Dive Brief:
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U.S. District Court Judge Katherine Polk Failla has dismissed a lawsuit brought by a Wal-Mart de Mexico shareholder, who had alleged damages stemming from the retail giant bribery scandal involving its operations in Mexico, Reuters reports.
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Failla denied the claims involving former Wal-Mex chairman Ernesto Vega and CEO Scot Rank, saying that Wal-Mex and Wal-Mart weren’t liable for activity of their executives, and that the company itself behaved ethically and legally during an investigation of the alleged activity, according to Reuters.
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Wal-Mart and federal officials have been working on a settlement of the case, though the retail giant still faces several shareholder lawsuits in its wake. Wal-Mart spokesperson Randy Hargrove told Reuters, "We appreciate the court's careful consideration of the issues and dismissing these claims." But, he added that it "wouldn't be appropriate" to discuss how it might affect other lawsuits.
Dive Insight:
For five years, the U.S. Justice Department and Securities and Exchange Commission have been investigating Wal-Mart under the Foreign Corrupt Practices Act, which prohibits and monitors improper international dealings like bribery. Talks fell apart last fall as the Obama administration prepared to wind down, and government officials renewed their investigation, according to earlier press reports.
In some areas of the world, bribing officials is an accepted practice to obtain building permits or licensing and to close business deals. It’s not exactly copacetic from the perspective of the U.S. government, however, as Wal-Mart Stores Inc. and its Mexican division, Walmart de México, have found. U.S. investigators looking into Wal-Mart’s dealings there eventually expanded their probe elsewhere, including Brazil, India and China.
Still, there are grey areas. In some countries, "gifts" are expected during business negotiations. The U.S. Department of Justice has a guide — including case studies — on how to comply with the Foreign Corrupt Practices Act of 1977, which outlaws the kind of activity that has gotten Wal-Mart in hot water, while still keeping up with business gift customs.
Wal-Mart's bribery scandal just isn’t going away and has already included investigative press reports (a story originally broken by The New York Times five years ago launched the probe), government inquiries on both sides of the border and criminal court proceedings that have cost the retailer dearly — more than $820 million, by some accounts.
The case could imperil Wal-Mart’s access to federal programs like food assistance, a source of a significant portion of the spending ability among its consumer base. Organizations that plead guilty to federal crimes can be blocked from winning government contracts, meaning Wal-Mart — the country’s largest grocer — could lose its access to the Supplemental Nutrition Assistance Program, commonly known as food stamps, which accounted for some $13 billion in sales last year.