May face charges, but unlikely to amount to a large fine as FCPA penalties are connected to profits the alleged misconduct generated
WASHINGTON, OCT 19:
A US government investigation is said to have found evidence of Wal-Mart Stores Inc allegedly paying thousands of small bribes to Indian officials to get customs clearances and obtain real-estate permits, the Wall Street Journal has reported.
Vast majority of payments were below USD 200 (about Rs. 13,000 at current exchange rate) and some were as low as USD 5 (Rs 330) but together totalled millions of dollars.
The three-year federal probe “found evidence of bribery in India, centering on widespread but relatively small payments made to local officials there”, the Journal reported citing persons it didn’t identify.
“Much of the suspected bribery investigators unearthed in India involves thousands of small payments to low-level local officials to help move goods through customs or obtain real-estate permits.
“The vast majority of the suspicious payments were less than USD 200, and some were as low as USD 5,” it said. “But when added together they totalled millions of dollars.”
The world’s largest retailer entered India in 2007 through a supermarket joint venture with Bharti Enterprises but split up in 2013. Since then, it is mostly focused on wholesale business.
Wall Street Journal said investigators found similar payments in Mexico, but “the bulk of such activity seemed to be in India“.
Wal-Marat may face charges
Wal—Mart is likely to face charges of violating the US Foreign Corrupt Practices Act due to these payments, the paper said, adding that the charges in India are unlikely to amount to a large fine as FCPA penalties are connected to profits the alleged misconduct generated.
“Because penalties under the FCPA are often connected to the amount of profit the alleged misconduct generated, the payments in India wouldn’t be likely to result in any sizable penalty, since Wal—Mart’s operations there haven’t been particularly profitable,” it cited people familiar with the matter as saying.
Wal-Mart’s Indian unit reportedly had suffered a loss of Rs. 232 crore in 2014. Its revenue had dropped 32 per cent to Rs. 2,992.7 crore in that year.
In November last year, the retailer had sacked a manager following the probe by the US Department of Justice.
Previously, it had sacked its CFO and legal team.
When contacted, a Wal-Mart India Vice President and Head — Corporate Affairs Rajneesh Kumar said: “As we have said from the beginning, we are cooperating fully with the government in this matter and can’t comment further on that process.”
He further said for Wal—Mart, compliance with the US Foreign Corrupt Practices Act (FCPA) and other anti—corruption laws is key priority.
“We work closely with third—party compliance experts on support and training as we continuously review and strengthen our programs around the world,” Kumar added.
In Nov 2012, the company’s erstwhile joint venture Bharti Wal—Mart had suspended five people, including then CFO Pankaj Madan, as part of an ongoing global investigation by the US retail giant against alleged corrupt practices in India.
The investigations in India was part of Wal—Mart’s probe that included other countries like, China and Brazil, over allegations of violation of FCPA of the US, that bars bribing officials of foreign governments.
Source : http://www.thehindubusinessline.com
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