ALM Properties, Inc.
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Lest there be doubt that Wal-Mart Stores Inc. is taking seriously the allegations of widespread bribery in its Mexico subsidiary, in October the retailing giant announced a shake-up of its in-house legal function with a clear focus on compliance. And at least part of the reason was revealed in November, when the company filed a form 8-K with the Securities and Exchange Commission. It's not just Mexico. The company is also investigating possible violations of the Foreign Corrupt Practices Act in its businesses in Brazil, China, and India.
The situation in India seems particularly volatile. An investigative team consisting of auditors from KPMG and lawyers from Greenberg Traurig is examining the operation at Bharti Walmart, the company's 50-50 joint venture with India's Bharti Enterprises, according to The Times of India . At press time in late November, the company's chief financial officer, who doubled as its acting legal counsel, and the four other members of its legal team were suspended pending the completion of the investigation, the paper reported. (A Wal-Mart spokesman confirmed the suspensions, but declined to comment, saying: "It would be inappropriate for us to comment further until we have finished the investigation.")
Wal-Mart's 8-K provided additional details about the company's global internal inquiry. It's being directed by the audit committee of Wal-Mart's board, which is composed entirely of independent directors. (The company previously noted that Jones Day is conducting the probe.) And it hasn't been cheap. From February to November, the company spent $99 million responding to the allegations.
The world's largest retailer first disclosed its own internal investigation as well as a federal probe in late 2011, after The New York Times began reporting on alleged bribes paid by its Mexico subsidiary to expand business in that country. The external investigations have since multiplied. The SEC and the U.S. Department of Justice are both looking into "possible violations of the FCPA" alongside "a number of federal and local government agencies in Mexico," the 8-K acknowledged. Shareholder suits have also been filed against the company as well as current and former officers and directors.
In recent months the company also announced several personnel changes. According to a Reuters report on Wal-Mart's plans, "starting on December 1 its compliance, ethics, investigations, and legal units will become one organization," which will be led by general counsel and executive vice president Jeff Gearhart. In addition, Sidley Austin partner Jay Jorgensen was scheduled to join as senior vice president and global chief compliance officer.
These announcements came a short time after the company hired Daniel Trujillo to take over as senior vice president and chief compliance officer for Walmart International. An internal memo announcing his appointment said that Trujillo "will be responsible for reviewing, assessing, and integrating our compliance efforts outside of the U.S.; leveraging talent, resources, and compliance best practices across our international markets; and ensuring appropriate training, monitoring, education, and audit of our international compliance functions."
It was jointly issued by general counsel Gearhart and Walmart International CEO Doug McMillon. Trujillo declined to comment for this article.
Ryan McConnell, a partner at Baker & McKenzie in Houston (and a Corporate Counsel columnist), has worked with Trujillo and described him as a "cutting-edge" kind of compliance officer, who uses technology and risk-based analysis to target problem areas in a company. McConnell and Trujillo coauthored an article for CorpCounsel.com in May entitled "Playing Moneyball in the Compliance Department." They discussed using technology, empirical data, and statistics "to effectively manage allegation programs, document production, due diligence, compliance audits, and training." This approach is especially useful to companies that are working to comply with the Foreign Corrupt Practices Act, which prohibits bribing foreign officials to advance business interests.
Most recently Trujillo was deputy general counsel and director of compliance at Schlumberger Limited, which bills itself as the world's largest supplier of technology and services to the oil and gas industry. During his time with the French-based company, Trujillo worked in more than 50 countries in numerous legal roles in Latin America, Europe, Africa, the Middle East, and the United States. In all, he has more than 20 years of experience establishing and managing legal and compliance departments and programs and speaks five languages.
David Tovar, head of the company's corporate communications, says that Trujillo's appointment is part of the larger, ongoing process. "Wal-Mart is committed to having strong and effective compliance programs around the world," Tovar emphasizes. "Over the past 18 months, we have made improvements to our global compliance programs and have taken a number of specific, concrete actions with respect to our processes, procedures, and people."
In April, Wal-Mart named Tom Gean, a former U.S. attorney for the Western District of Arkansas, as its global FCPA compliance officer. Gean, who spent eight years as Wal-Mart's chief compliance officer, will report to Trujillo, who, like Jorgenson, will report to GC Gearhart.