Lie Detectors Needed!

Looks like Wal-Mart could have used one of those lie detectors.

Ten years ago Wal-Mart was looking to expand in Mexico and ran into some bureaucratic trouble. Opening new stores was difficult. Zoning permits, impact statements, building permits, traffic studies—they were all taking too long. So they hired local lawyers to “fix” things, which in the developing world means that probably graft was involved.

Soon, a familiar story ensued: an employee involved in the expansion was passed over for a promotion, so he went to the senior brass in the US with allegations of bribery and corruption. The brass investigated, but the people they sent down there had lots of experience in law enforcement and little in Wal-Mart’s corporate culture and a few feathers got ruffled. A new investigator was put in charge—one who might have been implicated in the first place. His report was far from adequate, but the payments to local “fixers” stopped. Headquarters let the matter drop.

What happened next is atypical: the whistleblower also dropped the matter. He didn’t carry on his crusade to the next level. It wasn’t until late last year—six years later—that the issue surfaced again. Indeed, the company disclosed in their annual report two months ago that they were reviewing their compliance with the Foreign Corrupt Practices Act.

Working in other cultures is different than in the US. A tip one place might be a bribe somewhere else, and it’s often hard to tell the difference. But Federal Justice Officials are involved now, and they will take a hard look at both the events and the investigations. Wal-Mart is a tough competitor in a rough business with a big target on its back. They can’t afford this kind of distraction, and they’ll probably settle the charges.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-09T16:20:20+00:00 April 25th, 2012|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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