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US: Walmart shares dip over Mexican bribery cover-up

Date: 24 Apr 2012

Photo outside a WalMex store

Walmart has been hit by a bribery scandal involving its Mexican business. Executives paid bribes of around $24 million to gain permits for new stores and, most damagingly, executives at the group's headquarters allegedly covered up evidence of the activity according to the New York Times.

Mexico is one of Walmart's best performing big emerging market. It has expanded rapidly in the country and now has around 2,000 stores, making it Mexico's largest private sector employer.

The company sees its international markets as its most important avenue for future growth, so a spotlight on how it is achieving that growth may be particularly damaging, and has seen its share price dip by 5 percent.

Walmart announced last December that it had launched an investigation into whether some of its employees had violated the Foreign Corrupt Practices Act.

When it initially carried out an internal investigation back in 2005, investigators had reported that there was 'reasonable suspicion to believe' that laws had been violated and recommended further enquiries. Instead, it was shut down and former CEO Lee Scott, according to the New York Times, "rebuked internal investigators for being overly aggressive."

The affair raises serious questions for current Walmart CEO Mike Duke, who was in chart of Walmart International at the time the incidents took place, and who received the detailed account of the allegations in 2005. If it is shown that he participated in the cover-up it could make his position untenable.

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