WMT Walmart Inc

By Joann S. Lublin, Aruna Viswanatha and Sarah Nassauer 

Wal-Mart Stores Inc. tried and failed to settle a foreign-bribery probe that has stretched for five years and cost the company more than $820 million, according to people familiar with the federal investigation.

In the final weeks of the Obama administration, the world's largest retailer and U.S. officials weren't able to agree on a deal before Donald Trump's inauguration, people familiar with the matter said. "Wal-Mart and the government are very far apart in terms of a settlement, " one of the people said Thursday.

The Justice Department and Securities and Exchange Commission have been investigating allegations that Wal-Mart violated the Foreign Corrupt Practices Act by paying bribes to foreign government officials as it expanded around the word. The talks are intended to settle any charges that would arise from the probe. Wal-Mart has acknowledged the government probes and said it is cooperating with them.

Discussions stalled over several issues beyond the size of potential penalties Wal-Mart would have to pay. The people familiar with the probe said one major sticking point has been Wal-Mart's eligibility to continue accepting food stamps in its 5,300 Wal-Mart and Sam's Club stores in the U.S. after a settlement is reached.

A company that pleads guilty to a federal crime can lose its right to win government contracts -- a penalty that could block Wal-Mart from the $71 billion food-stamp program. The retailer, one of the largest sellers of groceries, is also one of the biggest beneficiaries of food-stamp spending.

Another sticking point in the talks was a government demand to assign an independent monitor to watch the retailer's behavior, a request typical in large settlements for violations of the Foreign Corrupt Practices Act. Wal-Mart has rejected the demand: Wal-Mart executives "won't take a monitor," one of the people said, because the retailer believes it has already toughened its compliance efforts.

The two sides could reach a compromise where the Wal-Mart board's audit committee reports potential settlement compliance issues to the government, the people said.

The Justice Department and SEC investigations were largely driven by a 2012 series of articles in the New York Times portraying details of possible misconduct at Wal-Mart in Mexico. The investigation spread to other regions where Wal-Mart does business, including Brazil, India, and China. A final settlement is expected to cover multiple countries, the people said.

Wal-Mart efforts to reach a deal with U.S. officials intensified after the November election. Its lawyers held talks with the government "but then they died down," one of the people said, as Obama officials prepared to depart.

The two sides have also argued over how many stores benefited from alleged misconduct, what time period is relevant and how to calculate profits from those stores, the people said.

The loss of food-stamp shoppers would be a blow to Wal-Mart, which each year receives some 18% of the money spent through the Supplemental Nutrition Assistance Program, or SNAP. That represented about $13 billion in sales last year.

Both sides have considered ways to craft a settlement that would allow Wal-Mart to continue accepting food stamps, the people said. One option would be for the retailer to admit to a lesser charge that wouldn't trigger the punishment, they said.

The changeover to the Trump administration isn't likely to affect the rank-and-file investigators on the case, the people familiar with the investigation said. But it does usher in a different viewpoint at the top.

President Trump criticized U.S. efforts to prosecute foreign bribery cases back in 2012 in response to a question about the Wal-Mart investigation. "Let Mexico, or let China, or let these other countries prosecute...It's a horrible law, and it should be changed," Mr. Trump said in a 2012 interview on CNBC. "I mean we're like the policemen for the world. It's ridiculous."

Meanwhile, the Supreme Court is set to take up a case later this year that would affect how the government calculates one aspect of FCPA penalties. The SEC has said there is no time limit on the period for which it can calculate profits derived from illegal conduct.

Most courts have agreed with the SEC's interpretation, but the 11th Circuit Court of Appeals said in 2016 that a five-year statute of limitations applies, an understanding that could limit the size of a penalty against Wal-Mart.

(END) Dow Jones Newswires

January 27, 2017 15:03 ET (20:03 GMT)

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