In an extensive article published Saturday, The New York Times reported that "bribery played a persistent and significant role in Wal-Mart's rapid growth in Mexico," where subsidiary Wal-Mart de Mexico is now the country's largest private employer, with a workforce of 209,000 people. Futhermore, the article showed that Wal-Mart executives shut down an internal investigation into the matter several years ago, even after the company's own lead investigator stated in a report in late 2005 that "[t]here is reasonable suspicion to believe that Mexican and USA laws have been violated."
Monday afternoon, Reps. Elijah Cummings (D-MD) and Henry Waxman (D-CA) announced an investigation into the allegations included in the Times article. In a letter sent to Wal-Mart CEO Michael Duke, the lawmakers requested a meeting with company officials "who can respond to these allegations" by April 27.
"The New York Times report... raises serious questions about potential violations of United States law, including the Foreign Corrupt Practices Act," the letter states. "It also raises significant questions about the actions of top company officials in the United States who reportedly tried to disregard substantial evidence of abuse."
The FCPA, which became law in 1977, "makes it unlawful to bribe foreign government officials to obtain or retain business."
"The allegations that Wal-Mart officials in Mexico may have broken U.S. laws by bribing officials to get their stores built faster raise serious concerns," Rep. Cummings said in a statement to TPM. "But I am even more alarmed by reports that top company executives in the U.S. tried to cover-up these abuses. We need to ensure that US corporations comply fully with the law, and we need to determine the full scope of these alleged abuses."
Shares of Wal-Mart closed down 4.7 percent to $59.54 on Monday, MarketWatch reported. Shares of Wal-Mart de Mexico, 69 percent owned by Wal-Mart, fell 12 percent -- their biggest drop in 10 years.
Meanwhile, speculation started flying about possible legal consequences.
"We could easily see criminal prosecutions," Jacob Frenkel, a former official of the Securities and Exchange Commission, told CNBC. "The fact that it's a U.S. company working through a Mexican subsidiary does not give the U.S. company protection."
Frenkel told the network he wouldn't rule out jail time for Wal-Mart executives, and said the company could end up spending $1 billion in settlements and internal investigations.
Kevin T. Abikoff, chairman of the anti-corruption practice at law firm Hughes Hubbard & Reed LLP, told The Wall Street Journal that if authorities determine that the company broke the law it "will levy as large a fine as possible in a case like this, because it has repeatedly counseled companies that companies will be looked on with great favor if they do come forward."
Wayne State University Law School Professor Peter Henning, writing for the Times' Dealbook, argued that investigators may take "a more aggressive approach" in the case for two reasons. One, senior management at Wal-Mart de Mexico was involved. Two, Wal-Mart investigators raised questions about $16 million in "contributions" and "donations" to local governments, but the company did not pursue the matter further.
At the same time, Henning wrote, the FCPA's five-year statute of limitations could pose a problem for prosecutors.
"One way the government can try to avoid the statute of limitations is to charge a conspiracy, which only requires that one act in furtherance of the criminal agreement take place within the last five years," Henning wrote.
In a statement released Saturday, Wal-Mart emphasized that the activities alleged in the Times' article took place several years ago, but it did not deny them.
"Many of the alleged activities in The New York Times article are more than six years old," David Tovar, Wal-Mart's vice president of corporate communications, said in the statement. "If these allegations are true, it is not a reflection of who we are or what we stand for. We are deeply concerned by these allegations and are working aggressively to determine what happened."
The company said it began an investigation into FCPA compliance last fall, and has met voluntarily with the Justice Department and the SEC "to self-disclose the ongoing investigation on this matter." The Times, however, reported Saturday that the company only notified the DOJ after learning of the newspaper's reporting in Mexico.