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Chicago-Kent College of Law Professor Andy Spalding on the impact of the Mexican bribery scandal on Wal-Mart and its executives.
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Closed down nearly 5% today that stock which many of you -- in your portfolio somewhere.
Slumping on news that it is being investigated on allegations of bribery in its Mexican unit Mexico Wal-Mart to Mexico.
To which should I say surprise surprise house Democrats also announcing this afternoon that they would be launching their own probe -- claims joining us now is -- following an antitrust expert and teaches.
He teaches international business law at Chicago Kent college of law.
Any great to see it now I you know I don't wanna be frivolous about this charge but I did cover Latin America for twelve years.
I actually brought the Wall Street Journal -- Americas I thought they'd be an investor in a Mexican newspaper which is now doing quite well.
But our lawyers went down there to look at it -- they came back and said no way.
There's so many laws in Mexico that if you follow one -- violate ten others -- they said it's virtually impossible to do business down there without violating a -- work.
Were those lawyers right.
Well certainly in in a market like Mexico bribery is going to be pretty commonplace and probably most foreign companies.
-- in business there are having to face very difficult decisions about paying -- however.
For US companies that's really not a defense no matter how prevalent the -- might be we still have we decided not to do business there because of a Dow Jones made the decision that they could not do business there.
Because in order to do business -- they'd have to be violating a law.
Well that might very well be true a Mexican law or US slot and I think a lot of companies are gonna have to -- some -- some very difficult decisions in the wake of enforcement decisions like this.
And the often it's not so much the crime it's the copper up and it appears that going up to among the highest levels here at Wal-Mart.
There were a lot of people who knew about this including the current CEO who was running the international business at the time -- As well as the former CEO Lee Scott we put it calls a lot of these people and obviously Wal-Mart is kind of but circling the -- it's at this point in saying this does not represent what our company is all about but how bad could this -- could.
Board members could former company leaders.
Go to -- Well absolutely.
There's corporate liability potentially here and there's individual liability and the Department of Justice in the last year or so has made a push towards individual liability.
And and that individual liability could extend to.
Authorizing the payments or knowing about the payments it could expect extend to conducting in and improper investigation or an adequate investigation.
And it could extend to improper accounting of the payments.
So there's -- there's there's a lot of potential of problems here also that you could actually be adhering to to a foreign countries law.
And be breaking our -- the foreign -- Procter -- practices act says you have to not only here to the local countries law but you have to adhere to our law at the same currency.
You're you're juggling two books right that the foreign law and our law.
Well to some extent that's true but the FC PA also provides that if the payment is is odd is illegal under the written law of -- host country.
And -- can be a defense however that's almost never true.
And -- vote most every country in the world has a domestic anti bribery.
Law on the books.
-- what you think happens to Michael duke right now again this current CEO but also had run the international business of Wal-Mart and was according to these emails with the New York Times has revealed.
Knew full well that this was going on and you know and then you've got Lee Scott the former CEO who.
Allegedly.
It's kinda tamp down on the investigation.
Well they're facing a potential civil liability and even potential come -- building.
And and they are going to be thinking about whether they want to litigate though companies don't usually litigate these charges -- typically settle.
Individuals will litigate.
And they have to recognize right now that the Department of Justice is again and really focusing on individuals and could be looking for area.
For a a good example to set -- -- -- how much is gonna cost Avon by the way I've heard that they are spending any upwards of a hundred million dollars on.
All of their fines and legal fees is that what we're looking -- for wall part of could've been worse than that.
Well -- -- I think it could be worse.
You know financial liability for a company facing a CPA charges that includes not just the legal liability for the violations.
But also of the the legal fees.
And the liability under the statute can be three times the amount of the profits.
That the bribes made possible.
Not three times the bribes three times I don't know profits made possible with the project I'm going to -- it here and there so you're saying the actual no profit which could be hundreds of millions as well as those company stores dot.
Mexico is wal mart's biggest subsidiary and and biggest biggest international.
Markets and if you think about the profits of those bars might have made possible in the years since the -- occurred.
-- that the numbers could be staggering.
By the way I pray that Wal-Mart continues MX group is they've done such good for that country in terms of bringing products -- -- that otherwise the Mexicans couldn't afford.
Cutting into some of the monopolies that existed there they've -- a lot of good -- so I hope this doesn't.
Put a Pall over their operations -- Spalding thank you very much for being appreciated.
