Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle
Mr. Mars first sent Mr. Halter’s report to Mr. Rodríguezmacedo. Then he arranged to ship Mr. Halter’s investigative files to him as well. In an e-mail, he sought Mr. Senser’s advice on how to send the files in “a secure manner.”
Mr. Senser recommended FedEx. “There is very good control on those shipments, and while governments do compromise them if they are looking for something in particular, there is no reason for them to think that this shipment is out of the ordinary,” he wrote.
“The key,” he added, “is being careful about how you communicate the details of the shipment to José Luis.” He advised Mr. Mars to use encrypted e-mail.
Wal-Mart’s spokesman, Mr. Tovar, said the company could not discuss Mr. Scott’s meeting or the decision to transfer the case to Mr. Rodríguezmacedo. “At this point,” he said, “we don’t have a full explanation of what happened. Unfortunately, we realize that until the investigation is concluded, there will be some unanswered questions.”
Wal-Mart’s leaders, however, had clear guidance about the propriety of letting a target of an investigation run it.
On the same day Mr. Senser was putting the finishing touches on the new investigations protocol, Wal-Mart’s ethics office sent him a booklet of “best practices” for internal investigations. It had been put together by lawyers and executives who supervised investigations at Fortune 500 companies.
“Investigations should be conducted by individuals who do not have any vested interest in the potential outcomes of the investigation,” it said.
The transfer appeared to violate even the “modified protocol” for investigations. Under the new protocol, Corporate Investigations was still supposed to handle “significant” allegations — including those involving potential crimes and senior executives. When Mr. Senser asked his deputies to list all investigations that met this threshold, they came up with 31 cases.
At the top of the list: Mexico.
After the meeting with Mr. Scott, Mr. Senser had told Mr. Lewis in his performance evaluation that his “highest priority” should be to eliminate “the perceptions that investigators are being too aggressive.” He wanted Mr. Lewis to “earn the trust of” his “clients” — Wal-Mart’s leaders. He wanted him to head off “adversarial interactions.”
Mr. Senser now applied the same advice to himself.
Even as Mr. Halter’s files were being shipped to Mr. Rodríguezmacedo, Mr. Stucky made plans to fly to Mexico with other executives involved in the bribery investigation. The trip, he wrote, was “for the purpose of re-establishing activities related to the certain compliance matters we’ve been discussing.” Mr. Stucky invited Mr. Senser along.
“It is better if we do not make this trip to Mexico City,” Mr. Senser replied. His investigators, he wrote, would simply be “a resource” if needed.
Ten days after Mr. Stucky flew to Mexico, an article about Wal-Mart appeared in The Times. It focused on “the increasingly important role of one man: Eduardo Castro-Wright.” The article said Mr. Castro-Wright was a “popular figure” inside Wal-Mart because he made Wal-Mart de Mexico one of the company’s “most profitable units.”
Wall Street analysts, it said, viewed him as a “very strong candidate” to succeed Mr. Scott.
For those who had investigated Mr. Cicero’s allegations, the preliminary inquiry had been just that — preliminary. In memos and meetings, they had argued that their findings clearly justified a full-blown investigation. Mr. Castro-Wright’s precise role had yet to be determined. Mr. Halter had never been permitted to question him, nor had Mr. Castro-Wright’s computer files been examined, records and interviews show.
At the very least, a complete investigation would take months.
Mr. Rodríguezmacedo, the man now in charge, saw it differently. He wrapped up the case in a few weeks, with little additional investigation.
“There is no evidence or clear indication,” his report concluded, “of bribes paid to Mexican government authorities with the purpose of wrongfully securing any licenses or permits.”
That conclusion, his report explained, was largely based on the denials of his fellow executives. Not one “mentioned having ordered or given bribes to government authorities,” he wrote.
His report, six pages long, neglected to note that he had been implicated in the same criminal conduct.
That was not the only omission. While his report conceded that Wal-Mart de Mexico executives had authorized years of payments to gestores, it never explained what these executives expected the gestores to do with the millions of dollars they received to “facilitate” permits.
He was also silent on the evidence that Wal-Mart de Mexico had doled out donations to get permits. Nor did he address evidence that he and other executives had suppressed or rewritten audits that would have alerted Bentonville to improper payments.
Instead, the bulk of Mr. Rodríguezmacedo’s report attacked the integrity of his accuser.
Mr. Cicero, he wrote, made Wal-Mart de Mexico’s executives think they would “run the risk of having permits denied if the gestores were not used.” But this was merely a ruse: In all likelihood, he argued, Wal-Mart de Mexico paid millions for “services never rendered.” The gestores simply pocketed the money, he suggested, and Mr. Cicero “may have benefited,” too.
But he offered no direct proof. Indeed, as his report made clear, it was less an allegation than a hypothesis built on two highly circumstantial pillars.
First, he said he had consulted with Jesús Zamora-Pierce, a “prestigious independent counsel” who had written books on fraud. Mr. Zamora, he wrote, “feels the conduct displayed by Sergio Cicero is typical of someone engaging in fraud. It is not uncommon in Mexico for lawyers to recommend the use of gestores to facilitate permit obtainment, when in reality it is nothing more than a means of engaging in fraud.”
Second, he said he had done a statistical analysis that found Wal-Mart de Mexico won permits even faster after Mr. Cicero left. The validity of his analysis was impossible to assess; he did not include his statistics in the report.
In building a case against Mr. Cicero, Mr. Rodríguezmacedo’s report included several false statements. He described Mr. Cicero’s “dismissal” when records showed he had resigned.
He also wrote that Kroll’s investigation of Mr. Cicero concluded that he “had a considerable increase in his standard of living during the time in which payments were made to the gestores.” Kroll’s report made no such assertion, people involved in the investigation said.
His report promised a series of corrective steps aimed at putting the entire matter to rest. Wal-Mart de Mexico would no longer use gestores. There would be a renewed commitment to Wal-Mart’s anticorruption policy. He did not recommend any disciplinary action against his colleagues.
There was, however, one person he hoped to punish. Wal-Mart de Mexico, he wrote, would scour Mr. Cicero’s records and determine “if any legal action may be taken against him.”
Mr. Rodríguezmacedo submitted a draft of his report to Bentonville. In an e-mail, Mr. Lewis told his superiors that he found the report “lacking.” It was not clear what evidence supported the report’s conclusions, he wrote. “More importantly,” he wrote, “if one agrees that Sergio defrauded the company and I am one of them, the question becomes, how was he able to get away with almost $10 million and why was nothing done after it was discovered?”
Mr. Rodríguezmacedo responded by adding a paragraph to the end of his report: They had decided not to pursue “criminal actions” against Mr. Cicero because “we did not have strong case.”
“At the risk of being cynical,” Mr. Lewis wrote in response, “that report is exactly the same as the previous which I indicated was truly lacking.”
But it was enough for Wal-Mart. Mr. Rodríguezmacedo was told by executives in Bentonville on May 10, 2006, to put his report “into final form, thus concluding this investigation.”
No one told Mr. Cicero. All he knew was that after months of e-mails, phone calls and meetings, Wal-Mart’s interest seemed to suddenly fade. His phone calls and e-mails went unanswered.
“I thought nobody cares about this,” he said. “So I left it behind.”
Alejandra Xanic von Bertrab and James C. McKinley Jr. contributed reporting from Mexico City.