Moral Integrity and The Rule of Law
By Arthur Katz, JD
The New York Times recently published a lengthy article entitled “Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle.”
Although it ultimately may be shown that The New York Times got some of its facts wrong and that some of the anticipated legal ramifications are incorrect, what appears to have happened is that payments were made in Mexico on a number of occasions in connection with expediting the granting of various building and other permits that Wal-Mart’s Mexican affiliate needed in order to build its various stores.
The article, among other disclosures, said that an aggregate of at least $24 million was paid, that the issued receipts were coded to reflect the true nature of the services rendered, that such payments were known by senior management not just in Mexico but also in the U.S., that prompt actions were not taken to fully investigate or to terminate the activity and, indeed, actions apparently were taken which may have fostered the continuation of the illegal activity and a continued culture of commercial bribery in the right circumstances.
Some of the actions taken by Wal-Mart and its Mexican affiliate violated the law. Wal-Mart apparently did not properly account for the payments made on its books, which was and is a violation of law. Moreover, and despite what those of us who work in the field would say were “best practices” at the time the acts were committed and reported up to senior management, senior management instead of fully investigating the activities and causing Wal-Mart to take aggressive actions to make sure that the illegal activity was discontinued, apparently made an effort to minimize and even cover up what occurred. The attitude exhibited by senior Wal-Mart management obviously was not the proper tone from the top that regulators and lawyers encouraged at the time that the events occurred or at the present time.
It now appears that, before the story was released and after Wal-Mart learned that an investigation was being pursued by The New York Times, Wal-Mart took the affirmative action it should have taken more than six years earlier and started to treat the matter with the seriousness it deserved.
What does this episode show us? How can we teach our children and students to be honest, to have a sense of integrity and to obey the law when the example set by one of our largest and better-managed public companies is something less than what is right? Even though Wal-Mart may not be able to be prosecuted on some of its actions because the statute of limitations on some of the offenses may have run out, its actions were wrong and a violation of law. By secretly coding its receipts and not properly accounting for its expenditures, it would appear that Wal-Mart knew that its actions were wrong at the time engaged in. We are a society that follows the rule of law. Excusing Wal-Mart for its actions, no matter how rationalized, is just plain wrong.
We try to teach our children that laws are not made to be broken by the mighty. That the same laws apply to all of us. Merely because no one is physically injured does not excuse a wrongdoer. White-collar commercial bribery is not just wrong, it is illegal, and when it is undertaken by a corporation like Wal-Mart, it only encourages smaller and less successful entities to do the same. This is not an instance where we need to set an example, but one in which Wal-Mart should be treated like any other offender and be properly penalized under our existing laws which are enforced by the U.S. Securities and Exchange Commission and Department of Justice. #
Arthur Katz is a member of the law firm of Otterbourg, Steindler, Houston & Rosen, P.C.
