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Jun 20, 2019

Walmart pays US$138M in long-running DOJ bribe probe

A customer pushes a shopping cart after at a Walmart Inc. store in Burbank, California, U.S., on Monday, Nov. 19, 2018. To get the jump on Black Friday selling, retailers are launching Black Friday-like promotions in the weeks prior to the event since competition and price transparency are forcing retailers to grab as much share of the consumers' wallet as they can.

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Walmart Inc. (WMT.N) agreed to pay about US$138 million to settle U.S. Justice Department claims that its Brazilian unit violated U.S. bribery laws to secure construction permits for new stores.

WMT Brasilia pleaded guilty Thursday to failing to keep accurate records, while the U.S. parent reached a non-prosecution agreement with the Justice Department over violations of the Foreign Corrupt Practices Act, according to documents filed in federal court in Alexandria, Virginia.

The Brazilian unit’s plea follows a yearslong criminal investigation into allegations that Walmart paid bribes in Mexico, China, India and Brazil over the course of a decade to fast-track store openings. The U.S. Securities and Exchange Commission also investigated the conduct.

The Justice Department didn’t immediately respond to messages seeking comment.

In the closing days of the Obama administration, Walmart balked at demands to pay more than US$600 million in penalties, leading prosecutors to go back to gather more evidence from witnesses, people familiar with matter told Bloomberg at the time.

In 2017, the company set aside almost US$300 million for a possible settlement, after which the sides deadlocked over what misconduct the retail giant would admit to, a person familiar with the matter previously said.

Walmart’s Brazilian unit admitted that US$527,000 in improper payments to an intermediary were inaccurately recorded on financial records. Walmart Brazil employees logged those payments as going to construction companies when they knew the money was going to a former Brazilian government official, according to the plea agreement filed in Virginia. The former official helped Walmart win a construction permit. Walmart earned more than US$3.6 million in profit from stores built by these construction companies.

Walmart disclosed possible violations in Mexico to the Justice Department and SEC in November 2011. The following year, the New York Times outlined details of allegations that the retailer paid some US$24 million to Mexican officials to win quick zoning changes, sidestep licenses and environmental permits and deflect opposition to open stores, turning Walmart into that country’s largest private-sector employer.

The Walmart case posed challenges for investigators. Much of the conduct uncovered in Mexico, for example, couldn’t be used as evidence because it was too old, according to the people familiar with the matter. So the government sought to build stronger cases in other countries. In Brazil and India, investigators found more recent examples of what they believed were improper payments, yet struggled to find examples of rampant misconduct in China, the people said.