leading digital teams.

The Quarterly : What has surprised the executive committee since you started this journey, and what have been the most important lessons?

Beatriz Núñez: I see the number of areas we had to create from scratch, such as the data office, product organization, new businesses. The product organization today is rapidly delivering technology and data solutions to the organization, all cross functional. Since its creation, Walmart Connect—which sells online and physical advertising space—has become the fourth-largest media business in Mexico. And it continues to amaze me how an organization like Walmex, which could have been a dinosaur, embraces this capacity for innovation from scratch. A great lesson has been that agility is only an enabling element. The goal was not the transformation itself, and the destination was not to be an agile company; it was to achieve the purpose of putting the customer and our associates at the heart of an omnichannel retail business.

Cristian Barrientos: Perhaps it is something new for many people, but Walmart, where I have been for 13 years, has always advocated that we be tough on the problem and not on the person. I think it is a phrase that illustrates very well not taking things personally, opening one’s mind to being able to work collaboratively, to receive feedback, and really solve a problem, rather than feel attacked.

Guilherme Loureiro: The transformation of Walmart taught me that no matter what you have done in your life, the world is changing, and you must change too. You must have the humility to accept that it doesn’t matter how successful you are, you must continue learning and growing.

The Quarterly : Finally, how would you describe the path you have been on to date, and where do you see it going next?

Guilherme Loureiro: We have grown from being a traditional brick-and-mortar retailer to adding an e-commerce business to becoming an omnichannel retailer. As we have learned more from our customers, we have capitalized on our assets and have added digital services like telco [BAIT] and financial services [Cashi].

We now aspire to become an omni-driven ecosystem. We must continue to learn, develop our people and, most importantly, listen to our customers to build the required capabilities and capacity to better serve them every day.

Guilherme Loureiro is CEO of Walmex, where Beatriz Núñez is chief growth officer. Cristian Barrientos is CEO of Walmart Chile. José Ricardo Cota is a partner in McKinsey’s Mexico City office, Thomas Kilroy is a senior partner in the Chicago office, and Eduardo Malpica  is a senior partner in the Miami office.

The authors wish to thank Ahmad Zaidi for his contributions to this article.

Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.

This article was edited by Katy McLaughlin, a senior editor in the Southern California office.

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Wal-Mart Bribery Case Raises Fundamental Governance Issues

Wal-Mart appeared to commit virtually every governance sin in its handling of the Mexican bribery case, if the long, carefully reported New York Times story is true. The current Wal-Mart board of directors must get to the bottom of the bribery scheme in Mexico and the possible suppression by senior Wal-Mart leaders in Bentonville, Arkansas (the company’s global headquarters) of a full investigation.

In addition, the board must also review – and fix as necessary – the numerous company internal governing systems, processes and procedures that appear to have been non-existent or to have failed. And, most importantly, it must define the CEO’s core role as one which truly fuses high performance with high integrity, and does not exalt performance at the expense of integrity – and possibly discipline or remove the past CEO (still on the board) or the current CEO.

The essential allegations in the Times story are as follows:

For a substantial period before 2005, the CEO of Wal-Mart in Mexico and his chief lieutenants, including the Mexican general counsel and chief auditor, knowingly orchestrated bribes of Mexican officials to obtain building permits, zoning variances and environmental clearances, and also falsified records to hide these payments. When the lawyer in Mexico directly responsible for bribery payments had a change of heart and reported the scheme to Wal-Mart lawyers in the United States, those lawyers hired an independent firm which, after an initial look, recommended a major inquiry.

This was rejected by senior Wal-Mart management, which instead told an internal Wal-Mart investigative unit to look into it. That unit, too, said, in early 2006, that a substantial inquiry was warranted. But top Wal-Mart leaders in the U.S., including the company’s general counsel, referred the matter back to the Wal-Mart general counsel in Mexico – the very lawyer who was allegedly at the center of the bribery scheme. Unsurprisingly, the Mexican general counsel promptly closed the matter, finding no problems and suggesting no disciplinary measures for senior Wal-Mart leaders in Mexico. He remained in his position until relieved of his duties last week, just before the Times story appeared.

Below are some of the most concerning governance issues – using governance to refer not just to relations between board and management but, importantly, to how the CEO governs the company from top to bottom. I will not use the word “alleged” in every sentence, but one should assume that I do because none of these facts have been established by law enforcement authorities and are, at this point, allegations contained in a piece of investigative journalism.

• Culture of Silence. Most corporate scandals are perpetuated by a culture of silence. Here there appears to have been no integrity hotline or whistleblower system that worked, because the alleged bribery scheme went on for years without anyone reporting it to an independent company ombudsperson (and some employees were clearly aware of it). Moreover, the Mexican business leaders hid the bribery scheme from the global Wal-Mart leadership in the U.S. And, as far as one can tell based on the allegations so far, the Wal-Mart leaders in the U.S., when they learned of the allegations in some detail, hid the matter from the Wal-Mart board of directors. Wal-Mart appears to have operated like a compartmentalized criminal enterprise rather than a lawful global company.

But, in addition to dealing with the dangerous legal issues facing Wal-Mart, the current board must ask and answer a number of hard questions about how the company was governed and managed. What was the failure of the then board in not overseeing whether the company had adequate compliance systems and processes in such a fundamental area as compliance with the Foreign Corrupt Practices Act? Did the board know anything about the matter then – and did it fail to act properly (as note above, there is no information yet that the board was informed)? What were the fundamental system and process failures, have they been fixed, and what needs to be done to fix them in the future? What kind of discipline and cancellation of benefits is appropriate for those who were involved at the time and still remain at the company – a list which includes the then CEO of Mexico (now a Wal-Mart “consultant” until July), the current and immediate past CEOs of the company, and senior legal and finance staff? And for those Wal-Mart officers or employees implicated in the matter but no longer with the company, what kinds of legal actions by the company are appropriate if they were involved in violations of law, company codes or general fiduciary duties?

Most of the public will be watching to see whether Wal-Mart is legally liable and pays significant damages. But, for those deeply concerned about corporations’ ability to govern themselves, and about the fusion of high performance with high integrity as the core mission of capitalism, the future details on problems and remedies relating to Wal-Mart’s governance, leadership and management hold equal fascination.

The allegations of the “vast bribery case hushed up by Wal*Mart” reported in detail in the New York Times of Sunday, April 22 (article), if they prove true, offer important lessons for senior leaders and directors of enterprises of all types and sizes. First, if no one is paying attention to the company’s culture, if no one is willing to act as a “steward” for that culture, it will devolve to the lowest common denominator: Do “whatever (is) necessary” to achieve the commercial objectives. Wal*Mart’s code of conduct as well as their ethics and compliance policies all prohibited bribing public officials (even if they are in Mexico); required those who know of such acts to report it; and suggested that internal investigations be headed by people not associated with the alleged offending organization. Not only were all these regulations ignored, but they were ignored by some of Wal*Mart’s most senior leaders. So much for “tone at the top”! These misjudgments are at serious variance with the ethical principles Sam Walton left behind in the company’s culture. Stewards of Sam’s culture appear to be few and far between, so the Wal*Mart culture has eroded to a “whatever it takes” mentality while no one was paying attention.

Second, if Wal*Mart, an important corporate leader worldwide, really wants to protect and promote its standing as a principled and ethical business in the face of such a significant reputational threat, their best strategy would be to aggressively and transparently address these issues head on. Rather, they took the decision to hide the allegations behind a wall of bureaucracy and denial. Wal*Mart executives allegedly watered down official reports of the misdeeds, attempted to shift the search for the offender to the whistleblower, kept the investigation inside the corporation and even put the person alleged to have been the mastermind of the program in charge of the investigation. Many of these same errors can be found in the history of the recent Penn State Athletic Department case and the Roman Catholic Church child abuse case. Wal*Mart should have recognized that these stories eventually come out and that they would then have to deal, not only with the fact of the bad behavior, but also with an attempted cover-up. History can be an excellent teacher, but only if one pays attention to it.

Third, an enterprise’s strategy, risk and ethical behavior are inextricably tied. Especially large and mature enterprises accustomed to high performance growth have a tendency to over-reach when setting their strategic and financial plans. When these plans meet the reality of the market and the risk of failure becomes apparent, executives start looking for tactics that will raise the likelihood of success – “whatever it takes”. When the business strategy is targeted at a market not known for its high ethical standards, the risk that the company will find itself in violation of its own standards as well as the laws of the home and target countries increases dramatically. Wal*Mart was surely aware of these conditions yet continued to encourage its “WalMex” team to pursue aggressive goals without understanding what was going on behind the scenes to drive such exceptional performance. Once more thr ight people were not paying attention.

So, what should happen next? First, the internal investigation that Wal*Mart has announced should be handled by independent investigators and the results delivered directly to the board of directors and the Justice Department. Second, if the investigation corroborates the allegation in the Times article, the offending executives should be fired immediately. Third, Wal*Mart must cooperate fully and openly with the consequent Justice Department investigation including delivering the accused executives to their day in court. Fourth, even if Mr. Duke is not directly implicated in the bribery allegations, he should resign since these very serious misdeeds happened on his watch (or lack thereof) and he failed to enforce a tone at the top that should have squelched the bad behavior as well as the cover-up. Finally, Mr. Rob Walton should take a serious look at his board of directors, the fiduciary stewards of the Wal*Mart culture, determine how they lost track of Mr. Sam Walton’s principles, and permanently rectify the situation, returning Wal*Mart to the culture Mr. Sam Walton intended.

