Tags: Walmex | Money | Laundering | Probe

Walmex Stock Sinks on Likely Money Laundering Probe

Wednesday, 15 August 2012 12:54 PM

Wal-Mart de Mexico shares fell more than 5 percent on Wednesday after two U.S. congressmen investigating bribery allegations at Mexico's top retailer said they had evidence that may point to tax evasion and money laundering.

Walmex, as the company is known locally, is facing probes in the United States and Mexico over allegations that the company, controlled by Wal-Mart Stores Inc, bribed local Mexican officials to open stores more rapidly.

Two members of a U.S. congressional probe said on Tuesday they had obtained Walmex records showing it may also have had compliance issues relating to tax evasion and money laundering in Mexico.

Walmex shares fell as much as 6.8 percent in early trading before settling at 36.23 pesos, down 5.1 percent. Wal-Mart shares were up 0.5 percent at $74.37.

Walmex said in a brief statement before the market opened on Wednesday that it was not aware it was being investigated in Mexico for money laundering or tax evasion.

The office of Mexican Attorney General Marisela Morales has said it is investigating the bribery allegations, but an official in the office on Wednesday said it was not investigating money laundering or tax evasion.

A spokeswoman for Mexico's tax office declined to comment, citing privacy restrictions.

Dirty money is a recognized problem in Mexico, where the government has been waging a six-year battle against drug cartels and companies are often known to keep two sets of accounts.

A report in January by Washington-based Global Financial Integrity estimated about $50 billion a year is siphoned illegally out of Mexico due largely to tax evasion and trade manipulation, such as multinational firms manipulating trade data to evade taxes.

Last month, Mexico's National Banking and Securities Commission fined HSBC $27.5 million for lax controls in its anti-money laundering systems.

The country's July presidential election was also marred by allegations of money laundering by the winning candidate's party.


Reps. Elijah Cummings and Henry Waxman, the ranking members, respectively, of the Oversight and Energy committees of the U.S. House of Representatives, disclosed the latest details of their probe in an August 14 letter to the company.

Walmex said in a brief statement, "If such an investigation over these matters was initiated, and Walmex was notified, Walmex will cooperate with the authorities."

Cummings and Waxman launched a review of Wal-Mart earlier this year after The New York Times reported that the world's largest retailer had intentionally stifled an internal probe into bribery in its Mexican affiliate.

The two lawmakers did not give details about the new tax evasion and money laundering evidence.

Walmex mostly operates supermarkets and restaurants in Mexico and Central America, but it also has a small banking unit in Mexico, Banco Wal-Mart.

Banco Wal-Mart has been expanding rapidly since it started offering credit to retail customers in 2007, but it is one of Mexico's smallest banks with just 5.5 billion pesos ($417.56 million) in assets.

The company has said it is cooperating with the U.S. Department of Justice and the Securities and Exchange Commission and was conducting its own review.

Cummings and Waxman, both Democrats, complained on Tuesday that Wal-Mart has been uncooperative with the congressional probe.

Walmex Chief Executive Scot Rank said in July that as part of efforts to improve compliance with laws such as the Foreign Corrupt Practices Act (FCPA), the company had hired a former Pricewaterhouse Coopers partner as head of compliance, real estate and corporate affairs.

Rank also said another executive would join in August with responsibility for anti-corruption efforts, reporting directly to Wal-Mart's global FCPA compliance officer, Tom Gean.

Walmex shares are down 5.3 percent the year. The company in June said it would slash planned store openings for 2012 and cut planned investment spending in response to the investigations.

Through July, Walmex opened had 111 stores and restaurants in Mexico and Central America this year, down from 176 at the same point in 2011.

In its second-quarter earnings statement, Walmex said it expects to incur expenses related to the investigations but it could not give an estimate of those costs.

© 2020 Thomson/Reuters. All rights reserved.

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Wednesday, 15 August 2012 12:54 PM
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