What Did Wal-Mart's GC Know About Bribery in Mexico?
Thomas Mars, the former chief legal officer of Wal-Mart Stores Inc. who is now implicated in a major, multinational bribery scandal, and current general counsel Jeffrey Gearhart are nearly career twins. Both attended law school at the University of Arkansas; though about seven years apart, both served as editor of the law review, and both went to work for the Rose Law firm and later became partners at Kutak Rock.
And both Mars and Gearhart went on to join the Wal-Mart legal departmentMars as the chief legal officer in 2002, and Gearhart as GC of the corporate division in 2003. In fact, at the time Mars surprised in-house counsel observers by choosing Gearheat, then a Wal-Mart outside counsel, for the GC job. But it was a natural fit for Mars because their paths were so closely linked.
So one has to wonder now how much Mars confided in Gearhart in 2005. Thats when a senior in-house lawyer in Mexico claimed the Wal-Mart de Mexico subsidiary paid out some $24 million in bribes to foreign officials to secure licenses and permits for new stores.
The New York Times reported Sunday that both Mars and Wal-Marts chief executive at the time were made aware of the 2005 allegations. And Gearharts role at the time included supervising corporate governance, compliance, and risk management, according to his bio on the company website.
Those duties would require him to make sure the company was in compliance with the Foreign Corrupt Practices Act, which prohibits bribes to foreign officials. So did Mars tell Gearhart about the Mexico allegations?
We may never know. Neither Mars nor Gearhart are currently granting interviews.
What we do know is that Mars elevated Gearhart to deputy general counsel in 2007. His duties expanded then, but still included oversight of the compliance divisions.
When the worlds largest retailer decided to move Mars out of the CLO job in 2009 and named him chief administrative officer, Gearhart was chosen to replace him. Gearhart took the title of executive vice president and general counsel.
Today Gearhart, 47, is listed as one of 12 Wal-Mart executive officers; Mars is not included on that list. Gearhart oversees some 140 in-house counsel and serves as corporate secretary.
He is also dealing with the Securities and Exchange Commission and the U.S. Department of Justice over the fallout from the bribery scandal. Wal-Mart has said that it began a global FCPA compliance review, including a new internal investigation in Mexico, about six months ago.
Theodore (Ted) Boutrous Jr., a partner at Gibson Dunn & Crutcher, has worked closely with Gearhart through the years and praises the GCs superb judgment. Boutrous served as lead outside counsel in Wal-Marts landmark sex discrimination suit, which it won before the U.S. Supreme Court last June.
When youre in the trenches on a big case, you really get to know someone and how they operate as things go up and down, Boutrous said. Jeff never wavers in how he handles things, always with integrity and skill. He always tries to do the right thing.
Meanwhile, Wal-Mart released an updated statement on Tuesday regarding the bribe allegations.
The statement discusses the companys new FCPA policies, which improve on many of its existing compliance measures and auditing procedures. Wal-Mart has also created a new FCPA global compliance officer position, with responsibility for compliance around the world. The officer will oversee five other FCPA compliance directors based in international markets, including a dedicated FCPA compliance director in Mexico.
The statement stresses the companys cooperation with U.S. authorities over the six-year-old allegations and states, We are working quickly to determine what happened and are committed to getting to the bottom of this matter.
CorpCounsel also learned on Tuesday that Eduardo Castro-Wright, in 2005 the CEO of Wal-Mart de Mexico and an alleged participant in the bribes, was moved last fall into a lesser position. He had been brought to the United States and promoted twice here, until the bribery allegations began resurfacing.
His retirement agreement [PDF] calls for him to work as a paid consultant and adviser from his Nevada home until July 2012.
See also: Will Wal-Mart Regret Not Disclosing Its Bribery Investigation Sooner?, CorpCounsel, April 2012.