Superb post. You have cut to the heart of the matter, as you did in your book. What happened here is contrary to the founding principles Sam Walton established. Hopefully, this embarrassment will prod Wal-Mart’s board to permanently address these serious lapses, emerging stronger and better.

Are you all joking? Does everyone at Harvard similarly buy this spoon fed horse-sh#t? “Failure to Fuse Performance with Integrity?” Sounds like the hallowed halls of your ivy-league corporate interest defending school have a serious reality problem. Wal-mart is a corporation. It is given all the rights of a citizen of the U.S., with little or no responsibility to its externalities, and its only goal is TO MAKE MONEY.

You guys all have your panties in a bunch because they happen to get caught! “Deeply concerned about corporations’ ability to govern themselves?” Are you kidding? Have you ever contemplated the notion of ‘conflict of interest’? Its like letting your five year old in a room all day with 10 pounds of brownies and being “seriously concerned” when he ends up sick!

“Reconcile the tension between being partners and guardians?” Do you all believe the stuff that comes out of your mouths? Or is it just a careful way to make sure the Mitt Romneys of the world can buy-gut-and-sell with impunity while you call it brilliant? How can you still pretend that there is anything but the thin veneer of hypocrisy attached to the term ‘business ethics’ after the crash of 2008, when all your ‘self governing’ titans of the financial markets grab-assed the country’s way into a $700billion tax payer bailout!

Even a cursory search reveals a long history of backdoor settlements for corporate crime including violating child-labor laws, union-breaking, and the largest gender discrimination lawsuit in history. A return to the principles that Sam Walton established? Give me a break. He had a good idea to use globalization to uproot small (higher quality) local businesses across the country and turn us into an overweight, diabetic, hoarding culture based on sweatshop-cheap goods. He was all about making money, who cares what crap product he was putting out and how it affected his employees, local communities, or even the landscape of america in the process.

He was a hollow shell, contributed nothing but cheap crap, and this story is right in line with the culture of wal-mart that has existed almost since its inception. I’m sorry you need to view corporations as some kind of benevolent, shameful, self-correcting contributors to our society because your job depends on it. But if you really look at your own apologistic stance and the fact that the only value you add is to make corporate leeches feel better about sucking the wealth out of the poor and middle class in this country to feed the rich, I feel like it isn’t too late for you to do something about it. A 10 year old could see how stupid your fake outrage is. And I can tell by your elaborate syntactical ‘scorn’ and manufactured nostalgia for ‘the old Sam Walton’ that you are at least 10. Have a nice day.

The United States government puts a premium on corporate cooperation in foreign bribery cases, relying on companies to conduct thorough internal investigations and voluntarily disclose any wrongdoing.

Indications that Wal-Mart Stores may have taken steps to keep an internal investigation from digging deeper into $24 million in questionable payments — and later promoting an executive who may have been implicated in them — may affect how the government decides to proceed against the giant retailer.

Wal-Mart first disclosed in December that it had started “a voluntary internal review of its policies, procedures and internal controls pertaining to its global anticorruption compliance program.

While Walmart cheats its employees and the communities they plunder with their predatory pricing, nothing will be done until consumers will overcome their greed. I know people who would spend $5 in gas to save 40 cents, rather than shop at the store within walking distance. Walmart is creating a world of slums as the many fill the pockets of the few. If you don’t like that idea, don’t shop at Walmart.

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[…] The company “appeared to commit virtually every governance sin in its handling of the Mexican bribery case, if the long, carefully reported New York Times story is true,” Heineman wrote in an article posted Saturday on the Harvard Law School Forum on Corporate Governance. […]

[…] also wrote “Wal-Mart Bribery Case Raises Fundamental Governance Issues” for the Harvard Law School Forum on Corporate Governance and Financial Regulation on April 28, […]

[…] Although there will be myriad important legal and governance lessons from both the News Corp and Walmart cases, none is more important for business leaders than the imperative to act decisively in the face of demonstrable wrongdoing, and not engage in willful ignorance and indifference with the hope the problem will remain hidden. (See my more detailed analyses of governance issues for News Corp and Walmart.) […]

[…] It is obvious, then, that economic self-interest that in the aggregate can produce societal economic benefit can easily turn into avarice and self-aggrandizement. In the cases of Barclays or GSK, these traits led to fraud in setting interest rates or marketing drugs. And, of course, Barclays and GSK are but the latest in an incessant drumbeat of corporate scandals just since the turn of this century, beginning with Enron (conflicts of interest, misleading public statements) and Worldcom (phony accounting) and leading to News Corp (phone hacking) and Wal-Mart (bribery). (For my take on the the last two, see here and here). […]

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Wal-Mart Hushed Up a Vast Mexican Bribery Case

By David Barstow

• April 21, 2012

MEXICO CITY — In September 2005, a senior Wal-Mart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country.

The former executive gave names, dates and bribe amounts. He knew so much, he explained, because for years he had been the lawyer in charge of obtaining construction permits for Wal-Mart de Mexico.

Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark. In a confidential report to his superiors, Wal-Mart’s lead investigator, a former F.B.I. special agent, summed up their initial findings this way: “There is reasonable suspicion to believe that Mexican and USA laws have been violated.”

The lead investigator recommended that Wal-Mart expand the investigation.

Instead, an examination by The New York Times found, Wal-Mart’s leaders shut it down.

Neither American nor Mexican law enforcement officials were notified. None of Wal-Mart de Mexico’s leaders were disciplined. Indeed, its chief executive, Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Wal-Mart in 2008. Until this article, the allegations and Wal-Mart’s investigation had never been publicly disclosed.

But The Times’s examination uncovered a prolonged struggle at the highest levels of Wal-Mart, a struggle that pitted the company’s much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.

Under fire from labor critics, worried about press leaks and facing a sagging stock price, Wal-Mart’s leaders recognized that the allegations could have devastating consequences, documents and interviews show. Wal-Mart de Mexico was the company’s brightest success story, pitched to investors as a model for future growth. (Today, one in five Wal-Mart stores is in Mexico.) Confronted with evidence of corruption in Mexico, top Wal-Mart executives focused more on damage control than on rooting out wrongdoing.

In one meeting where the bribery case was discussed, H. Lee Scott Jr., then Wal-Mart’s chief executive, rebuked internal investigators for being overly aggressive. Days later, records show, Wal-Mart’s top lawyer arranged to ship the internal investigators’ files on the case to Mexico City. Primary responsibility for the investigation was then given to the general counsel of Wal-Mart de Mexico — a remarkable choice since the same general counsel was alleged to have authorized bribes.

The general counsel promptly exonerated his fellow Wal-Mart de Mexico executives.

When Wal-Mart’s director of corporate investigations — a former top F.B.I. official — read the general counsel’s report, his appraisal was scathing. “Truly lacking,” he wrote in an e-mail to his boss.

The report was nonetheless accepted by Wal-Mart’s leaders as the last word on the matter.

In December, after learning of The Times’s reporting in Mexico, Wal-Mart informed the Justice Department that it had begun an internal investigation into possible violations of the Foreign Corrupt Practices Act, a federal law that makes it a crime for American corporations and their subsidiaries to bribe foreign officials. Wal-Mart said the company had learned of possible problems with how it obtained permits, but stressed that the issues were limited to “discrete” cases.

“We do not believe that these matters will have a material adverse effect on our business,” the company said in a filing with the Securities and Exchange Commission.

But The Times’s examination found credible evidence that bribery played a persistent and significant role in Wal-Mart’s rapid growth in Mexico, where Wal-Mart now employs 209,000 people, making it the country’s largest private employer.

A Wal-Mart spokesman confirmed that the company’s Mexico operations — and its handling of the 2005 case — were now a major focus of its inquiry.

“If these allegations are true, it is not a reflection of who we are or what we stand for,” the spokesman, David W. Tovar, said. “We are deeply concerned by these allegations and are working aggressively to determine what happened.”

In the meantime, Mr. Tovar said, Wal-Mart is taking steps in Mexico to strengthen compliance with the Foreign Corrupt Practices Act. “We do not and will not tolerate noncompliance with F.C.P.A. anywhere or at any level of the company,” he said.

The Times laid out this article’s findings to Wal-Mart weeks ago. The company said it shared the findings with many of the executives named here, including Mr. Scott, now on Wal-Mart’s board, and Mr. Castro-Wright, who is retiring in July. Both men declined to comment, Mr. Tovar said.

The Times obtained hundreds of internal company documents tracing the evolution of Wal-Mart’s 2005 Mexico investigation. The documents show Wal-Mart’s leadership immediately recognized the seriousness of the allegations. Working in secrecy, a small group of executives, including several current members of Wal-Mart’s senior management, kept close tabs on the inquiry.

