Counterparties: Bushmasters and baksheesh

By Ben Walsh
December 18, 2012

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We found out in April, thanks to the NYT’s David Barstow, that Wal-Mart de Mexico was a corrupt organization and that the US parent company had seemingly no interest in what was going on there. But just how bad did things get? Barstow’s now back, showing that the corruption at Mexico’s largest employer was systemic and integral to its growth:

Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance — public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.

Through confidential Wal-Mart documents, The Times identified 19 store sites across Mexico that were the target of Wal-Mart de Mexico’s bribes… Over and over, for example, the dates of bribe payments coincided with dates when critical permits were issued. Again and again, the strictly forbidden became miraculously attainable.

In the wake of the initial NYT report, Wal-Mart has spent $100 million investigating the bribes, including the  corruption scandal at Wal-Mart’s Indian joint venture; it is also the subject of a criminal investigation, part of a larger move by the Justice Department to crack down on violators of the Foreign Corrupt Practices Act.

Ira Stoll says that Wal-Mart isn’t the only villain in this story: he’s disappointed that local Mexican officials who accept bribes are largely given a pass by the NYT. Also unexplored, he says, is the idea that regulations all too often “serve to enrich the people who write the regulations”. The Atlantic Wire’s Adam Clark Estes points out that part of the problem is the size of the bribes a global behemoth like Wal-Mart can pay compared to local incomes. For example, one mayor with an annual salary of $47,000 was given $114,000 in cash over a single year.

Corruption isn’t the only controversy Wal-Mart is facing. On Monday, it pulled the Bushmaster AR-15, the gun that killed 26 people in Newtown, from its shelves. The NYT also hints that there are further shoes to drop in the story of Wal-Mart’s corruption: today’s story is presented as Part 2 of a series. Here’s looking forward to Part 3. — Ben Walsh

On to today’s links:

Wonks
Do not offer Nassim Taleb an orange Shasta – Chronicle for Higher Education
The media have discovered “chained CPI” and its sneaky social security cuts – CJR
3 alternatives that are more progressive than “chained CPI” – Dylan Matthews

Mission Creep
“The government has almost completely taken over the American home mortgage market” – Jesse Eisinger

Taxmageddon
A concise look at the fiscal cliff deal that’s emerging from Washington – Ezra Klein

Scoops
Amex’s CEO has reportedly been approached about becoming the next Treasury Secretary – Bloomberg

Ugh
How did public schoolteachers end up owning a stake in the largest seller of semiautomatic rifles? – Dan Primack
Cerberus is immediately selling its stake in the company that made the gun used in Newtown – Dealbook

Shark-Jumping
Facebook is going to bring autoplay TV commercials to your news feed – Ad Age
Your Instagram photos are Instagram’s to sell – CNET

Regulations
Qualified mortgage rules will either save banks from lawsuits or kill lending, depending on who you ask – Dealbook

Capers
Police make arrest in massive theft from Canada’s strategic maple syrup reserve – Globe and Mail

Crisis Retro
Ex-Moody’s analyst: “I expected the financial system to fall apart, it was inevitable” – Guardian

Charts
27 years of failed Wall Street earnings forecasts – Sam Ro

EU Mess
“There was hunger then. Now it’s more depression” – Greece’s families face a harsh winter – WSJ
Reexamining the odds of a Greek exit from the Euro – Vox EU

As If You Needed To Ask
Study confirms Manhattan apartment prices “driven in part by speculative factors” – NY Fed

Tax Arcana
Larry Summers explains where the really big tax loopholes are – Reuters Opinion

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