Some top Walmart executives have been active in a lobbying group that is pushing to weaken the country's main anti-bribery law, as first reported in the Washington Post. That statute is at the heart of the Justice Department's criminal investigation of the giant retailer in the wake of an explosive report alleging that Walmart officials covered up an internal probe into bribery by its Mexican subsidiary.
Walmart's general counsel, Jeff Gearhart, and Thomas Hyde, former executive vice president for legal compliance ethics, were listed as board members of the U.S. Chamber Institute for Legal Reform (ILR), an arm of the country's most powerful business lobby, the U.S. Chamber of Commerce, on its most recent tax filing. Hyde was one of the company's executives who was initially informed about the alleged bribes in 2005, according to The New York Times. The ILR is spearheading an initiative to amend the Foreign Corrupt Practices Act by reducing liability for companies that bribe foreign officials and exempting companies such as Walmart that have their own compliance programs.
There is no indication that Walmart's problems in Mexico prompted its involvement in the effort to amend the law. The retailer, which employs 2.2 million people and runs more than 10,000 stores around the world, recently stated that it had established new protocols to ensure that internal probes of alleged FCPA violations are handled consistently and that it had created a position for a global FCPA compliance officer.
David Tovar, vice president for corporate communications for Walmart, told The Huffington Post, "Walmart has never lobbied on FCPA. Simply because Walmart is a member of an organization does not mean we agree with every position they take."
For over the last year and a half, the Chamber and other leading business lobbies, including the National Association of Manufacturers, the Pharmaceutical Research and Manufacturers Association and the Financial Services Roundtable, have been pushing to reform the FCPA. And the Chamber has hired some well-connected lobbyists, including former Attorney General Michael Mukasey, to fight the issue, spending $400,000 last fall on outside lobbyists and over $5 million on its own team. The law, which prohibits American companies from making improper payments to foreign officials, was passed in 1977 in the wake of several high-profile bribery scandals such as Bananagate, in which Chiquita admitted to bribing the president of Honduras to lower the company's taxes.
The industry groups claim that the Justice Department and Securities and Exchange Commission's enforcement of the law has been overly aggressive and that the FCPA hurts the ability of American companies to compete in a global marketplace. Among its proposed amendments to the FCPA: reducing liability for companies that bribe foreign officials, carving out exceptions for companies that have compliance programs, and redefining who is a "foreign official."
The lobbying push was prompted by the groups' alarm over the increase in enforcement actions in 2010, says Mark J. Rochon, who chairs the FCPA subcommittee at the National Association of Criminal Defense Lawyers, which has joined the Chamber in pushing for changes to the law. That single year saw eight of the top 10 largest settlements of FCPA violations of all time, with a record $1.8 billion in financial penalties to the DOJ and SEC.
Under pressure from the industry and some members of Congress, the Justice Department announced last fall that it would issue some guidance on the meaning of the FCPA and its application. And in recent months, the business lobby has been anticipating that some of its proposals to tighten the standards would be adopted: At the Dow Jones Global Compliance Symposium in March, the Chamber's Mukasey was optimistic for future changes, emphasizing that the law was forcing some companies to abandon business in parts of the world, opening the door to "folks like the Chinese and the Russians who are less delicate" in enforcing compliance of anti-bribery laws.
Some panelists criticized the Justice Department for being overly aggressive in its enforcement, noting the recent dismissal of a huge case brought by officials against defendants accused of paying bribes to win contracts to sell body armor and weapons. Butler University professor Mike Koehler lamented that "these were astounding failures on behalf of the DOJ. They ruin real people's lives. They empty people's wallets."
The Obama administration is "unequivocally opposed" to weakening the statute, said Secretary of State Hillary Clinton during a speech at an event last month hosted by Transparency International, an anti-corruption group. "We don't need to lower our standards. We need to work with other countries to raise theirs. I actually think a race to the bottom would probably disadvantage us. It would not give us the leverage and the credibility that we are seeking."
The Chamber-led initiative seemed to be making some progress. On April 11, just a week and a half before the New York Times story on the bribery scandal shook up the Beltway, the ILR hosted a meeting at the Chamber's headquarters to discuss its concerns with several senior government officials, including assistant attorney general Lanny Breuer, DOJ Fraud Unit chief Denis McInerny and Securities and Exchange Commission enforcement director Robert Khuzami. (Justice Department officials separately met with good-government groups, such as the Open Society Institute and the Project on Government Oversight, which support tough enforcement of the FCPA.)
"It was a very productive and constructive session," says Rochon. "We came away pleased that they were engaging with the issues and are attentive to these concerns."
Now it seems likely that any changes to the law will be put on ice for now. "I don't see any political momentum to see FCPA reform now, with what looks like a landmark case," James Post, professor of management at Boston University, told the Wall Street Journal on Tuesday. "You'd have a hard time in an election year, in any event, but I think the Walmart case is so consequential, it basically freezes the possibility of reform any time soon."
Ben Freeman, a National Security Fellow at the Project on Government Oversight, which opposes the Chamber-led initiative to weaken the law, says that the tide has shifted in the wake of the report. "It had been a cease-fire in recent months but this Walmart story just showed that we need a FCPA. It's ammo for our side."
Spokesmen for the ILR and the Justice Department did not return calls for comment.
Start your workday the right way with the news that matters most. Learn more