Michael T. Duke, Wal-Mart’s current chief executive, was also kept informed. At the time, Mr. Duke had just been put in charge of Wal-Mart International, making him responsible for all foreign subsidiaries. “You’ll want to read this,” a top Wal-Mart lawyer wrote in an Oct. 15, 2005, e-mail to Mr. Duke that gave a detailed description of the former executive’s allegations.

The Times examination included more than 15 hours of interviews with the former executive, Sergio Cicero Zapata, who resigned from Wal-Mart de Mexico in 2004 after nearly a decade in the company’s real estate department.

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.”

The Times also reviewed thousands of government documents related to permit requests for stores across Mexico. The examination found many instances where permits were given within weeks or even days of Wal-Mart de Mexico’s payments to the two lawyers. Again and again, The Times found, legal and bureaucratic obstacles melted away after payments were made.

The Times conducted extensive interviews with participants in Wal-Mart’s investigation. They spoke on the condition that they not be identified discussing matters Wal-Mart has long shielded. These people said the investigation left little doubt Mr. Cicero’s allegations were credible. (“Not even a close call,” one person said.)

But, they said, the more investigators corroborated his assertions, the more resistance they encountered inside Wal-Mart. Some of it came from powerful executives implicated in the corruption, records and interviews show. Other top executives voiced concern about the possible legal and reputational harm.

In the end, people involved in the investigation said, Wal-Mart’s leaders found a bloodlessly bureaucratic way to bury the matter. But in handing the investigation off to one of its main targets, they disregarded the advice of one of Wal-Mart’s top lawyers, the same lawyer first contacted by Mr. Cicero.

“The wisdom of assigning any investigative role to management of the business unit being investigated escapes me,” Maritza I. Munich, then general counsel of Wal-Mart International, wrote in an e-mail to top Wal-Mart executives.

The investigation, she urged, should be completed using “professional, independent investigative resources.”

The Allegations Emerge

On Sept. 21, 2005, Mr. Cicero sent an e-mail to Ms. Munich telling her he had information about “irregularities” authorized “by the highest levels” at Wal-Mart de Mexico. “I hope to meet you soon,” he wrote.

Ms. Munich was familiar with the challenges of avoiding corruption in Latin America. Before joining Wal-Mart in 2003, she had spent 12 years in Mexico and elsewhere in Latin America as a lawyer for Procter & Gamble.

At Wal-Mart in 2004, she pushed the board to adopt a strict anticorruption policy that prohibited all employees from “offering anything of value to a government official on behalf of Wal-Mart.” It required every employee to report the first sign of corruption, and it bound Wal-Mart’s agents to the same exacting standards.

Ms. Munich reacted quickly to Mr. Cicero’s e-mail. Within days, she hired Juan Francisco Torres-Landa, a prominent Harvard-trained lawyer in Mexico City, to debrief Mr. Cicero. The two men met three times in October 2005, with Ms. Munich flying in from Bentonville for the third debriefing.

During hours of questioning, Mr. Torres-Landa’s notes show, Mr. Cicero described how Wal-Mart de Mexico had perfected the art of bribery, then hidden it all with fraudulent accounting. Mr. Cicero implicated many of Wal-Mart de Mexico’s leaders, including its board chairman, its general counsel, its chief auditor and its top real estate executive.

But the person most responsible, he told Mr. Torres-Landa, was the company’s ambitious chief executive, Eduardo Castro-Wright, a native of Ecuador who was recruited from Honeywell in 2001 to become Wal-Mart’s chief operating officer in Mexico.

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.

Wal-Mart de Mexico’s stunning growth made Mr. Castro-Wright a rising star in Bentonville. In early 2005, when he was promoted to a senior position in the United States, Mr. Duke would cite his “outstanding results” in Mexico.

Mr. Cicero’s allegations were all the more startling because he implicated himself. He spent hours explaining to Mr. Torres-Landa the mechanics of how he had helped funnel bribes through trusted fixers, known as “gestores.”

Gestores (pronounced hes-TORE-ehs) are a fixture in Mexico’s byzantine bureaucracies, and some are entirely legitimate. Ordinary citizens routinely pay gestores to stand in line for them at the driver’s license office. Companies hire them as quasi-lobbyists to get things done as painlessly as possible.

But often gestores play starring roles in Mexico’s endless loop of public corruption scandals. They operate in the shadows, dangling payoffs to officials of every rank. It was this type of gestor that Wal-Mart de Mexico deployed, Mr. Cicero said.

Mr. Cicero told Mr. Torres-Landa it was his job to recruit the gestores. He worked closely with them, sharing strategies on whom to bribe. He also approved Wal-Mart de Mexico’s payments to the gestores. Each payment covered the bribe and the gestor’s fee, typically 6 percent of the bribe.

It was all carefully monitored through a system of secret codes known only to a handful of Wal-Mart de Mexico executives.

The gestores submitted invoices with brief, vaguely worded descriptions of their services. But the real story, Mr. Cicero said, was told in codes written on the invoices. The codes identified the specific “irregular act” performed, Mr. Cicero explained to Mr. Torres-Landa. One code, for example, indicated a bribe to speed up a permit. Others described bribes to obtain confidential information or eliminate fines.

Each month, Mr. Castro-Wright and other top Wal-Mart de Mexico executives “received a detailed schedule of all of the payments performed,” he said, according to the lawyer’s notes. Wal-Mart de Mexico then “purified” the bribes in accounting records as simple legal fees.

They also took care to keep Bentonville in the dark. “Dirty clothes are washed at home,” Mr. Cicero said.

Mr. Torres-Landa explored Mr. Cicero’s motives for coming forward.

Mr. Cicero said he resigned in September 2004 because he felt underappreciated. He described the “pressure and stress” of participating in years of corruption, of contending with “greedy” officials who jacked up bribe demands.

As he told The Times, “I thought I deserved a medal at least.”

The breaking point came in early 2004, when he was passed over for the job of general counsel of Wal-Mart de Mexico. This snub, Mr. Torres-Landa wrote, “generated significant anger with respect to the lack of recognition for his work.” Mr. Cicero said he began to assemble a record of bribes he had helped orchestrate to “protect him in case of any complaint or investigation,” Mr. Torres-Landa wrote.

“We did not detect on his part any express statement about wishing to sell the information,” the lawyer added.

According to people involved in Wal-Mart’s investigation, Mr. Cicero’s account of criminality at the top of Wal-Mart’s most important foreign subsidiary was impossible to dismiss. He had clearly been in a position to witness the events he described. Nor was this the first indication of corruption at Wal-Mart de Mexico under Mr. Castro-Wright. A confidential investigation, conducted for Wal-Mart in 2003 by Kroll Inc., a leading investigation firm, discovered that Wal-Mart de Mexico had systematically increased its sales by helping favored high-volume customers evade sales taxes.

A draft of Kroll’s report, obtained by The Times, concluded that top Wal-Mart de Mexico executives had failed to enforce their own anticorruption policies, ignored internal audits that raised red flags and even disregarded local press accounts asserting that Wal-Mart de Mexico was “carrying out a tax fraud.” (The company ultimately paid $34.3 million in back taxes.)

Wal-Mart then asked Kroll to evaluate Wal-Mart de Mexico’s internal audit and antifraud units. Kroll wrote another report that branded the units “ineffective.” Many employees accused of wrongdoing were not even questioned; some “received a promotion shortly after the suspicions of fraudulent activities had surfaced.”

None of these findings, though, had slowed Mr. Castro-Wright’s rise.

Just days before Mr. Cicero’s first debriefing, Mr. Castro-Wright was promoted again. He was put in charge of all Wal-Mart stores in the United States, one of the most prominent jobs in the company. He also joined Wal-Mart’s executive committee, the company’s inner sanctum of leadership.

The Initial Response

Ms. Munich sent detailed memos describing Mr. Cicero’s debriefings to Wal-Mart’s senior management. These executives, records show, included Thomas A. Mars, Wal-Mart’s general counsel and a former director of the Arkansas State Police; Thomas D. Hyde, Wal-Mart’s executive vice president and corporate secretary; Michael Fung, Wal-Mart’s top internal auditor; Craig Herkert, the chief executive for Wal-Mart’s operations in Latin America; and Lee Stucky, a confidant of Lee Scott’s and chief administrative officer of Wal-Mart International.

Wal-Mart typically hired outside law firms to lead internal investigations into allegations of significant wrongdoing. It did so earlier in 2005, for example, when Thomas M. Coughlin, then vice chairman of Wal-Mart, was accused of padding his expense accounts and misappropriating Wal-Mart gift cards.

At first, Wal-Mart took the same approach with Mr. Cicero’s allegations. It turned to Willkie Farr & Gallagher, a law firm with extensive experience in Foreign Corrupt Practices Act cases.

The firm’s “investigation work plan” called for tracing all payments to anyone who had helped Wal-Mart de Mexico obtain permits for the previous five years. The firm said it would scrutinize “any and all payments” to government officials and interview every person who might know about payoffs, including “implicated members” of Wal-Mart de Mexico’s board.

In short, Willkie Farr recommended the kind of independent, spare-no-expense investigation major corporations routinely undertake when confronted with allegations of serious wrongdoing by top executives.

