The Walmart story that everyone is talking about

You know it's quite a piece when the competition is giving prominent play to the followups. Sunday's blockbuster expose by NYT reporter David Barstow is a real nightmare for Walmart. Its stock is down nearly 5 percent today, federal authorities will no doubt launch an extensive investigation, many senior executives, including perhaps the CEO, will be out, and the company will be faced with years of internal inquiries, both in Mexico, where the bribing scandal took place, and in all its other overseas locations. The Barstow piece is very long, so here is a summation (via Daily Beast)

In 2005, a former exec at Walmart de Mexico named Sergio Cicero Zapata alleged in an email to a senior Walmart lawyer that the retail giant's Mexican arm routinely greased the skids, dishing out generous payouts to aid its mammoth growth. (Currently, one in five Walmart stores is located in Mexico.) An investigator's dream, Cicero named names, as well as provided details on when the bribes were given and how much they totaled. Cicero had resigned from the company in 2004 because, he told the Times, he felt underappreciated after participating in years of corruption.

A set of company sleuths were sent south, traveling to Mexico City to see if there was truth to the bombshell revelations. According to the Times: there was. After unearthing evidence of bribes in excess of $24 million, the chief investigator, a former FBI special agent, sent an email to company headquarters saying, "There is reasonable suspicion to believe that Mexican and USA laws have been violated."

After top Walmart execs were presented with evidence of misconduct, top management struggled for a while with how to respond, reports the Times. At stake was the company's much-touted support for high ethical standards, which in this case was at odds with its allegedly shady formula for market dominance. Facing a potential PR nightmare, execs appear to have been more concerned with spin than solutions. They never contacted legal authorities about the findings, and ultimately appointed the general counsel of Walmart de Mexico--who himself faced allegations of bribery--to handle the case. He exonerated his colleagues and shut down the investigation, according to the Times.

In their investigation, reporters from the Times, who scoured thousands of government documents relating to building permit requests in Mexico, found that the alleged bribes were incredibly effective, making permit obstacles vanish in days or weeks. All layers of bureaucratic and political life were allegedly receptive to this liberal outlay of cash, as zoning concerns and environmental fines disappeared and Walmart expanded across the country.

Eduardo Castro-Wright was chief operating officer of Walmart de Mexico until 2005, and was promoted to Walmart's vice chairman in 2008. Although the Times reports that there had been a few bribes before Castro-Wright's arrival in 2002, the frequency of bribes increased dramatically while he was in charge, and Cicero identified him as the force behind much of the corruption. His goal was to rapidly obtain building permits, so Walmart could build stores faster and remain ahead of the competition. When he was promoted to his post in the U.S. (three years after the bribery investigation began), the company cited his "outstanding results" in Mexico. He is scheduled to retire in July.

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Ronald Halter, who spent more than two decades with FBI, was one of Walmart's special investigators who led the preliminary probe into the bribery allegations in 2005. The investigation confirmed many of Cicero's allegations, according to the Times; in one day, Halter's team had uncovered more than 441 instances of potentially illegal payments to gestores. They also discovered that two gestores alone had received $8.5 million in payments. Perhaps most significantly, he found that massive payments ceased in 2005, the same year that Castro-Wright moved to the U.S. Although Walmart had initially planned to launch a full investigation if the probe found any evidence supporting Cicero's allegations, Halter's report and the rest of the case was turned over to Walmart de Mexico's general counsel, who closed the investigation.