Bharti Wal-Mart suspends CFO, legal team in India

After Reebok, the Wal-Mart India story seems to be taking

an ugly turn. As a part of its high-profile, global investigation into potential violations of America’s anti-bribery laws, the India unit of Wal-Mart has suspended its chief financial officer and the entire legal team.

As the probe is on, Bharti Wal-Mart will go slow on the planned retail expansion of its cash-and-carry stores in the country. The firm was to open new cash-and-carry stores in Sangli and Sholapur in Maharashtra and Anand in Gujarat in the coming months. The company will now wait until investigations into violations of the US Foreign Corruption Practice Act (FCPA) reach a conclusion. About two weeks ago, an anti-corruption squad consisting of auditors from KPMG and US-based law firm Greenberg Traurig separately summoned five members of the legal team in the country and asked them not to enter the Bharti Wal-Mart office till investigations are concluded.

The five included the CFO, who doubled up as the firm’s acting legal counsel, a senior manager, manager, assistant manager and retainer. The five, whose job was to procure licences required for stores and other real estate approvals, taxation and logistics, were told not to attend office until the FCPA-related investigations were over.

The Bharti Wal-Mart alliance began operations in India in 2009 and operates 18 Best Price Modern Wholesale outlets in a string of cities that sell to other retailers and businesses. Investigators from KPMG and GreenbergTraurig are probing cases from 2009 onwards, the year the company opened its first wholesale store in Amritsar.

The global scrutiny stems from a bribery scandal that surfaced last year in Mexico, where Wal-Mart officials allegedly paid bribes in a bid to expand in the central American country. Since the Mexico episode, Wal-Mart has spent around $35 million (Rs 193 crores) in strengthening its FCPA compliance and to investigate for possible violations worldwide.

The company is also the subject of an investigation by the Enforcement Directorate, which is probing whether Wal-Mart flouted India’s foreign exchange regulations when it invested about $100 million (about Rs 500 crores) into the holding company of Bharti Enterprises-owned Bharti Retail.