Wal-Mart’s leaders rejected this approach. Instead, records show, they decided Wal-Mart’s lawyers would supervise a far more limited “preliminary inquiry” by in-house investigators.

The inquiry, a confidential memo explained, would take two weeks, not the four months Willkie Farr proposed. Rather than examining years of permits, the team would look at a few specific stores. Interviews would be done “only when absolutely essential to establishing the bona fides” of Mr. Cicero. However, if the inquiry found a “likelihood” that laws had been violated, the company would then consider conducting a “full investigation.”

The decision gave Wal-Mart’s senior management direct control over the investigation. It also meant new responsibility for the company’s tiny and troubled Corporate Investigations unit.

The unit was ill-equipped to take on a major corruption investigation, let alone one in Mexico. It had fewer than 70 employees, and most were assigned to chasing shoplifting rings and corrupt vendors. Just four people were specifically dedicated to investigating corporate fraud, a number Joseph R. Lewis, Wal-Mart’s director of corporate investigations, described in a confidential memo as “wholly inadequate for an organization the size of Wal-Mart.”

But Mr. Lewis and his boss, Kenneth H. Senser, vice president for global security, aviation and travel, were working to strengthen the unit. Months before Mr. Cicero surfaced, they won approval to hire four “special investigators” who, according to their job descriptions, would be assigned the “most significant and complex fraud matters.” Mr. Scott, the chief executive, also agreed that Corporate Investigations would handle all allegations of misconduct by senior executives.

And yet in the fall of 2005, as Wal-Mart began to grapple with Mr. Cicero’s allegations, two cases called into question Corporate Investigations’ independence and role.

In October, Wal-Mart’s vice chairman, John B. Menzer, intervened in an internal investigation into a senior vice president who reported to him. According to internal records, Mr. Menzer told Mr. Senser he did not want Corporate Investigations to handle the case “due to concerns about the impact such an investigation would have.” One of the senior vice president’s subordinates, he said, “would be better suited to conduct this inquiry.” Soon after, records show, the subordinate cleared his boss.

The other case involved the president of Wal-Mart Puerto Rico. A whistle-blower had accused the president and other executives of mistreating employees. Although Corporate Investigations was supposed to investigate all allegations against senior executives, the president had instead assigned an underling to look into the complaints — but to steer clear of those against him.

Ms. Munich objected. In an e-mail to Wal-Mart executives, she complained that the investigation was “at the direction of the same company officer who is the target of several of the allegations.”

“We are in need of clear guidelines about how to handle these issues going forward,” she warned.

The Inquiry Begins

Ronald Halter, one of Wal-Mart’s new “special investigators,” was assigned to lead the preliminary inquiry into Mr. Cicero’s allegations. Mr. Halter had been with Wal-Mart only a few months, but he was a seasoned criminal investigator. He had spent 21 years in the F.B.I., and he spoke Spanish.

He also had help. Bob Ainley, a senior auditor, was sent to Mexico along with several Spanish-speaking auditors.

On Nov. 12, 2005, Mr. Halter’s team got to work at Wal-Mart de Mexico’s corporate headquarters in Mexico City. The team gained access to a database of Wal-Mart de Mexico payments and began searching the payment description field for the word “gestoria.”

By day’s end, they had found 441 gestor payments. Each was a potential bribe, and yet they had searched back only to 2003.

Mr. Cicero had said his main gestores were Pablo Alegria Con Alonso and Jose Manuel Aguirre Juarez, obscure Mexico City lawyers with small practices who were friends of his from law school.

Sure enough, Mr. Halter’s team found that nearly half the payments were to Mr. Alegria and Mr. Aguirre. These two lawyers alone, records showed, had received $8.5 million in payments. Records showed Wal-Mart de Mexico routinely paid its gestores tens of thousands of dollars per permit. (In interviews, both lawyers declined to discuss the corruption allegations, citing confidentiality agreements with Wal-Mart.)

“One very interesting postscript,” Mr. Halter wrote in an e-mail to his boss, Mr. Lewis. “All payments to these individuals and all large sums of $ paid out of this account stopped abruptly in 2005.” Mr. Halter said the “only thing we can find” that changed was that Mr. Castro-Wright left Wal-Mart de Mexico for the United States.

Mr. Halter’s team confirmed detail after detail from Mr. Cicero’s debriefings. Mr. Cicero had given specifics — names, dates, bribe amounts — for several new stores. In almost every case, investigators found documents confirming major elements of his account. And just as Mr. Cicero had described, investigators found mysterious codes at the bottom of invoices from the gestores.

“The documentation didn’t look anything like what you would find in legitimate billing records from a legitimate law firm,” a person involved in the investigation said in an interview.

Mr. Lewis sent a terse progress report to his boss, Mr. Senser: “FYI. It is not looking good.”

Hours later, Mr. Halter’s team found clear confirmation that Mr. Castro-Wright and other top executives at Wal-Mart de Mexico were well aware of the gestor payments.

In March 2004, the team discovered, the executives had been sent an internal Wal-Mart de Mexico audit that raised red flags about the gestor payments. The audit documented how Wal-Mart de Mexico’s two primary gestores had been paid millions to make “facilitating payments” for new store permits all over Mexico.

The audit did not delve into how the money had been used to “facilitate” permits. But it showed the payments rising rapidly, roughly in line with Wal-Mart de Mexico’s accelerating growth. The audit recommended notifying Bentonville of the payments.

The recommendation, records showed, was removed by Wal-Mart de Mexico’s chief auditor, whom Mr. Cicero had identified as one of the executives who knew about the bribes. The author of the gestor audit, meanwhile, “was fired not long after the audit was completed,” Mr. Halter wrote.

Mr. Ainley arranged to meet the fired auditor at his hotel. The auditor described other examples of Wal-Mart de Mexico’s leaders withholding from Bentonville information about suspect payments to government officials.

The auditor singled out José Luis Rodríguezmacedo Rivera, the general counsel of Wal-Mart de Mexico.

Mr. Rodríguezmacedo, he said, took “significant information out” of an audit of Wal-Mart de Mexico’s compliance with the Foreign Corrupt Practices Act. The original audit had described how Wal-Mart de Mexico gave gift cards to government officials in towns where it was building stores. “These were only given out until the construction was complete,” Mr. Ainley wrote. “At which time the payments ceased.”

These details were scrubbed from the final version sent to Bentonville.

Investigators were struck by Mr. Castro-Wright’s response to the gestor audit. It had been shown to him immediately, Wal-Mart de Mexico’s chief auditor had told them. Yet rather than expressing alarm, he had appeared worried about becoming too dependent on too few gestores. In an e-mail, Mr. Rodríguezmacedo told Mr. Cicero to write up a plan to “diversify” the gestores used to “facilitate” permits.

“Eduardo Castro wants us to implement this plan as soon as possible,” he wrote.

Mr. Cicero did as directed. The plan, which authorized paying gestores up to $280,000 to “facilitate” a single permit, was approved with a minor change. Mr. Rodríguezmacedo did not want the plan to mention “gestores.” He wanted them called “external service providers.”

Mr. Halter’s team made one last discovery — a finding that suggested the corruption might be far more extensive than even Mr. Cicero had described.

In going through Wal-Mart de Mexico’s database of payments, investigators noticed the company was making hefty “contributions” and “donations” directly to governments all over Mexico — nearly $16 million in all since 2003.

“Some of the payments descriptions indicate that the donation is being made for the issuance of a license,” Mr. Ainley wrote in one report back to Bentonville.

They also found a document in which a Wal-Mart de Mexico real estate executive had openly acknowledged that “these payments were performed to facilitate obtaining the licenses or permits” for new stores. Sometimes, Mr. Cicero told The Times, donations were used hand-in-hand with gestor payments to get permits.

Deflecting Blame

When Mr. Halter’s team was ready to interview executives at Wal-Mart de Mexico, the first target was Mr. Rodríguezmacedo.

Before joining Wal-Mart de Mexico in January 2004, Mr. Rodríguezmacedo had been a lawyer for Citigroup in Mexico. Urbane and smooth, with impeccable English, he quickly won fans in Bentonville. When Wal-Mart invited executives from its foreign subsidiaries for several days of discussion about the fine points of the Foreign Corrupt Practices Act, Mr. Rodríguezmacedo was asked to lead one of the sessions.

It was called “Overcoming Challenges in Government Dealings.”

Yet Mr. Cicero had identified him as a participant in the bribery scheme. In his debriefings, Mr. Cicero described how Mr. Rodríguezmacedo had passed along specific payoff instructions from Mr. Castro-Wright. In an interview with The Times, Mr. Cicero said he and Mr. Rodríguezmacedo had discussed the use of gestores shortly after Mr. Rodríguezmacedo was hired. “He said, ‘Don’t worry. Keep it on its way.’ ”

Mr. Rodríguezmacedo declined to comment; on Friday Wal-Mart disclosed that he had been reassigned and is no longer Wal-Mart de Mexico’s general counsel.

