Walmart Settles Brazil Corruption Case for $138M

ALEXANDRIA, Va. (CN) – Walmart has agreed to fork over roughly $138 million in criminal penalties to settle claims by the Justice Department that one of its subsidiaries in Brazil paid a “sorceress” over $500,000 in bribes to make permitting problems go away.

(AP Photo/Tony Gutierrez)

According to a plea agreement filed Thursday in Virginia federal court, the corruption unfolded between 2001 and 2010 when Walmart Brasilia knowingly led its parent corporation to falsify company records. Specifically, the Brazilian subsidiary recorded the bribery payments as if they were going to construction firms when they were actually being funneled to a government intermediary for her assistance in opening stores as rapidly as possible.

Though the woman is not identified, she is described in court papers as a “sorceress” and “genie” due to her “magic” ability to sort through permitting issues quickly.

“Knowing that Walmart was a U.S. issuer, and that Walmart Brazil’s books and records were used by Walmart to create financial records to be publicly filed with the U.S. Securities and Exchange Commission, Walmart Brazil falsely recorded its payments to Brazil Intermediary for its services as payments to the Brazil construction companies, not as payments to Brazil intermediary,” the agreement states.

Executives at Walmart who were responsible for implementing and maintaining the company’s internal accounting and anti-corruption mechanisms knew of the improprieties for years, Assistant Attorney General Brian Benczkowski said in a statement Thursday.

But Walmart’s admitted violations of the Foreign Corrupt Practices Act continued unabated as the retail giant underwent “exponential international growth,” Eastern Virginia U.S. Attorney G. Zachary Terwilliger said.

The corruption that took place in Brazil allowed unethical practices to flourish in other countries like Mexico, China and India as well.

According to information gathered by FBI investigators, a former attorney for a Walmart subsidiary in Mexico testified that he oversaw a similar scheme. For years, third-party intermediaries made improper payments to government officials to obtain permits and licenses.

In India, another Walmart subsidiary’s books were also cooked – improper payments were recorded in company files with vague descriptions like “miscellaneous” or “professional fees.”

Further, a Chinese subsidiary’s internal audit team flagged a variety of “weaknesses” in the company’s financial records, but they were never addressed.

According to the plea agreement, Walmart has agreed to retain an independent corporate compliance manager for two years and entered into a three-year non-prosecution agreement.

The $137.9 million criminal penalty includes a forfeiture of $3.6 million and a fine of $724,898.

In a separate agreement with the Securities and Exchange Commission, the retail giant also agreed to disgorge $144 million in profits.

Walmart could not immediately be reached for comment Thursday.

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