Wal-Mart. Photo credit: AP.

Any general counsel whose company thinks bribery might be a worthwhile business move could take a lesson or two from Wal-Mart Stores Inc., the world's largest retailer.

The first lesson is quite simply about the financial hit.  Besides the $283 million Wal-Mart said Thursday it put in reserve to settle its Foreign Corrupt Practices Act case with the U.S. Department of Justice and U.S. Securities and Exchange Commission, it has spent another $870 million on the case over the past five years.

That money went towards an internal investigation into the alleged bribes paid in Mexico, legal fees in related shareholder lawsuits and expenses to build a state-of-the-art global compliance program.

Alexandra Wrage, president of TRACE International Inc., a nonprofit membership association that helps companies combat corporate bribery, said the penalty was smaller than experts expected while the additional costs were fairly normal.

“It reinforces what we already know—that the cost of lawyers and forensic accountants typically outweigh the cost of penalties in an FCPA matter,” Wrage explained.

John Wood, a former U.S. attorney and now partner at Hughes Hubbard & Reed in Washington, D.C., said the smaller penalty could also be a takeaway. “Wal-Mart likely mitigated the potential fine by engaging in a thorough investigation, cooperating with the government investigation and putting in place a strong compliance program,” Wood said. Wood, like all the attorneys quoted in this article, was not involved in the Wal-Mart case.

A possibly more painful lesson, though, involves the legal fallout from the case. Several shareholder suits are pending in federal courts against Wal-Mart over the Mexico matter, and some of them include current and former officers and directors as defendants.

One of the suits led to a landmark Delaware Supreme Court ruling (Wal-Mart, like many companies, is incorporated in Delaware) that in July found an exception to attorney-client privilege when a stockholder needs the information to sue a director for breach of fiduciary duty. This ruling could have lasting significance for many companies besides Wal-Mart.

The company has also seen the FCPA case significantly impact its employees. At least eight Wal-Mart senior executives in Mexico, India and at headquarters in Bentonville, Arkansas, who touched the FCPA probe have left the company, according to a report from The New York Times. That includes then-corporate general counsel Thomas Mars, who was GC from 2005 to 2006 when an earlier internal investigation of bribery was stymied. He then became Wal-Mart's chief administrative officer, but left in 2013, after his earlier conduct was questioned in the new probe. Mars is now senior litigation counsel at Friday Eldredge & Clark in Little Rock.

Another casualty was Maritza Munich, then general counsel of Walmart International. An in-house counsel in Mexico, Sergio Cicero Zapata, first alleged in The New York Times in 2012 that seven years earlier he had given Munich evidence of some $24 million in bribes allegedly paid to help secure licenses and permits for new stores throughout Mexico.

Munich pursued the investigation until it implicated Walmart de Mexico's top officers—the then-chief executive officer and its general counsel. Both men have since left the company.

But their leaving was not Munich's work. Her probe was thwarted by executives in Bentonville, according to reporting from the Times and others. Munich, who left the company in February 2006, has repeatedly declined comment about Wal-Mart, citing attorney-client privilege.

Ryan Rohlfsen, an FCPA attorney and partner at Ropes & Gray in Chicago, said if reports that Munich was thwarted are true, that is another powerful lesson for companies.

Rohlfsen, a former FCPA federal prosecutor, explained, “Had that been thoroughly investigated from the beginning, there is a good chance the overall DOJ/SEC investigation would not have lasted as long as it did, or have broadened so far in scope.” Wal-Mart has confirmed the investigation expanded to reach into Brazil, India and China, among other places.

One of the biggest lessons, he added, is that “internal controls do matter.” If stronger controls had been in place at the company, Rohlfsen said, they “would have helped prevent such conduct, or potentially minimized its impact.”

David Isaak, a partner at Smyser Kaplan & Veselka in Houston who has taught on public corruption and FCPA offenses at the University of Houston Law Center, said another takeaway is that FCPA enforcement continues to be a priority for the DOJ.

Echoing Rohlfsen's remarks, Isaak said, “It is critical for any business operating internationally to have a robust and proactive compliance program.”