Mr. Halter’s team hoped Mr. Rodríguezmacedo would shed light on how two outside lawyers came to be paid $8.5 million to “facilitate” permits. Mr. Rodríguezmacedo responded with evasive hostility, records and interviews show. When investigators asked him for the gestores’ billing records, he said he did not have time to track them down. They got similar receptions from other executives.

Only after investigators complained to higher authorities were the executives more forthcoming. Led by Mr. Rodríguezmacedo, they responded with an attack on Mr. Cicero’s credibility.

The gestor audit, they told investigators, had raised doubts about Mr. Cicero, since he had approved most of the payments. They began to suspect he was somehow benefiting, so they asked Kroll to investigate. It was then, they asserted, that Kroll discovered Mr. Cicero’s wife was a law partner of one of the gestores.

Mr. Cicero was fired, they said, because he had failed to disclose that fact. They produced a copy of a “preliminary” report from Kroll and e-mails showing the undisclosed conflict had been reported to Bentonville.

Based on this behavior, Mr. Rodríguezmacedo argued, the gestor payments were in all likelihood a “ruse” by Mr. Cicero to defraud Wal-Mart de Mexico. Mr. Cicero and the gestores, he contended, probably kept every last peso of the “facilitating payments.”

Simply put, bribes could not have been paid if the money was stolen first.

It was an argument that gave Wal-Mart ample justification to end the inquiry. But investigators were skeptical, records and interviews show.

Even if Mr. Rodríguezmacedo’s account were true, it did not explain why Wal-Mart de Mexico’s executives had authorized gestor payments in the first place, or why they made “donations” to get permits, or why they rewrote audits to keep Bentonville in the dark.

Investigators also wondered why a trained lawyer who had gotten away with stealing a small fortune from Wal-Mart would now deliberately draw the company’s full attention by implicating himself in a series of fictional bribes. And if Wal-Mart de Mexico’s executives truly believed they had been victimized, why hadn’t they taken legal action against Mr. Cicero, much less reported the “theft” to Bentonville?

There was another problem: Documents contradicted most of the executives’ assertions about Mr. Cicero.

Records showed Mr. Cicero had not been fired, but had resigned with severance benefits and a $25,000 bonus. In fact, in a 2004 e-mail to Ms. Munich, Mr. Rodríguezmacedo himself described how he had “negotiated” Mr. Cicero’s “departure.” The same e-mail said Mr. Cicero had not even been confronted about the supposed undisclosed conflict involving his wife. (Mr. Cicero flatly denied that his wife had ever worked with either gestor.) The e-mail also assured Ms. Munich there was no hint of financial wrongdoing. “We see it merely as an undisclosed conflict of interest,” Mr. Rodríguezmacedo wrote.

There were other discrepancies.

Mr. Rodríguezmacedo said the company had stopped using gestores after Mr. Cicero’s departure. Yet even as Mr. Cicero was being debriefed in October 2005, Wal-Mart de Mexico real estate executives made a request to pay a gestor $14,000 to get a construction permit, records showed.

The persistent questions and document requests from Mr. Halter’s team provoked a backlash from Wal-Mart de Mexico’s executives. After a week of work, records and interviews show, Mr. Halter and other members of the team were summoned by Eduardo F. Solórzano Morales, then chief executive of Wal-Mart de Mexico.

Mr. Solórzano angrily chastised the investigators for being too secretive and accusatory. He took offense that his executives were being told at the start of interviews that they had the right not to answer questions — as if they were being read their rights.

“It was like, ‘You shut up. I’m going to talk,’ ” a person said of Mr. Solórzano. “It was, ‘This is my home, my backyard. You are out of here.’ ”

Mr. Lewis viewed the complaints as an effort to sidetrack his investigators. “I find this ludicrous and a copout for the larger concerns about what has been going on,” he wrote.

Nevertheless, Mr. Herkert, the chief executive for Latin America, was notified about the complaints. Three days later, he and his boss, Mr. Duke, flew to Mexico City. The trip had been long-planned — Mr. Duke toured several stores — but they also reassured Wal-Mart de Mexico’s unhappy executives.

They arrived just as the investigators wrapped up their work and left.

A Push to Dig Deeper

Wal-Mart’s leaders had agreed to consider a full investigation if the preliminary inquiry found Mr. Cicero’s allegations credible.

Back in Bentonville, Mr. Halter and Mr. Ainley wrote confidential reports to Wal-Mart’s top executives in December 2005 laying out all the evidence that corroborated Mr. Cicero — the hundreds of gestor payments, the mystery codes, the rewritten audits, the evasive responses from Wal-Mart de Mexico executives, the donations for permits, the evidence gestores were still being used.

“There is reasonable suspicion,” Mr. Halter concluded, “to believe that Mexican and USA laws have been violated.” There was simply “no defendable explanation” for the millions of dollars in gestor payments, he wrote.

Mr. Halter submitted an “action plan” for a deeper investigation that would plumb the depths of corruption and culpability at Wal-Mart de Mexico.

Among other things, he urged “that all efforts be concentrated on the reconstruction of Cicero’s computer history.”

Mr. Cicero, meanwhile, was still offering help. In November, when Mr. Halter’s team was in Mexico, Mr. Cicero offered his services as a paid consultant. In December, he wrote to Ms. Munich. He volunteered to share specifics on still more stores, and he promised to show her documents. “I hope you visit again,” he wrote.

Mr. Halter proposed a thorough investigation of the two main gestores. He had not tried to interview them in Mexico for fear of his safety. (“I do not want to expose myself on what I consider to be an unrealistic attempt to get Mexican lawyers to admit to criminal activity,” he had explained to his bosses.) Now Mr. Halter wanted Wal-Mart to hire private investigators to interview and monitor both gestores.

He also envisioned a round of adversarial interviews with Wal-Mart de Mexico’s senior executives. He and his investigators argued that it was time to take the politically sensitive step of questioning Mr. Castro-Wright about his role in the gestor payments.

By January 2006, the case had reached a critical juncture. Wal-Mart’s leaders were again weighing whether to approve a full investigation that would inevitably focus on a star executive already being publicly discussed as a potential successor to Mr. Scott.

Wal-Mart’s ethics policy offered clear direction. “Never cover up or ignore an ethics problem,” the policy states. And some who were involved in the investigation argued that it was time to take a stand against signs of rising corruption in Wal-Mart’s global operations. Each year the company received hundreds of internal reports of bribery and fraud, records showed. In Asia alone, there had been 90 reports of bribery just in the previous 18 months.

The situation was bad enough that Wal-Mart’s top procurement executives were summoned to Bentonville that winter for a dressing down. Mr. Menzer, Wal-Mart’s vice chairman, warned them that corruption was creating an unacceptable risk, particularly given the government’s stepped-up enforcement of the Foreign Corrupt Practices Act. “Times have changed,” he said.

As if to underscore the problem, Wal-Mart’s leaders were confronted with new corruption allegations at Wal-Mart de Mexico even as they pondered Mr. Halter’s action plan. In January, Mr. Scott, Mr. Duke and Wal-Mart’s chairman, S. Robson Walton, received an anonymous e-mail saying Wal-Mart de Mexico’s top real estate executives were receiving kickbacks from construction companies. “Please you must do something,” the e-mail implored.

Yet at the same time, records and interviews show, there were misgivings about the budding reach and power of Corporate Investigations.

In less than a year, Mr. Lewis’s beefed-up team had doubled its caseload, to roughly 400 cases a year. Some executives grumbled that Mr. Lewis acted as if he still worked for the F.B.I., where he had once supervised major investigations. They accused him and his investigators of being overbearing, disruptive and naïve about the moral ambiguities of doing business abroad. They argued that Corporate Investigations should focus more on quietly “neutralizing” problems than on turning corrupt employees over to law enforcement.

Wal-Mart’s leaders had just witnessed the downside of that approach: in early 2005, the company went to the F.B.I. with evidence that the disgraced former vice chairman, Mr. Coughlin, had embezzled hundreds of thousands of dollars. The decision produced months of embarrassing publicity, especially when Mr. Coughlin claimed he had used the money to pay off union spies for Wal-Mart.

Meanwhile, Wal-Mart de Mexico executives were continuing to complain to Bentonville about the investigation. The protests “just never let up,” a person involved in the case said.

Another person familiar with the thinking of those overseeing the investigation said Wal-Mart would have reacted “like a chicken on a June bug” had the allegations concerned the United States. But some executives saw Mexico as a country where bribery was embedded in the business culture. It simply did not merit the same response.

“It’s a Mexican issue; it’s better to let it be a Mexican response,” the person said, describing the thinking of Wal-Mart executives.

In the midst of this debate, Ms. Munich submitted her resignation, effective Feb. 1, 2006. In one of her final acts, she drafted a memo that argued for expanding the Mexico investigation and giving equal respect to Mexican and United States laws.

“The bribery of government officials,” she noted dryly, “is a criminal offense in Mexico.”

She also warned against allowing implicated executives to interfere with the investigation. Wal-Mart de Mexico’s executives had already tried to insert themselves in the case. Just before Christmas, records show, Mr. Solórzano, the Wal-Mart de Mexico chief executive, held a video conference with Mr. Mars, Mr. Senser and Mr. Stucky to discuss his team’s “hypothesis” that Mr. Cicero had stolen gestor payments.

