Wal-Mart paid millions in bribes in India, says report
2 min read . Updated: 20 Oct 2015, 12:20 AM IST
PremiumThousands of small payments were made to low-level officials to help move goods through customs or obtain real estate permits
Washington: A three-year-long investigation by the US government found evidence that Wal-Mart Stores Inc. paid bribes to local officials in India, the Wall Street Journal (WSJ) reported. The same probe found less-than-expected signs of corruption in Wal-Mart’s Mexico business, it said.
The bribing in India comprised thousands of small payments to low-level officials to help move goods through customs or obtain real estate permits, the newspaper reported, citing persons it didn’t identify. The vast majority of the payments were below $200, and some were as low as $5, with the total amounting to millions of dollars, the report said.
Wal-Mart is likely to face charges of violating the US Foreign Corrupt Practices Act due to these payments, the paper said. The Bentonville, Arkansas-based retailer is “cooperating fully with the government in this matter and can’t comment further on that process," a spokesperson for the retailer’s local arm said.
“For Wal-Mart, compliance with the US Foreign Corrupt Practices Act (FCPA) and other anti-corruption laws is a key priority. We work closely with third-party compliance experts on support and training as we continuously review and strengthen our programmes around the world."
Wal-Mart, which last week suffered its worst stock decline in more than 27 years after predicting a drop in annual profit, has seen its Indian operations plagued by botched ventures and sluggish growth. The world’s largest retailer in 2007 entered a supermarket joint venture with Bharti Enterprises only to see it split up in 2013, and Wal-Mart India has since then focused only on its wholesale business.
The charges in India are unlikely to amount to a large fine as FCPA penalties are connected to profits the alleged misconduct generated, WSJ said. Wal-Mart’s Indian unit has not turned a profit since inception eight years ago.
Wal-Mart has been the subject of several Indian government probes in recent years, including an investigation into allegations that it lobbied officials which ended in 2013 without any conclusions.
In 2012, Wal-Mart disclosed that it had spent $25 million over a span of four years to lobby US lawmakers to help it gain access to foreign markets, including India.
Auditors and forensic experts then spent many days at the then joint venture’s head office in Gurgaon, going through multiple billings to third parties to ensure no bribes were paid.
In a separate case, in November 2012, long-pending inquiries into its structure came under the scanner of the Enforcement Directorate for alleged violations of foreign direct investment (FDI) rules, on a reference from the central bank.
In October that year, the department of industrial policy and promotion asked the Reserve Bank of India to investigate if Wal-Mart had violated FDI norms by investing in a retail company of the Bharti Group.
In 2013, Bharti Walmart Pvt. Ltd saw top-level exits, with chief executive Raj Jain, chief financial officer Pankaj Madan and executives from the legal team leaving the company.
Towards the end of 2013 the retailer put an end to its joint venture with Bharti Retail Ltd, saying the partnership was not tenable.
It now operates as a single business unit—Wal-Mart India Pvt. Ltd—managing wholesale cash-and-carry stores in India, a business where the Indian government allows 100% FDI. The company is headed by Krish Iyer.
According to a person familiar with the retailer’s business in the country, there are no pending probes by any Indian authorities against Wal-Mart. The person spoke on condition of anonymity.
