NYTimes investigations editor discusses Wal-Mart coverage

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Paul Fishleder, the deputy investigations editor at The New York Times, was asked to comment by Talking Biz News about the paper’s recent investigation into Wal-Mart’s bribery tactics in Mexico.

The stories won reporter David Barstow the Talking Biz News co-Business Journalist of the Year Award for 2012.

Fishleder writes:

Barstow’s reporting began with a tip from a source. He had two huge challenges to overcome.  First off, he had to discover and recreate what had happened inside the secret precincts at the top of Wal-Mart without the hope of cooperation from anyone inside Wal-Mart. And in Mexico, he had to demonstrate that bribes had been paid even though no one would admit to receiving them.

He learned that a former Wal-Mart de Mexico lawyer named Sergio Cicero Zapata had contacted company executives in Arkansas and told them how for years he and his bosses had used systematic bribery to obtain zoning rulings and construction permits that allowed Wal-Mart to win market dominance in every corner of Mexico. There were hundreds of suspect payments, totaling more than $24 million.

Wal-Mart began its own investigation. Yet within months, just as the inquiry began to bear fruit, the company’s leaders shut it down. No doubt they believed that the matter would quietly end there.  And it would have, but for Barstow.

Barstow obtained hundreds of highly confidential Wal-Mart documents, an amazing trove of memos and e-mails.  He interviewed the key players here and in Mexico.  Before he was through, he knew more about how Wal-Mart dealt with this sorry episode than Wal-Mart did. He was able to piece together the hidden corporate drama — in all its machinations and power plays — of an internal investigation that Wal-Mart’s leaders feared could cripple it as it expanded through Latin American and around the world. 

Barstow found the smoking gun.  He turned up Wal-Mart memos documenting that its investigators had in fact found powerful evidence that Cicero was right. There was “reasonable suspicion to believe that Mexican and USA laws have been violated,” they told their superiors. Yet Wal-Mart never notified law enforcement officials in either country.

Barstow did the shoe-leather investigation that Wal-Mart should have done in the first place, unearthing the wrongdoing that the bosses in Arkansas chose to ignore.

Traveling across Mexico with a Mexican reporter, Alejandra Xanic von Bertrab, he tunneled into the databases and filing cabinets of the local bureaucracies that govern construction permits and zoning issues. He discovered how, in city after city, Wal-Mart had paid bribes to win approvals that the law didn’t allow.

Where Barstow most completely exposed the corruption was in Teotihuacan, where in 2004, Wal-Mart bribed its way around regulation after regulation to build a supermarket in the shadow of the ancient pyramids, one of the most venerated places in Mexico.: There was the bribe for a crucial, last-minute change in a zoning map; the payment for a traffic permit; the payment for the blessing of the Institute of Archaeology and History, official guardian of Mexico’s cultural treasures, and the bribes to Teotihuacan’s mayor for the all-important construction permit. The store opened on schedule, in time for Christmas shopping.

As a direct result of Barstow’s reporting:
• The Justice Department and the Securities and Exchange Commission are investigating Wal-Mart for violations of the federal antibribery law, the Foreign Corrupt Practices Act.
* The Times’s revelations brought a sudden halt to a growing movement to ease up on FCPA enforcement.
* In Mexico, authorities are investigating Wal-Mart, the country’s largest    private employer, for possible violations of its anticorruption laws.
• Even before his first piece was published, Barstow shook Wal-Mart into action. Wal-Mart was in a routine worldwide anticorruption audit when it learned that Barstow was on the Mexican case. The company hurriedly notified federal authorities and reopened its own investigation.
• In mid-November 2012, Wal-Mart disclosed in a regulatory filing that it was examining possible violations of the antibribery law in three of its other primary overseas markets — China, India and Brazil.
• Amid shareholder suits and protests, Wal-Mart has radically overhauled its compliance and investigative protocols, and a number of central players in the scandal have left the company.
• Its expansion plans have been compromised in Mexico and the United States, and are likely to be slowed in other overseas markets, too.
• By year’s end, Wal-Mart’s investigation had cost it nearly $100 million.