“Given the serious nature of the allegations, and the need to preserve the integrity of the investigation,” Ms. Munich wrote, “it would seem more prudent to develop a follow-up plan of action, independent of Walmex management participation.”

The Chief Weighs In

Mr. Scott called a meeting for Feb. 3, 2006, to discuss revamping Wal-Mart’s internal investigations and to resolve the question of what to do about Mr. Cicero’s allegations.

In the days before the meeting, records show, Mr. Senser ordered his staff to compile data showing the effectiveness of Corporate Investigations. He assembled statistics showing that the unit had referred relatively few cases to law enforcement agencies. He circulated copies of an e-mail in which Mr. Rodríguezmacedo said he had been treated “very respectfully and cordially” by Mr. Senser’s investigators.

Along with Mr. Scott, the meeting included Mr. Hyde, Mr. Mars and Mr. Stucky, records show. The meeting brought the grievances against Corporate Investigations into the open. Mr. Senser described the complaints in Mr. Lewis’s performance evaluation, completed shortly after the meeting. Wal-Mart’s leaders viewed Mr. Lewis’s investigators as “overly aggressive,” he wrote. They did not care for Mr. Lewis’s “law enforcement approach,” and the fact that Mr. Scott convened a meeting to express these concerns only underscored “the importance placed on these topics by senior executives.”

By meeting’s end, Mr. Senser had been ordered to work with Mr. Mars and others to develop a “modified protocol” for internal investigations.

Mr. Scott said he wanted it done fast, and within 24 hours Mr. Senser produced a new protocol, a highly bureaucratic process that gave senior Wal-Mart executives — including executives at the business units being investigated — more control over internal investigations. The policy included multiple “case reviews.” It also required senior executives to conduct a “cost-benefit analysis” before signing off on a full-blown investigation.

Under the new protocol, Mr. Lewis and his team would only investigate “significant” allegations, like those involving potential crimes or top executives. Lesser allegations would be left to the affected business unit to investigate.

“This captures it, I think,” Mr. Hyde wrote when Mr. Senser sent him the new protocol.

Four days after Mr. Scott’s meeting, with the new protocol drafted, Wal-Mart’s leaders began to transfer control of the bribery investigation to one of its earliest targets, Mr. Rodríguezmacedo.

Mr. Mars first sent Mr. Halter’s report to Mr. Rodríguezmacedo. Then he arranged to ship Mr. Halter’s investigative files to him as well. In an e-mail, he sought Mr. Senser’s advice on how to send the files in “a secure manner.”

Mr. Senser recommended FedEx. “There is very good control on those shipments, and while governments do compromise them if they are looking for something in particular, there is no reason for them to think that this shipment is out of the ordinary,” he wrote.

“The key,” he added, “is being careful about how you communicate the details of the shipment to José Luis.” He advised Mr. Mars to use encrypted e-mail.

Wal-Mart’s spokesman, Mr. Tovar, said the company could not discuss Mr. Scott’s meeting or the decision to transfer the case to Mr. Rodríguezmacedo. “At this point,” he said, “we don’t have a full explanation of what happened. Unfortunately, we realize that until the investigation is concluded, there will be some unanswered questions.”

Wal-Mart’s leaders, however, had clear guidance about the propriety of letting a target of an investigation run it.

On the same day Mr. Senser was putting the finishing touches on the new investigations protocol, Wal-Mart’s ethics office sent him a booklet of “best practices” for internal investigations. It had been put together by lawyers and executives who supervised investigations at Fortune 500 companies.

“Investigations should be conducted by individuals who do not have any vested interest in the potential outcomes of the investigation,” it said.

The transfer appeared to violate even the “modified protocol” for investigations. Under the new protocol, Corporate Investigations was still supposed to handle “significant” allegations — including those involving potential crimes and senior executives. When Mr. Senser asked his deputies to list all investigations that met this threshold, they came up with 31 cases.

At the top of the list: Mexico.

After the meeting with Mr. Scott, Mr. Senser had told Mr. Lewis in his performance evaluation that his “highest priority” should be to eliminate “the perceptions that investigators are being too aggressive.” He wanted Mr. Lewis to “earn the trust of” his “clients” — Wal-Mart’s leaders. He wanted him to head off “adversarial interactions.”

Mr. Senser now applied the same advice to himself.

Even as Mr. Halter’s files were being shipped to Mr. Rodríguezmacedo, Mr. Stucky made plans to fly to Mexico with other executives involved in the bribery investigation. The trip, he wrote, was “for the purpose of re-establishing activities related to the certain compliance matters we’ve been discussing.” Mr. Stucky invited Mr. Senser along.

“It is better if we do not make this trip to Mexico City,” Mr. Senser replied. His investigators, he wrote, would simply be “a resource” if needed.

Ten days after Mr. Stucky flew to Mexico, an article about Wal-Mart appeared in The Times. It focused on “the increasingly important role of one man: Eduardo Castro-Wright.” The article said Mr. Castro-Wright was a “popular figure” inside Wal-Mart because he made Wal-Mart de Mexico one of the company’s “most profitable units.”

Wall Street analysts, it said, viewed him as a “very strong candidate” to succeed Mr. Scott.

Case Closed

For those who had investigated Mr. Cicero’s allegations, the preliminary inquiry had been just that — preliminary. In memos and meetings, they had argued that their findings clearly justified a full-blown investigation. Mr. Castro-Wright’s precise role had yet to be determined. Mr. Halter had never been permitted to question him, nor had Mr. Castro-Wright’s computer files been examined, records and interviews show.

At the very least, a complete investigation would take months.

Mr. Rodríguezmacedo, the man now in charge, saw it differently. He wrapped up the case in a few weeks, with little additional investigation.

“There is no evidence or clear indication,” his report concluded, “of bribes paid to Mexican government authorities with the purpose of wrongfully securing any licenses or permits.”

That conclusion, his report explained, was largely based on the denials of his fellow executives. Not one “mentioned having ordered or given bribes to government authorities,” he wrote.

His report, six pages long, neglected to note that he had been implicated in the same criminal conduct.

That was not the only omission. While his report conceded that Wal-Mart de Mexico executives had authorized years of payments to gestores, it never explained what these executives expected the gestores to do with the millions of dollars they received to “facilitate” permits.

He was also silent on the evidence that Wal-Mart de Mexico had doled out donations to get permits. Nor did he address evidence that he and other executives had suppressed or rewritten audits that would have alerted Bentonville to improper payments.

Instead, the bulk of Mr. Rodríguezmacedo’s report attacked the integrity of his accuser.

Mr. Cicero, he wrote, made Wal-Mart de Mexico’s executives think they would “run the risk of having permits denied if the gestores were not used.” But this was merely a ruse: In all likelihood, he argued, Wal-Mart de Mexico paid millions for “services never rendered.” The gestores simply pocketed the money, he suggested, and Mr. Cicero “may have benefited,” too.

But he offered no direct proof. Indeed, as his report made clear, it was less an allegation than a hypothesis built on two highly circumstantial pillars.

First, he said he had consulted with Jesús Zamora-Pierce, a “prestigious independent counsel” who had written books on fraud. Mr. Zamora, he wrote, “feels the conduct displayed by Sergio Cicero is typical of someone engaging in fraud. It is not uncommon in Mexico for lawyers to recommend the use of gestores to facilitate permit obtainment, when in reality it is nothing more than a means of engaging in fraud.”

Second, he said he had done a statistical analysis that found Wal-Mart de Mexico won permits even faster after Mr. Cicero left. The validity of his analysis was impossible to assess; he did not include his statistics in the report.

In building a case against Mr. Cicero, Mr. Rodríguezmacedo’s report included several false statements. He described Mr. Cicero’s “dismissal” when records showed he had resigned. He also wrote that Kroll’s investigation of Mr. Cicero concluded that he “had a considerable increase in his standard of living during the time in which payments were made to the gestores.” Kroll’s report made no such assertion, people involved in the investigation said.

His report promised a series of corrective steps aimed at putting the entire matter to rest. Wal-Mart de Mexico would no longer use gestores. There would be a renewed commitment to Wal-Mart’s anticorruption policy. He did not recommend any disciplinary action against his colleagues.

There was, however, one person he hoped to punish. Wal-Mart de Mexico, he wrote, would scour Mr. Cicero’s records and determine “if any legal action may be taken against him.”

Mr. Rodríguezmacedo submitted a draft of his report to Bentonville. In an e-mail, Mr. Lewis told his superiors that he found the report “lacking.” It was not clear what evidence supported the report’s conclusions, he wrote. “More importantly,” he wrote, “if one agrees that Sergio defrauded the company and I am one of them, the question becomes, how was he able to get away with almost $10 million and why was nothing done after it was discovered?”

Mr. Rodríguezmacedo responded by adding a paragraph to the end of his report: They had decided not to pursue “criminal actions” against Mr. Cicero because “we did not have strong case.”

“At the risk of being cynical,” Mr. Lewis wrote in response, “that report is exactly the same as the previous which I indicated was truly lacking.”

