One year ago, the New York Times ran a major story (here) titled “Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle.”

The conduct at issue in the Times article related to Wal-Mart’s largest foreign subsidiary, Wal-Mart de Mexico (“Wal-Mart Mexico), and suggested that Wal-Mart Mexico “orchestrated a campaign of bribery to win market dominance” and that the entity “paid bribes to obtain permits in virtually every corner” of Mexico.

The April 2012 NY Times article resulted in intense world-wide media scrutiny of Wal-Mart.  However, it was known months before the NY Times article that Wal-Mart was under FCPA scrutiny.  (See here for the December 2011 post highlighting Wal-Mart’s FCPA disclosure).  Thus, this week is a false one year anniversary of Wal-Mart’s FCPA scrutiny, but a meaningful anniversary nevertheless.

A year ago this week, in response to the NY Times article, Wal-Mart’s stock dropped approximately 8%.  However, savvy investors should have recognized the NY Times induced dip as a buying opportunity because the market often overreacts (perhaps because of the plethora of suspect FCPA enforcement information in the public domain).  For instance, the last trading day before the NY Times April article, Wal-Mart stock closed at $62.45.  Last Friday, Wal-Mart stock closed at $78.29.

A December 2012 front-page NY Times article (see here for the prior post) added additional details to the previous April 2012, but did not change much from an FCPA perspective.

In the year since the original NY Times article, Wal-Mart’s FCPA scrutiny has followed a fairly typical pattern.  Wal-Mart’s internal review has expanded beyond Mexico, civil shareholder suits and derivative claims have been filed, Wal-Mart has engaged in various remedial measures, and the company’s pre-enforcement action professional fees and expenses has skyrocketed (see this prior post for my calculation of $604,000 per work day).

The conduct described in the NY Times articles was unremarkable from a Foreign Corrupt Practices Act perspective – a view I have consistently held since last April (see here for a prior post and here for my article “Foreign Corrupt Practices Act Enforcement As Seen Through Wal-Mart’s Potential Exposure.”

The unremarkable portion of the NY Times articles is that foreign subsidiary of a major multi-national company operating in an FCPA high-risk jurisdiction allegedly made payments to “foreign officials” to facilitate or grease the issuance of certain licenses or permits.  Even according to the NY Times, Wal-Mart’s subsidiary in Mexico “had taken steps to conceal [the payments] from Wal-Mart’s headquarters in Bentonville, Ark.” and Wal-Mart Mexico’s chief auditor altered reports sent to Bentonville discussing various problematic payments.

Payments in connection with foreign licenses, permits and the like have been the basis for many FCPA enforcement actions prior to Wal-Mart’s FCPA scrutiny and will likely be the basis for many FCPA enforcement actions in the future.

Indeed, a November 2012 NY Times article (here) by David Barstow (the same author as the April 2012 and December 2012 articles) rightly noted that Wal-Mart’s investigation “was uncovering the kinds of problems and oversights that plague many global corporations.”  It was perhaps the most insightful thing the NY Times has said about Wal-Mart’s FCPA scrutiny, yet the November 2012 article received scant attention compared to the other two articles.

It is also interesting to ponder the salient question of whether the payments at issue in Wal-Mart, which are outside the context of procurement, actually violate the FCPA (and here, as in many cases, there is an important distinction between the law Congress passed and DOJ/SEC enforcement theories).  For instance, as noted in this prior post and in my above Wal-Mart Scrutiny article, the government has an overall losing record in non-procurement type cases when actually put to its burden of proof.  However, as we all know, this will matter very little when it comes to any resolution of Wal-Mart’s scrutiny.

For all of the above reasons, I do not believe that Wal-Mart’s scrutiny “will test FCPA enforcement in new ways” as suggested by this post on the FCPA Blog.  Nor should it.

FCPA enforcement ought not be influenced merely by the fact that a talented journalist at a leading newspaper has devoted time and effort to cover an instance of FCPA scrutiny.  If Barstow and the NY Times would have focused on BizJet, the reaction likely would have been, and with good reason, more negative.  But then again, there probably would not have been any reaction at all because BizJet is obviously no Wal-Mart.  Insert many other recent FCPA enforcement actions [here], if Barstow and the NY Times would have focused on [that] instance of FCPA scrutiny, the story would have largely read the same.

Nor do I believe that Wal-Mart’s FCPA scrutiny will likely end up in the Top 5 FCPA enforcement actions of all time in terms of settlement amount.  The reason?  All of the cases in the Top 5 are procurement cases, not cases focused on licenses, permits and the like.

If Wal-Mart does indeed crack the Top 5 (and with the seeming escalation of FCPA fine and penalty amounts, it is likely only a matter of time when a license, permit case does crack the Top 5), it will likely be for reasons unrelated to substantive FCPA issues, but rather an increase in the company’s culpability score under the advisory Sentencing Guidelines based on its alleged handling of the potential FCPA issues in 2005.

Indeed, the remarkable aspects of the NY Times investigation is the alleged conduct (or lack thereof) of Wal-Mart and its top executives upon learning of problematic conduct in its Mexican subsidiary in 2005.  Even in 2005 and continuing today, most business leaders, audit committees, and boards tend to overreact to FCPA issues and often reflexibly launch broad internal investigations.  But, according to the NY Times, that is not what Wal-Mart did.  Another remarkable aspect of the NY Times investigation is how Eduardo Castro-Wright (at the critical time period the CEO of Wal-Mart Mexico) was allegedy known by others at Wal-Mart to be involved in the Mexican payments, but was nevertheless continuously thereafter promoted by Wal-Mart.

Corporate governance, or lack thereof, is what made the NY Times April 2012 remarkable.  This is the reason why Wal-Mart generated all the buzz it did a year ago this week and I’ve consistently held the view that the Wal-Mart story is a corporate governance sandwich with the FCPA as a mere condiment.

But even here, the seldom-discussed November 2012 NY Times article, adds additional relevant details.  It suggests that Wal-Mart’s December 2011 FCPA disclosure was motivated by Wal-Mart’s desire to pro-actively understand its FCPA risk (notwithstanding whatever may have occurred within the company in 2005 upon learning of potentially problematic payments in Mexico).  According to the article, Wal-Mart’s internal review began in Spring 2011 when Jeffrey Gearhart (Wal-Mart’s general counsel) learned of an FCPA enforcement action against Tyson Foods (like Wal-Mart, a company headquartered in Arkansas – see here for the prior post discussing the Tyson enforcement action).  According to the NY Times article, “the audit began in Mexico, China and Brazil, the countries Wal-Mart executives considered the most likely source of problems” and Wal-Mart hired KPMG and Greenberg Traurig to conduct the audit.