Walmart May Lose Traction in NYC After Mexico Bribery Scandal

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Opponents of Walmart locating anywhere in New York City are wasting no time trying to link their "Stop Walmart" campaign to expose on the retail titan's legal troubles regarding bribes the company’s Mexican subsidiary allegedly paid out.

The New York Times reported Sunday that Walmart's top corporate leadership engaged in an elaborate cover-up of an internal company probe that documented Walmart's Mexican subsidiary paid out $24 million in bribes to facilitate its rapid expansion south of the border. Such an alleged conspiracy, and subsequent cover-up, if true, puts Walmart in the cross hairs of potential violations of the U.S. Foreign Corrupt Practices Act. The Justice Department is spearheading an investigation.

Several mayoral hopefuls, from Speaker Christine Quinn and Public Advocate Bill deBlasio to Manhattan Borough President Scott Stringer and City Comptroller John Liu, issued statements citing Walmart's potential violations of the U.S. Foreign Corrupt Practices Act as evidence that the company could not be trusted here in New York City. 

But NYU Professor Mitchell Moss dismissed the Mexico-NYC linkage made by the elected officials who oppose Walmart gaining a foothold in the city.

"NYC is not Mexico," Moss wrote in an email. "We have laws, rules and a local government that is not under the control of drug dealers and violent gangs. The Mexico culture of corruption does not exist in the City of New York."

Steve Malanga, a senior fellow with the Manhattan Institute, added he expects Walmart to press on with its plans to break into NYC market. "They want to come into New York City because New Yorkers are already shopping at their suburban locations," Malanga explained.

In a statement, Walmart said it was committed to a thorough investigation of the case and that they were cooperating fully with the U.S. Department of Justice and the Securities Exchange Commission.

Walmart Looks to Set Up Shop

Walmart's efforts to identify a location in New York City have dropped off the radar recently. Crain's New York Business reported last year that the company was in "advanced negotiations” with The Related Companies for an anchor spot in Related's Gateway II East New York, Brooklyn, location. But on Monday neither Related nor Walmart would offer any confirmation or update, though Walmart did confirm it still wants to come to New York City.

A spokesman for New York State Comptroller Tom DiNapoli confirmed the comptroller is reviewing a land deal which would permit Related to buy the state land it needs for the East Brooklyn project.

Opponents of Walmart opening in New York say the multi-national box store giant would dramatically undercut local grocery and retail establishments that currently employ union workers who have health care coverage and make a living wage. Walmart and its boosters counter the store's presence would boost the local economy while giving consumers the benefit of real price competition.

The box store chain has been working to improve its image. Just last month Walmart website featured words of support from First Lady Michelle Obama for Walmart's Healthy Food Initiative to cut the cost of fruits and vegetables to consumers by a billion dollars. Last summer Walmart won kudos from Mayor Michael Bloomberg and other local politicians by coming up with $4 million to help revive the City's Summer Youth Employment Program that had been hard hit by budget cuts.

Joe Feldman, a retail analyst and managing director with the Telsey Advisory Group, said the Walmart Mexico scandal could not have broken at a worse time for the global retailer. "The company had made some great strides in 2005 and 2006, in terms of enhancing its reputation as a good corporate citizen, as more eco-friendly, more consumer-friendly and more employee friendly," Feldman said. He added the company could not afford a protracted internal probe before coming clean with the public and investors. "They have to take the lumps from it and move on. It takes twenty years to build a strong reputation and it takes twenty minutes to ruin it."

Mayor Bloomberg also weighed in the scandal and Walmart’s desire to open a store in the city.

"I have not been a big supporter of Walmart,” the mayor said. “I have been a big supporter of government not telling people whether they can do business here. I think you let the market decide if people want jobs or not, or buy products at different price ranges for different types."