Wal-Mart’s U.S. Expansion Plans Complicated by Bribery Scandal

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Wal-Mart’s U.S. Expansion Plans Complicated by Bribery Scandal


April 29, 2012

By STEPHANIE CLIFFORD and STEVEN GREENHOUSE

Read More: http://www.nytimes.com/2012/04/30/bu...imes&seid=auto

In Los Angeles, a Wal-Mart building permit is getting a once-over. In New York, the City Council is investigating a possible land deal with the retailer’s developer in Brooklyn. A state senator in California is pushing for a formal audit of a proposed Wal-Mart in San Diego. And in Boston and its suburbs, residents are pressuring politicians to disclose whether they have received contributions from the company. All of it in the past week.

Wal-Mart has worked hard in recent years to polish its reputation and give elected officials, community groups and shoppers a reason to say yes to their stores, especially as it pushes aggressively into big — and historically hostile — cities. Now, the revelation of a bribery scandal involving the retailer’s Mexican subsidiary is giving critics a new reason to say no. “Overnight, the environment has shifted in terms of Wal-Mart’s strategy in big cities, in winning over local politicians,” said Dorian T. Warren, a political science professor at Columbia who is writing a book about Wal-Mart’s efforts to expand into Chicago and Los Angeles.

The New York Times disclosed last week that Wal-Mart had found credible evidence that its Mexican subsidiary — the retailer’s biggest foreign operation, which opened 431 stores last year — had paid bribes and that an internal inquiry into the matter had been suppressed at corporate headquarters in Arkansas. The Mexican government has begun investigations into the retailer’s dealings with local officials. Felipe Calderón, the Mexican president, said last week that he was “indignant” about the company’s behavior, and some elected officials across the United States joined the chorus of outrage. In other countries where Wal-Mart operates, including China and India, the reaction was slower, but analysts said they expected the company to face significant new obstacles.

Wal-Mart last week took several steps intended to demonstrate it was serious about getting to the bottom of the bribery scandal — and preventing anything like it happening again — but the damage from the revelations could be problematic, analysts said. “It gives more power to critics, and that might prove to be the biggest negative of all,” said David Strasser, an analyst with Janney Montgomery Scott.

In the United States, Wal-Mart has largely exhausted places in suburban and rural areas to build new stores, and is focusing on many of the nation’s biggest cities. That means a lot of red tape for approvals. In the last few years, Wal-Mart has smoothed the way with donations to politicians and local nonprofit organizations, and arguments that it helps economic growth and provides healthy groceries. Steven Restivo, a Wal-Mart spokesman, said the bribery investigation would not affect those expansion plans. “We remain committed to opening stores all across the U.S., including large cities,” he said.

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