Wal-Mart. Photo credit: AP.

Any general counsel whose company thinks bribery might be a worthwhile business move could take a lesson or two from Wal-Mart Stores Inc., the world's largest retailer.

The first lesson is quite simply about the financial hit.  Besides the $283 million Wal-Mart said Thursday it put in reserve to settle its Foreign Corrupt Practices Act case with the U.S. Department of Justice and U.S. Securities and Exchange Commission, it has spent another $870 million on the case over the past five years.

That money went towards an internal investigation into the alleged bribes paid in Mexico, legal fees in related shareholder lawsuits and expenses to build a state-of-the-art global compliance program.

Alexandra Wrage, president of TRACE International Inc., a nonprofit membership association that helps companies combat corporate bribery, said the penalty was smaller than experts expected while the additional costs were fairly normal.

“It reinforces what we already know—that the cost of lawyers and forensic accountants typically outweigh the cost of penalties in an FCPA matter,” Wrage explained.

John Wood, a former U.S. attorney and now partner at Hughes Hubbard & Reed in Washington, D.C., said the smaller penalty could also be a takeaway. “Wal-Mart likely mitigated the potential fine by engaging in a thorough investigation, cooperating with the government investigation and putting in place a strong compliance program,” Wood said. Wood, like all the attorneys quoted in this article, was not involved in the Wal-Mart case.

A possibly more painful lesson, though, involves the legal fallout from the case. Several shareholder suits are pending in federal courts against Wal-Mart over the Mexico matter, and some of them include current and former officers and directors as defendants.

One of the suits led to a landmark Delaware Supreme Court ruling (Wal-Mart, like many companies, is incorporated in Delaware) that in July found an exception to attorney-client privilege when a stockholder needs the information to sue a director for breach of fiduciary duty. This ruling could have lasting significance for many companies besides Wal-Mart.

The company has also seen the FCPA case significantly impact its employees. At least eight Wal-Mart senior executives in Mexico, India and at headquarters in Bentonville, Arkansas, who touched the FCPA probe have left the company, according to a report from The New York Times. That includes then-corporate general counsel Thomas Mars, who was GC from 2005 to 2006 when an earlier internal investigation of bribery was stymied. He then became Wal-Mart's chief administrative officer, but left in 2013, after his earlier conduct was questioned in the new probe. Mars is now senior litigation counsel at Friday Eldredge & Clark in Little Rock.

Another casualty was Maritza Munich, then general counsel of Walmart International. An in-house counsel in Mexico, Sergio Cicero Zapata, first alleged in The New York Times in 2012 that seven years earlier he had given Munich evidence of some $24 million in bribes allegedly paid to help secure licenses and permits for new stores throughout Mexico.

Munich pursued the investigation until it implicated Walmart de Mexico's top officers—the then-chief executive officer and its general counsel. Both men have since left the company.

But their leaving was not Munich's work. Her probe was thwarted by executives in Bentonville, according to reporting from the Times and others. Munich, who left the company in February 2006, has repeatedly declined comment about Wal-Mart, citing attorney-client privilege.

Ryan Rohlfsen, an FCPA attorney and partner at Ropes & Gray in Chicago, said if reports that Munich was thwarted are true, that is another powerful lesson for companies.

Rohlfsen, a former FCPA federal prosecutor, explained, “Had that been thoroughly investigated from the beginning, there is a good chance the overall DOJ/SEC investigation would not have lasted as long as it did, or have broadened so far in scope.” Wal-Mart has confirmed the investigation expanded to reach into Brazil, India and China, among other places.

One of the biggest lessons, he added, is that “internal controls do matter.” If stronger controls had been in place at the company, Rohlfsen said, they “would have helped prevent such conduct, or potentially minimized its impact.”

David Isaak, a partner at Smyser Kaplan & Veselka in Houston who has taught on public corruption and FCPA offenses at the University of Houston Law Center, said another takeaway is that FCPA enforcement continues to be a priority for the DOJ.

Echoing Rohlfsen's remarks, Isaak said, “It is critical for any business operating internationally to have a robust and proactive compliance program.”