Bharti Walmart suspends CFO, legal team due to FCPA bribery probe
Bharti Walmart will go slow on planned rollouts of its cash-and-carry stores until investigation into violations of FCPA are over.
NEW DELHI: The India unit of Walmart has suspended its chief financial officer and entire legal team in the country as part of a high-profile, global investigation into potential violations of America's anti-bribery laws.Bharti Walmart will also go slow on planned rollouts of its cash-and-carry stores in the country until this investigation into violations of the US Foreign Corruption Practice Act (FCPA) reaches a conclusion.
Two persons with direct knowledge of the situation told ET that about two weeks ago, an anti-corruption squad consisting of auditors from KPMG and US-based law company GreenbergTraurig separately summoned five members of the legal team and told them not to enter the Bharti Walmart office until the investigations are concluded.
The five included the CFO, who doubled up as the firm's acting legal counsel, a senior manager, manager, assistant manager and retainer. The five, whose job was to procure licences required for stores and other real estate approvals, taxation and logistics, were told not to attend office until the FCPA-related investigations were over, said one of the persons asking not to be named.
"They want to investigate whether bribes were paid to government officials or not," said this person, requesting anonymity, because of the sensitivity of the matter.
This person said Bharti Walmart, an equal joint venture between Bharti Group and the world's biggest retailer, had also frozen its store expansion drive in India while this investigation was underway. The firm was due to open new cash-and-carry stores in Sangli and Sholapur in Maharashtra and Anand in Gujarat in the coming weeks and months.
A spokesperson for Bharti Walmart confirmed the suspension. "Walmart and Bharti have suspended a few associates pending the outcome of the investigation," she said in an emailed reply to an ET questionnaire. "We are a committed to conducting a complete and thorough investigation."
KPMG declined to comment and GreenbergTraurig was not immediately available for comment. Walmart last week informed the US Securities and Exchange Commission (SEC) that it has expanded an ongoing investigation into potential violations of the FCPA in Mexico to cover other countries, including India, China and Brazil.
While it was not clear whether the suspension of the staffers is a routine global practice in all cases involving such investigations, the disclosure will put an unwelcome spotlight on the company at a time the issue of allowing foreign supermarket groups to set up shop in the country is a hot political issue.
Parliament functioning was paralysed on Thursday after Opposition parties insisted that the decisions taken by the government in September to allow foreign direct investment (FDI) in multi-brand retail be put to vote.
The government says it's an executive decision and not binding on state governments that don't want it. The Bharti Walmart alliance began operations in India in 2009 and operates 18 Best Price Modern Wholesale outlets in a string of cities that sell to other retailers and businesses.
Investigators from KPMG and GreenbergTraurig are probing cases from 2009 onwards, the year the company opened its first wholesale store in Amritsar.
The legal team has come under special scrutiny because they had the maximum amount of dealings with government departments that issue licences and assorted real estate permissions, areas flagged up by investigators as potential violation-prone areas, one of the two persons quoted earlier said.
Indian law requires retailers to secure dozens of permissions involving multiple government departments - the Retailers Association of India lists as many as 51 different approvals required for opening even a single store. Many retailers privately admit that it is very difficult to obtain all those permissions in India without greasing the palms of officials at the 32 different agencies involved.
Bharti Walmart has said it does not tolerate non-compliance of the FCPA anywhere or at any level of the company. "Our expectation is that each and every one of our associates will adhere not only to the letter of the law, but also to the highest standards of personal integrity," the spokesperson told ET earlier this week.
The global scrutiny stems from a bribery scandal that surfaced last year in Mexico, where Walmart officials allegedly paid bribes in a bid to expand in the central American country. Since the Mexico episode, Walmart has spent around $35 million in strengthening its FCPA compliance and to investigate for possible violations worldwide.
The bribery investigations surrounding Walmart have provided additional ammunition to opponents of the policy allowing global retailers into the country. In the past few months, the anti-FDI in retail lobby has burned effigies of Walmart and filed cases against it.
The company is also the subject of an investigation by the Enforcement Directorate, which is probing whether Walmart flouted India's foreign exchange regulations when it invested about $100 million into the holding company of Bharti Enterprises-owned Bharti Retail Ltd.