Greasy palms

A bribery case against Walmart could be tougher than it looks. US law prohibits companies from making under-the-table payoffs to get new contracts from foreign officials. But the mega-retailer’s Mexican unit allegedly greased only low-level palms to grow an existing business. That’s arguably not covered, and the feds should beware bending an already controversial law to punish what may technically just be unethical.

Under the Foreign Corrupt Practices Act, companies can’t bribe foreign officials to get government contracts or “obtain or retain” business overseas. But they might slip a clerk a few bucks to, say, speed the approval of a permit. While not condoning so-called “grease payments,” Congress didn’t want law enforcers with bigger fish to fry, namely the Justice Department and Securities and Exchange Commission, wasting time on petty corruption.

That hasn’t stopped prosecutors from pursuing such conduct. Dow Chemical, Westinghouse Airbrake and others recently shelled out multi-million dollar settlements for allegedly paying minor bureaucrats to expedite licences and permits. Like most companies, they avoided a court fight rather than risk a crippling bribery conviction.

With so few cases scrutinised in court, watchdogs have extracted questionable payouts for unproven offenses — and set benchmarks for other settlements. But when individuals have fought, they’ve often won. In 2002, two employees of oil services company Baker Hughes beat charges that paying an Indonesian assessor to reduce taxes violated the FCPA. And in 2007, a federal appeals court said payoffs that lower costs abroad aren’t illegal if they don’t help companies “obtain or retain” business.

That should give Walmart room to resist possible bribery charges. If the allegations in Sunday’s New York Times are true, its subsidiary paid fixers to make opening Mexican stores easier by bribing local officials. WalMex already thrived in the country, so the payments may not have technically helped it “obtain or retain” business. They also seem like typical “grease payments.”

Even if a court were to buy these arguments, Walmart wouldn’t be out of the woods. It could face prosecution under Mexican law or provisions of the FCPA or the Sarbanes-Oxley law that require accurate accounting for payments.

Challenging bribery charges, though, might spotlight government overreach in recent FCPA cases — and slow congressional efforts to blunt the law. Walmart may have much to answer for, but so do overly aggressive prosecutors.