But it was enough for Wal-Mart. Mr. Rodríguezmacedo was told by executives in Bentonville on May 10, 2006, to put his report “into final form, thus concluding this investigation.”

No one told Mr. Cicero. All he knew was that after months of e-mails, phone calls and meetings, Wal-Mart’s interest seemed to suddenly fade. His phone calls and e-mails went unanswered.

“I thought nobody cares about this,” he said. “So I left it behind.”

Alejandra Xanic von Bertrab and James C. McKinley Jr. contributed reporting from Mexico City.

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Walmart de México: Investing in Renewable Energy

When Walmart de México y Centroamérica decided to buy the power generated by the Electrica del Valle de México’s (EVM) wind farm, EVM’s struggling project received a significant boost. While the proposed wind farm was located in an area with abundant wind resources, absent a creditworthy off-taker the project would not have been able to line up financing. With Walmart de México’s 15-year PPA (Power Purchase Agreement) in hand, the developers were able to gain financial backing, buy and erect the turbines, and begin generating electricity by 2010.

For Walmart de México, becoming the wind farm’s off-taker accomplished a number of important objectives. EVM guaranteed electricity at below the rates charged by Mexico’s state-controlled utility, shaving costs for the famously thrifty retailer. In addition, the project allowed Walmart de México to get closer to some of its sustainability goals. The wind farm would supply electricity to 348 Walmart de México facilities in central Mexico, providing 18% of the electricity Walmart de México consumed in Mexico in 2010.

The wind farm was just one part of the efforts Walmart de México was undertaking in the sustainability area. The company had pledged to meet ambitious goals, looking to reduce waste in its and its suppliers' operations. In the energy area, the company was hoping to receive 50% of its energy from renewable sources by 2015, even in a period of rapid growth, increasing its square footage in Mexico by 12% in 2012 alone.  All told, the efforts of Walmart de México had made it the world’s leading retailer in the area of sustainability – a distinction the company hoped to build on.

The success of the EVM wind farm had ignited Manuel Gómez Peña’s thinking about further renewable energy projects. Gómez, Walmart de México’s Director of Sustainability, was considering ways the project financing structure might be further adapted to allow Walmart de México to participate in and benefit from other projects. Gómez was also considering the mix of renewable energy sources. In addition to wind, solar and mini-hydroelectric projects were possibilities that Walmart de México could consider.

Any project that Walmart de México undertook had to work in concert with Mexico’s electricity grid and rate-making structure. Mexico’s political leadership had announced a commitment to electricity from renewable energy sources, to move the country away from its traditional reliance on natural gas and oil. Mexico’s government-controlled electricity utility had simplified the transmission rates for renewable energy and had constructed a few projects of its own. However, there were no special feed-in-tariffs for renewable energy and only a few tax incentives for the construction of renewable energy projects. Furthermore, there was a dearth of independent project developers with the resources and expertise to build large-scale projects.

Gómez also had to take into account Walmart de México’s capabilities and focus. While the company had made sustainability a priority, corporate officials were loathe to take on projects that took them too far from the company’s central activity of retailing. The company’s investment group analyzed sustainability projects on the same basis as any other project, concentrating on return on investment.

Gómez believed that the situation called for creative thinking. How could the company leverage its sterling credit rating to get renewable energy projects off the ground? For the EVM wind farm, Walmart de México's equity investment was minimal, just sufficient to meet the requirements for Mexico's self-supply tariff. Should the company take a larger equity position in further energy projects, rather than simply serving as an off-taker? What technologies should Walmart de México employ to achieve its renewable energy goals? Should the company hold a portfolio of projects or just concentrate on one technology? How could Walmart de México expand the program outside of Mexico to the other central American countries in which it operated?  Was there a way to include suppliers into a renewable program?

Developed in partnership with  CEDAN , Tecnológico de Monterrey, Mexico City

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Walmart de Mexico: Investing in Renewable Energy

Raw, online.

When Walmart de México y Centroamérica decided to buy the power generated by the Electrica del Valle de México’s (EVM) wind farm, EVM’s struggling project received a significant boost. While the proposed wind farm was located in an area with abundant wind resources, absent a creditworthy off-taker the project would not have been able to line up financing. With Walmart de México’s 15-year PPA (Power Purchase Agreement) in hand, the developers were able to gain financial backing, buy and erect the turbines, and begin generating electricity by 2010.

For Walmart de México, becoming the wind farm’s off-taker accomplished a number of important objectives. EVM guaranteed electricity at below the rates charged by Mexico’s state-controlled utility, shaving costs for the famously thrifty retailer. In addition, the project allowed Walmart de México to get closer to some of its sustainability goals. The wind farm would supply electricity to 348 Walmart de México facilities in central Mexico, providing 18% of the electricity Walmart de México consumed in Mexico in 2010.

The wind farm was just one part of the efforts Walmart de México was undertaking in the sustainability area. The company had pledged to meet ambitious goals, looking to reduce waste in its and its suppliers' operations. In the energy area, the company was hoping to receive 50% of its energy from renewable sources by 2015, even in a period of rapid growth, increasing its square footage in Mexico by 12% in 2012 alone. All told, the efforts of Walmart de México had made it the world’s leading retailer in the area of sustainability – a distinction the company hoped to build on.

The success of the EVM wind farm had ignited Manuel Gómez Peña’s thinking about further renewable energy projects. Gómez, Walmart de México’s Director of Sustainability, was considering ways the project financing structure might be further adapted to allow Walmart de México to participate in and benefit from other projects. Gómez was also considering the mix of renewable energy sources. In addition to wind, solar and mini-hydroelectric projects were possibilities that Walmart de México could consider.

Any project that Walmart de México undertook had to work in concert with Mexico’s electricity grid and rate-making structure. Mexico’s political leadership had announced a commitment to electricity from renewable energy sources, to move the country away from its traditional reliance on natural gas and oil. Mexico’s government-controlled electricity utility had simplified the transmission rates for renewable energy and had constructed a few projects of its own. However, there were no special feed-in-tariffs for renewable energy and only a few tax incentives for the construction of renewable energy projects. Furthermore, there was a dearth of independent project developers with the resources and expertise to build large-scale projects.

Gómez also had to take into account Walmart de México’s capabilities and focus. While the company had made sustainability a priority, corporate officials were loathe to take on projects that took them too far from the company’s central activity of retailing. The company’s investment group analyzed sustainability projects on the same basis as any other project, concentrating on return on investment.

Gómez believed that the situation called for creative thinking. How could the company leverage its sterling credit rating to get renewable energy projects off the ground? For the EVM wind farm, Walmart de México's equity investment was minimal, just sufficient to meet the requirements for Mexico's self-supply tariff. Should the company take a larger equity position in further energy projects, rather than simply serving as an off-taker? What technologies should Walmart de México employ to achieve its renewable energy goals? Should the company hold a portfolio of projects or just concentrate on one technology? How could Walmart de México expand the program outside of Mexico to the other central American countries in which it operated? Was there a way to include suppliers into a renewable program?

Developed in partnership with CEDAN, Tecnológico de Monterrey, Mexico City

Published Date: 16/12/2011

Suggested Citation: Jean Rosenthal,  K. Geert Rouwenhorst,  Isabel Studer, Jaan Elias,  and Juan Carlos Rivera, "Walmart de México: Investing in Renewable Energy," Yale SOM Case 101-11, December 16, 2011

Keywords: Mexico, Walmart, Women in Leadership

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The Walmart de Mexico scandal: Here’s a punishment that befits the crime

Walmart evaded environmental protections and other rules in mexico by paying out bribes. as punishment, the company should have to give up many of its mexican stores..

One of the more than 2,000 Walmarts in Mexico. (Photo by Christopher Porter)

Walmart spent much of last week burnishing its green image and touting its progress “toward becoming a more sustainable, responsible company.” All the while, those at the very top of the company, including CEO Mike Duke, knew that The New York Times was about to publish an  explosive story  that would lay to waste the notion that Walmart cares about anything other than its own growth.

The Times story presents credible evidence that Walmart’s Mexican subsidiary spent millions of dollars bribing local officials in order to speed up permits for new stores, get “zoning maps changed,” and make “environmental objections vanish.” When top executives, including Duke, learned of the bribes in 2005, they declined to notify U.S. and Mexican law enforcement, shut down Walmart’s own internal investigation, and continued to lavish promotions on the alleged ringleader, Eduardo Castro-Wright, who currently serves as Walmart’s vice chair.

In the days since the Times story broke, attention has turned to the potential punishment Walmart might face. A criminal investigation is underway at the U.S. Department of Justice, which, under the Foreign Corrupt Practices Act, could pursue prosecutions that might lead to substantial fines and even jail time for Duke and others implicated. The Mexican government, meanwhile, has initiated its own inquiry.

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If justice is to be served in this case, though, Walmart must not only face fines and prison terms, but also be forced to sell off a sizeable number of its ill-gotten Mexican stores. By bribing officials, Walmart was able to crush its competitors, opening new stores so fast they had no time to react. In just a few years, Walmart came out of nowhere to dominate the Mexican economy.

But, as any athlete or other competitor knows, if you’re caught cheating your way to a win, then you most certainly do not get to keep the prize.

