Thread: Wal-Mart silenced Mexican bribe inquiry

Wal-Mart silenced Mexican bribe inquiry

By Nivedita
Bhattacharjee

Sat Apr 21, 2012 10:03pm EDT
Wal-Mart Stores Inc, the world's largest retailer, squelched an internal investigation into allegations of bribery at its Mexican subsidiary instead of broadening the probe, the New York Times reported on Saturday.

The Times said that in September 2005, a senior Wal-Mart lawyer received ane-mail from Sergio Cicero Zapata, a former executive at the company's largest foreign unit, Wal-Mart de Mexico, describing how the subsidiary had paid bribesto obtain permits to build stores in the country.

Wal-Mart sent investigators to Mexico City and found a paper trail of hundreds of suspect payments totaling more than $24 million, but the company's leaders then shut down the investigation and notified neither U.S. nor Mexican law enforcement officials, the Times reported.

According to the Times, current Wal-Mart Chief Executive Mike Duke and former CEO Lee Scott, who now sits on the company's board, were among senior executives allegedly aware of the situation.


Wal-Mart said in a statement on Saturday it was "deeply concerned" about the allegations in the Times report and began an investigation into its compliance with the U.S. Foreign Corrupt Practices Act (FCPA) last fall. The company also said it had disclosed the probe to the U.S. Department of Justice and the Securities and Exchange Commission.

"Many of the alleged activities in The New York Times article are more than six years old. If these allegations are true, it is not a reflection of who we are or what we stand for," said David Tovar, vice president of corporate communications at Wal-Mart.

The company said it had taken steps in Mexico to boost internal controls for stronger FCPA compliance. It declined to make any executives available for comment, and said the investigation was continuing.

Richard Cassin, a U.S. FCPA lawyer, said Wal-Mart faces an uphill battle to convince the Justice Department and SEC that its problems are confined to Mexico.

"A corporate attitude toward the corruption there that allowed a cover-up to happen could signal wider compliance problems," said Cassin, who writes an industry blog, FCPA Blog.

"Before any resolution with U.S. authorities is possible, the company has to look under every stone for possible corruption. Are there any similar issues in China or other countries? That's what U.S. authorities will want to know. Wal-Mart's shareholders will be asking the same question," he said.

A spokesman at the SEC said it did not have any comment on the New York Times article. A Justice Department spokeswoman declined to comment.

Wal-Mart de Mexico, or Walmex, as the company is known locally, has expanded rapidly since Walmart opened its first store outside the United States in Mexico City in 1991, then part of a joint venture.

In 2011, the Mexican unit reported total sales of 379 billion pesos ($29
billion). Walmart's fiscal 2012 sales, for the year ended January 31, were $443.85 billion.


STEPS TO CONCEAL PAYMENTS


Middlemen or "gestores" are used in Mexico to help companies perform a variety of tasks, from obtaining residency permits and resolving tax issues to obtaining planning authorization.

They are often legitimate actors in Mexico's bureaucracy, but a lack of
transparency in the system can make it impossible to know whether bribery is involved in their dealings, several foreign businessmen working in Mexico told Reuters.


The Times reported that Cicero, the former Walmex executive, gave names, dates and bribe amounts, adding that he knew so much because for years he had been the lawyer in charge of obtaining construction permits for Walmex.


Cicero identified Eduardo Castro-Wright as the driving force behind years of bribery, according to the Times, adding that no Walmex leaders were disciplined.

Castro-Wright became CEO of Walmex in 2003 and was named CEO of Walmart US in 2005. He became a vice chairman in 2008 and led e-commerce from 2010 until January of this year, and is set to retire July 1. He could not be reached for comment.

Wal-Mart found documents showing that Walmex's top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart's headquarters in Bentonville, Arkansas, the Times reported.

Wal-Mart hired Willkie Farr & Gallagher, a law firm with extensive
experience in FCPA cases, to look into the matter, but when the firm suggested a thorough investigation, it was rejected for a more "limited preliminary inquiry," the paper said. Willkie Farr could not be reached for comment.

The Times said Wal-Mart's own lead investigator, a former F.B.I. special
agent, said there was reasonable suspicion to believe Mexican and U.S. laws had been violated and had recommended an expanded investigation.

The Times said that in a meeting where the investigation was discussed, then Chief Executive Lee Scott rebuked internal investigators for being too aggressive.

Days later, the paper said its records showed Wal-Mart's top lawyer arranged to ship the internal investigators' files on the case to Mexico City.

Primary responsibility for the investigation was then given to the general counsel of Walmex, who was alleged to have authorized bribes, the Times said. The general counsel then exonerated his fellow Walmex executives, the report said.

The Justice Department and the U.S. Securities and Exchange Commission have in the past few years aggressively stepped up enforcement of the FCPA, a 1970s law that bars bribes to officials of foreign governments.

