Hefty fine! Walmart to pay Rs 1,962 crore for bribing officials in India, 3 other countries

Walmart Inc has been asked to pay $282 million (Rs 1,962 crore) as fine for violating the Foreign Corrupt Practices Act (FCPA) in India, China, Mexico and Brazil. The Arkansas-based retail behemoth had allegedly paid bribes to several third-party intermediaries in these countries to get necessary approvals. The case dates back around a decade when Walmart entered India in 2007. The US Justice Department, in a statement, said Walmart failed to implement measures related to anti-corruption in India from 2009 until 2011. It also said Walmart made deals with third-party companies to bribe government officials. Prominent among all the allegations against Walmart was the funnelling of $500,000 in a Brazilian company, known as "sorceress", to get construction related approvals.

Walmart has now agreed to pay $144 million (Rs 1,001 crore) to settle the US Securities and Exchange Commission charges and $137 million (Rs 9,60 crore) to pay criminal charges by the United States Justice Department.

"Walmart profited from rapid international expansion, but in doing so chose not to take necessary steps to avoid corruption," said Assistant Attorney General Benczkowski of the US Justice Department's criminal division. He added that in numerous instances, senior Walmart employees knew of failures of its anti-corruption-related internal controls involving foreign subsidiaries, and yet Walmart failed for years to implement sufficient controls comporting with US criminal laws.

Even though senior Walmart personnel responsible for implementing and maintaining the company's internal accounting controls related to anti-corruption knew of these issues, Walmart did not begin to change its internal accounting controls related to anti-corruption to comply with US criminal laws until 2011, said the DoJ statement.

"In India, because of Walmart's failure to implement sufficient internal accounting controls related to anti-corruption, from 2009 until 2011, Walmart's operations there were able to retain third-party intermediaries (TPIs) that made improper payments to government officials in order to obtain store operating permits and licenses. These improper payments were then falsely recorded in Walmart's joint venture's books and records with vague descriptions like "misc fees," "miscellaneous," "professional fees," "incidental" and "government fee"," the DoJ statement said.

Charging Walmart of violating the FCPA, the Securities and Exchange Commission said the company failed to sufficiently investigate or mitigate certain anti-corruption risks and allowed subsidiaries in Brazil, China, India, and Mexico to employ third-party intermediaries who made payments to foreign government officials without reasonable assurances that they complied with the FCPA. 

"Walmart valued international growth and cost-cutting over compliance," said Charles Cain, Chief of the SEC Enforcement Division's FCPA Unit. "The company could have avoided many of these problems, but instead Walmart repeatedly failed to take red flags seriously and delayed the implementation of appropriate internal accounting controls."

The retail giant acquired 77 per cent in Indian e-commerce giant Flipkart for a whopping $16 billion deal in 2018. After the merger with Flipkart, Walmart Inc had also appointed officials at the senior roles, including a chief financial officer, ethics and compliance officer, and controller and general counsel, to address the problems related to corruption and internal accounting controls.

Walmart's Flipkart, Indian startup GOQii settle dispute over sharp discounting

India becomes investment darling for sovereign wealth and pension funds as US-China trade war deepens

Edited by Manoj Sharma