I am at the end of this exploration of the Walmart Inc. (Walmart) Foreign Corrupt Practices Act (FCPA) enforcement action. This massive case came in with multiple documents, a long list of instances of bribery and corruption, a slew of individuals who turned some very blind eyes to evidence literally in front of them, some $900+ million in pre-resolution investigative and remediation costs and a total fine and penalty of $282 million. The documents for this matter include, from the Department of Justice (DOJ): Criminal Information (Information); Non-Prosecution Agreement (NPA); Plea Agreement and Statement of Facts (Plea Agreement). From the Securities and Exchange Commission (SEC), a Cease and Desist Order (Order). Today, I consider what does it all mean for the compliance practitioner and compliance programs going forward.
As Matt Kelly, writing in Radical Compliance, noted, “what stands out more than anything else is the ordinariness of this resolution.” As I told Matt earlier this week at the ACFE national conference in Austin, that was going to be the topic of my final blog and although I thought of it before he wrote it, he did get it in print first so I do credit him for that. However, where Matt and I part company is that I think it is a landmark FCPA enforcement action that should be acknowledged as such.
Whenever the world’s largest retailer makes above the fold news, particularly for bribery and corruption, it is by definition landmark. The Walmart conduct in the past decade was clearly FCPA violative. Yet it was Walmart’s response which makes the case so important. Walmart showed the world that a company, which commits to doing business in compliance with the plethora of worldwide anti-bribery/anti-corruption laws can do so. The monies that Walmart spent in pre-settlement costs alone makes the case noteworthy and landmark.
But more than the monies it was creating a best in class compliance program which makes Walmart stand out. It was as if Walmart took the New York Times (NYT) breaking story about corruption in Mexico as an opportunity to right the ship and get fully behind compliance. Further, as Matt Ellis suggested in a 2012 blog post, entitled “Walmart, Go Big on FCPA Compliance”, it would certainly appear that Walmart did go big in the area of compliance. When you have 2.2 million employees worldwide, you simply have to go big. But more than simply going big, you have to get to some very basic cultural lessons about actually doing compliance, which Walmart has apparently done.
Mike Volkov, writing in Corruption Crime and Compliance, noted a clear lesson for every compliance practitioner was in the area of rapid expansion of international growth. Volkov stated, “The Walmart case, from a big picture standpoint, represents a serious warning to all global companies committed to rapid international growth. In the absence of a significant and sustained commitment to compliance, rapid international growth is bound to end up in a compliance breakdown, thereby threatening the ultimate success of any international business strategy.” It was this “commitment to compliance” where Walmart came to grief. There were plenty of persons and internal corporate disciplines who not only pointed out control deficiencies but also specifically recommended outside counsel come in and there be an external investigations into the allegation in all four countries named in the settlement documents.”
Walmart further demonstrates the need for more robust and ongoing risk assessments. If your international footprint is going to expand, the entire plethora of your compliance regime must expand to meet these new risks. It is not simply a matter of scaling up your existing internal controls and compliance program but also managing the new risks that you are or will encounter as you expand your corporate footprint.
Of course, the commitment from senior management is critical in all of this. There is a reason it is Hallmark Number 1 in the 10 Hallmarks of an Effective Compliance Program. Even if you are sick to death of the ubiquitous “Tone at the Top” this matter has shown that when senior management is not committed to doing business ethically and in compliance, it does not really matter how robust your compliance program may be. Conversely, when senior management is focused on compliance you see the type of all-encompassing response that only a Walmart can and indeed did make. Walmart should be celebrated for their response to the allegations of bribery and corruption after the NYT story broke. That response alone should be considered landmark.
Finally, are we at the end of an era of FCPA enforcement? Kelly certainly thinks so. However, it has been my observation that as big as the most recent biggest bribery and corruption case of all time is, there is always another one just around the corner. After Walmart came GlaxoSmithKline plc (GSK) in China. After GSK came Fédération Internationale de Football Association (FIFA). After FIFA came Volkswagen (VW). After VW came Odebrecht S.A. After Odebrecht came Rolls-Royce plc (RR). After RR came Petróleo Brasileiro S.A. (Petrobras). Still on the horizon, there is 1Malaysia Development Berhad (1MDB). Somewhere down the road is Unaoil S.A.M. Lurking offshore is the Angola “tuna boat” scandal. Who knows where the next landmark corruption case will come from?
For those who claim that the amount of the fine and penalty or the allegations of bribery and corruption do not warrant the attention paid to this case, the very fact of their ordinariness is what makes the Walmart FCPA enforcement action the landmark matter that it is.
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© Thomas R. Fox, 2019