Walmart’s expansion into Mexico began in earnest in 1997 when it bought a controlling stake in one of the country’s largest retail chains. Walmart then began to build new stores with stunning speed. By the time the bribery allegations reached executives at the company’s Arkansas headquarters in the fall of 2005, Walmart had more than 750 stores in Mexico and was opening new ones at the rate of almost two per week.

As Walmart grew, Mexico’s traditional vendors, open-air markets, and independent businesses declined. Competing supermarket chains were left in the dust too, unable to match Walmart’s speed and financial muscle.

Although Walmart’s expansion plans often encountered strong grassroots opposition, as its stores frequently do in the U.S., the company consistently outmaneuvered local residents, in part, we now know, by using bribes to skirt land-use rules and quickly win approvals.

Even the massive public outcry that arose in 2004, when Walmart unveiled plans to  build a store near the base of the Pyramid of the Sun  in Teotihuacan, failed to stop the giant. The store is now visible from the top of the pyramid.

In its no-holds-barred quest to dominate the Mexican landscape and economy, Walmart may have also violated Mexico’s antitrust laws. In 2002, the  Federal Competition Commission opened an investigation  into Walmart for using its market power to threaten farmers and other suppliers and pressure them into providing deep discounts that were not available to competing retailers, even at the same volume.

A year later, government officials said they found evidence that Walmart was violating competition laws, but not enough to pursue legal action. They closed the investigation on the condition that Walmart abide by a “code of conduct”  in its dealings with suppliers.

Throughout all of this, Walmart portrayed its Mexican operations to both stockholders and employees as the crowning jewel of its international division. In its 2006 Annual Report , released shortly after top executives decided to look the other way on the bribery charges, according to the timeline in the Times story, Walmart crowed about its success south of the border: “Wal-Mart de Mexico had a great year as operating income grew faster than its sales increase of 13.7% (inflation adjusted).”

For employees in foreign subsidiaries that were struggling to meet their expansion targets, the message was clear: Be more like Walmart de Mexico.

As all of this was occurring, Walmart was also launching its sustainability campaign , a broad effort to remake the company’s image in order to keep its growth machine going, both here and abroad.

And grow it has. By 2009, Walmart was opening stores at the rate of more than three per week in Mexico. The pace accelerated to more than five stores per week in 2010. Last year, Walmart opened a staggering 358 stores in Mexico — compared to only 59 stores opened by the next five largest retail chains in the country.

Walmart now has more than 2,000 stores in Mexico, a country with one-third the population and less than one-tenth the retail sales of the United States. Walmart is Mexico’s largest private employer and largest retailer by a wide margin, capturing an estimated 62 percent of sales made at publicly traded supermarket chains, according to HSBC.

The only just resolution to all of this — the only punishment that would actually sting Walmart and provide real benefit to the public whose laws were broken — would be to force Walmart to divest a sizable share of its Mexican stores. These outlets could be sold, under supervision by competition authorities, to a range of competitors, including independent entrepreneurs as well as other chains. This would begin to restore a more competitive retail economy, one not dominated by a single cheating giant.

It’s a super long shot, I know, especially given the tepid response from the Mexican government so far. But citizens and activists groups on both sides of the border should be calling for something more than Mike Duke’s resignation. Walmart’s penalty should fit the scale of its crime and offer a measure of restitution for the communities and local economies harmed.

See also: Walmart’s greenwash: Why the retail giant is still unsustainable

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Walmart's explosive Mexican bribery scandal: A concise guide

The New York Times reports that Walmart allegedly paid at least $24 million in bribes to become a dominant retailer in Mexico

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Walmart isn't just the largest retailer in the U.S. It's also a commercial powerhouse and the largest private employer in Mexico, the jewel of its global business empire. However, Walmart didn't come to dominate the Mexican market without spreading around a little shady cash, almost certainly in violation of U.S. and Mexican law, according to a lengthy, blockbuster report in The New York Times . After Walmart learned about The Times ' inquiries in December, it informed the Justice Department and Securities and Exchange Commission that it was opening an independent investigation into foreign bribery, without providing details. Now the details are out. Here's a brief guide to Walmart's big bribery scandal:

Briefly, what's the story?

In 2005, a former commercial real estate executive at Walmart de Mexico (Walmex) blew the whistle on a massive bribery scheme that fueled the company's explosive growth in the Central American country by paying officials to speed up permits and ignore laws. Walmart dispatched its own investigators, who found evidence of more than $24 million in suspect payments, approved by Walmex's top executives but hidden from the Bentonville, Ark., home office. Presented with this evidence, Walmart buried the information , allowing the implicated Walmex general counsel to wrap up the inquiry and exonerate himself and his fellow executives.

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What does Walmart say?

In a statement, Walmart public-relations chief David Tovar says that the company is "committed to getting to the bottom" of the allegations in The Times article , and more generally "committed to having a strong and effective global anti-corruption program in every country in which we operate." So "if these allegations are true, it is not a reflection of who we are or what we stand for."

Why is this such a big deal?

First, the alleged bribery in Walmart's fastest-growing market violates the company's public commitment to maintaining the highest ethical and moral standards. Second, many of the people allegedly involved in the bribery scheme or cover-up are still with the company: Eduardo Castro-Wright, Walmex CEO from 2002 to 2005, and reportedly the driving force behind the rampant bribery, is now Walmart vice chairman; then–CEO H. Lee Scott Jr. is still on Walmart's board; and current CEO Michael Duke was in charge of all foreign subsidiaries in 2005. Third, although its own investigator informed top Walmart officials that "there is reasonable suspicion to believe that Mexican and USA laws have been violated," the company didn't inform U.S. law enforcement until The Times started poking around, five years later.

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Did Walmart break any U.S. laws?

"This looks like a slam-dunk case under the Foreign Corrupt Practices Act" (FCPA), which bars U.S. companies from bribing officials abroad, says Felix Salmon at Reuters . And as is usually the case, "the crime was bad; the cover-up was worse." Whether or not Walmart actually violated FCPA, it "most definitely violated the culture that the Justice Department has fostered" over the past decade, where companies are expected to self-report their violations, says Nathan Vardi at Forbes .

But isn't bribery common in Mexico?

Yes, and in much of the rest of the world, says Tim Worstall at Forbes . So while "it looks as if there's something at least worth investigating under the FCPA" in Walmart's Mexico fiasco, "I would argue that that is a problem with the FCPA," not Walmex's practices. We may not like bribery, and we shouldn't accept it in the U.S., but corruption is the price of doing business in Mexico and many other countries. "This really is just the way of the world," and we either tolerate it or put our companies at a competitive disadvantage.

What happens next?

The Justice Department "will be under tremendous pressure to demonstrate that there are consequences" for flouting the FCPA, says Forbes ' Vardi . Otherwise, nobody will see the point in self-reporting their own violations of the law. It's bigger than just this Mexico scandal, says Reuters ' Salmon . The Times ' "report shows that corruption is marbled throughout Walmart's international operations, not only in Mexico but also in Asia," and "I'm quite sure that multiple extremely senior heads are going to roll."

Read the entire article in The New York Times .

Sources: AP , Forbes ( 2 ), Guardian , New York Times , Reuters , Wall Street Journal

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CASE STUDY – MEXICO WALMART SCANDAL

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Raghavendra Rau

José G. Vargas-hernández , José G. Vargas-Hernández

This paper analyzes the strategies which are followed by Wal-Mart in different parts of the world from the viewpoint of theories of institutions, property rights and agency. The analysis of the questions what happens to these firms when they are in countries with high corruption index? It could answer this question in light of the theory of institutions, the theory of property rights and the theory of the agency. This paper specifically focuses on finding out if the above theories are applicable. The analysis concludes that the same firm adopts a different strategy in each place even if is in conflict with their values at home.

José G. Vargas-Hernández

Experimental Neurology

Johannes Jakobsen

Igor Grygus

800x600 Level of physical education in high school is not conducive to the effective reduction of the deficit of motive activity of students, which is one of the reasons various deviations in their health. The health of young people is essential and defining moment of well-being of society and its progressive development. The basic principle of the impact physical activity core group of students with different types of autonomic nervous system was the principle of individualization of physical activity, not dropping the weights regularity and consistency. The load volume was optimal, at the level of preparedness that much depended on the type of dominance of the autonomic nervous system. All students conducted a rapid assessment of the overall level of physical health by Apanasenko G . L . at the beginning and end of the study. With the prevalence of type counting of the autonomic nervous system, significantly higher levels of physical health were found among students at the end of ...

Journal of Clinical Laboratory Analysis

Ali Zarei Mahmoudabadi

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Walmart to pay $282 million to settle seven-year global corruption probe

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Doug McMillon, CEO

It was Sam Walton’s purpose to help people live better lives. He wanted to help them save money so they could invest those things in their families and their communities. He wanted to help people build something meaningful and worthwhile and to live a better life. He wanted to leave things better than he’d found them...

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Walmart has grown from humble roots with the enduring purpose of helping people save money and live better. As a people-led, tech-powered omni-channel retailer, we want to help people live better not only through our customer proposition but in the way we deliver it, by….