In re Walmart Inc. (2019)
United States v. WMT Brasilia S.a.r.l. (E.D.V.A. 2019)

• Case Name
• In re Walmart Inc. (2019)
  United States v. WMT Brasilia S.a.r.l. (E.D.V.A. 2019)

• Date Filed
• 06/20/2019

• Enforcement Agency
• DOJ

• Foreign Official
• Unnamed government officials in Mexico, India, China, and Brazil.

• Date of Conduct
• 2000 to 2011

• Nature of Business
• Walmart Inc. is a Delaware corporation headquartered in Arkansas and is an international retailer. Walmart maintains publicly traded shares on the New York Stock Exchange.
  
  Walmart majority-owns subsidiaries that operate stores in Mexico, China, and Brazil, and a joint venture in India that “operated wholesale stores and distribution centers” (the “Mexico Subsidiary,” “Brazil Subsidiary,” “China Subsidiary,” and “India JV,” respectively).

• Influence to be Obtained
• According to the DOJ, from around July 2000 to April 2011, certain Walmart personnel in charge of implementing and maintaining the company’s internal accounting controls failed to implement sufficient controls. Although senior personnel were aware of a number of issues with anti-corruption controls at Walmart’s subsidiaries, they failed to change the controls until 2011. Specifically, the company had insufficient controls in place to conduct due diligence on third-party intermediaries who engaged with foreign officials; pay third-party intermediaries; verify work done by third-party intermediaries; draft contracts with third-party intermediaries containing anti-corruption clauses; prevent donations to government agencies from being used for personal purposes; and create procedures to implement policies related to gifts and entertainment for foreign officials.
  
  The DOJ alleged that Walmart’s subsidiaries in Mexico, India, China, and Brazil were able to hire third-party intermediaries without the proper internal controls in place to ensure that the intermediaries were not making improper payments to government officials to obtain permits and licenses. Further, while employees reported the internal control failures to senior executives, the DOJ has alleged that the reports were ignored because the weaker controls allowed the subsidiaries to quickly open stores, generating additional profits for Walmart.
  
  At the Mexico Subsidiary, it was reported that several executives were not only aware of a scheme to make improper payments to government officials in exchange for licenses and permits or to avoid fines, but approved of the scheme. The DOJ alleged that one of the subsidiary’s attorneys would instruct a third-party intermediary to pay a government official and the intermediary would send the subsidiary an invoice listing the purpose of the payment as either “avoiding a requirement,” “influence, control or knowledge of privileged information known by the government official,” or “payments to eliminate fines.” Once the attorney received the invoice, the intermediary would be paid the amount on the invoice, keeping between six to eight percent for themselves and paying the rest to the government official.
  
  From around 2008 to 2011, senior personnel at Walmart allegedly became aware of improper payments being made to government officials by employees at the India Subsidiary and payments being falsely recorded as “miscellaneous” or “incidental” fees in accounting records. The DOJ argues that despite audit reports raising concerns about internal controls and a whistleblower report alleging improper payments to government officials in India, Walmart failed to enhance accounting controls to address the concerns. Similarly, from around 2007 to 2010, senior personnel at Walmart allegedly had reason to believe that the China Subsidiary lacked proper internal controls. Although the internal audit team repeatedly raised weaknesses in the internal controls in audit reports, their concerns went unaddressed for years.
  
  The DOJ alleged that senior executives at Walmart became aware of corruption risks at the Brazil Subsidiary as early as 2000, but failed to implement due diligence procedures, conduct risk assessments, or implement anti-corruption policies or internal controls until 2008. According to the DOJ, from around 2010 to 2011, the Brazil Subsidiary repeatedly found that the internal controls were insufficient and Walmart received reports raising concerns about weaknesses in internal controls. However, Walmart failed to enhance controls and the Brazil Subsidiary continued to hire and re-hire third party intermediaries without the proper controls in place. According to the DOJ, the failure to implement controls allowed intermediaries to make improper payments to government officials in relation to the construction of new stores. Specifically, an intermediary indirectly hired by construction companies paid government officials, including government inspectors, to facilitate the construction of new stores. The intermediary was so well-known for her ability to quickly obtain licenses and permits that she was called the “sorceress” or the “genie” at the Brazil Subsidiary. The DOJ alleges that from 2009 to 2010, Walmart Brazil recorded $527,000 in payments to the intermediary as payments made to the construction companies. Walmart then incorporated the falsified financial records into its own records. The Brazil Subsidiary earned approximately $3.6 million in profits from the stores constructed by the companies responsible for hiring the intermediary.

• Enforcement
• On June 20, 2019, Walmart entered into a three-year non-prosecution agreement and agreed to retain an independent compliance monitor for two years. The Brazil Subsidiary pleaded guilty to one count of violating the FCPA’s books-and-records provision. Walmart and the Brazil Subsidiary agreed to pay a $137 million criminal penalty, of which $3.6 million reflects forfeiture and $724,898 reflects a fine for the Brazil Subsidiary. The penalty also reflects a 20 percent reduction from the bottom of the U.S. Sentencing Guidelines fine range for the portion of the penalty attributed to conduct in Mexico, and a 25 percent reduction for the portion of the penalty attributed to conduct in Brazil, China, and India. The DOJ noted that Walmart and the Brazil Subsidiary cooperated with the investigation and engaged in significant remedial measures to improve anti-corruption internal controls.
  
  In a related resolution with the SEC, Walmart agreed to disgorge $144 million in profits.

• Amount of the Value
• Not stated.

• Amount of Business Related to Payment
• Not stated.

• Intermediary
• Subsidiary; Third Party Intermediaries.

• Citizenship of Parent Entity
• United States

• Total Sanction
• $ 137,955,249

• Compliance Monitor
• Yes

• Reporting Requirements
• Yes (2 Years)

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 282,646,421

• Related Enforcement Actions
• In the Matter of Walmart Inc. (2019)
  

Walmart Inc.

• Citation
• In re Walmart Inc. (2019).

• Date Filed
• 06/20/2019

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records

• Other Statutory Provision
• None.

• Disposition
• Non-Prosecution Agreement, Non-Prosecution Agreement

• Defendant Jurisdictional Basis
• Issuer

• Defendant's Citizenship
• United States

• Individual Sanction
• $137,230,351.

WMT Brasilia S.a.r.l.

• Citation
• United States v. WMT Brasilia S.a.r.l., No. 1:19-cr-192 (E.D.V.A. 2019).

• Date Filed
• 06/20/2019

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records

• Other Statutory Provision
• None.

• Disposition
• Plea Agreement, Plea Agreement

• Defendant Jurisdictional Basis
• Agent of Issuer

• Defendant's Citizenship
• Brazil

• Individual Sanction
• $724,898.