In 2010, for example, the agencies collected a record $1.8 billion in
sanctions in bringing such cases against major companies including BAE Systems, Daimler and Alcatel-Lucent.

But the government units that enforce the law are only staffed with a few dozen prosecutors and agents who traditionally rely upon the companies to hire outside lawyers to conduct the bulk of the investigation themselves, since such probes usually involve collecting millions of documents and interviewing hundreds of witnesses outside the United States.

The companies then generally turn over to the agencies the results of the investigation, which can cost tens or even hundreds of millions of dollars in legal fees and take several years to complete.


There was little reaction in Wal-Mart's shares on Saturday. The stock has gained about 17 percent in the past 12 months, outperforming the S&P 500 index's 3 percent rise.

Wal-Mart silenced Mexican bribe inquiry: NY Times | Reuters

Moved article to

• General Discussion

The WalMart and Sam's Club outlets are two of the best friends an illegal alien has in this country. After the Federal Government, Organized Religion, and the public education system, of course.

Moved article to

• General Discussion

Thanks H2.
When Sam Walton started Wal-Mart, every item on the shelves was made in the USA and that was the sales pitch. It seems that when he died his globalist heirs made sure everything is made in china or in some other cheap overseas sweatshop.

Originally Posted by Newmexican

Thanks H2.
When Sam Walton started Wal-Mart, every item on the shelves was made in the USA and that was the sales pitch. It seems that when he died his globalist heirs made sure everything is made in china or in some other cheap overseas sweatshop.

'

------------------------------------------------

Sam's four children alternate as the 7th, 8th, 9th, and 10th wealthiest Americans - all fortunes made off of cheap Mexican labor and imports from China.

Sam Walton is rolling in his grave. BTW, none of his kids still live in Arkansas. Nor does Bill and Hillary Clinton or Mike Huckabee.

Sam Walton is rolling in his grave. BTW, none of his kids still live in Arkansas. Nor does Bill and Hillary Clinton or Mike Huckabee.

He may not be rolling, he might have been instrumental?


This article appears in the January 23, 2004 issue of Executive Intelligence Review. Wal-Mart's Walton Family:
The Beasts of Bentonville

by Richard Freeman [Note: Figures in this article are available to paying subscribers to Electronic Intelligence Weekly.]



The Walton family, which founded and today controls Wal-Mart, lives on blood money. Operating jointly with the City of London-Wall Street bankers, it became the world's wealthiest family by decimating the U.S. and world physical economies, and by applying ferocious austerity, driving wages and living standards beneath the level needed for existence. Forbes magazine places the worth of the family at greater than $100 billion.



The threat posed by the Waltons is not merely in the size of their fortune. Older monied families such as the Mellons, Rockefellers, and the corrupted Ford family fortunes have been more powerful politically and financially, as have also been the much smaller family nest-eggs of George Soros and Michael Steinhardt. But the danger today is that the Waltons, with such a storehouse of wealth available to them, will use it, for one thing, to build even more Wal-Mart stores, with even more devastating effects on the world economy! But not only that:

• The Waltons are using their enormous leverage to carefully construct a banking empire, under tight family control.
  
  
• They are bankrolling a vast neo-conservative political network. For example, John Walton, who is worth more than $20 billion himself, was the largest single individual contributor to Gov. Jeb Bush in the 2002 Florida gubernatorial race.
  
  
• They are the principal financial force in the effort to privatize the public school system, through school vouchers, which would wreck public education. They would create a School-Mart.

Democratic Presidential pre-candidate Lyndon LaRouche has launched a national and international boycott of Wal-Mart, to expose and shut down the company. LaRouche has shown that under Wal-Mart's policy of demanding that its suppliers supply goods to Wal-Mart at ridiculously low prices, the only way the suppliers can accomplish this is to shut down production in the United States, and ship it to sweatshop facilities overseas, which has caused the exodus of 1.5 million U.S. manufacturing jobs. Wal-Mart pays its workers below subsistence wages, and destroys communities. This is applied as a leading edge of a Roman Imperial-type policy, in which the American physical economy, no longer able to reproduce its own existence, sucks in a huge volume of imported goods from around the world. The more the United States feeds its import addiction, the more that destroys the U.S. physical economy, while driving the current account deficit to new and dangerous heights.



The campaign of LaRouche and , is drawing blood. Wal-Mart's national spokesperson, Mona Williams, lashed out on Nov. 28, 2003, "There's definitely a negative buzz out there. A lot of folks have started taking shots at us." One magazine noted the shift: "Wal-Mart kicked off the year in the media as the nation's 'most-admired company,' but it looks like it will wrap up 2003 as the 'Beast of Bentonville' " (Bentonville, Arkansas is Wal-Mart's headquarters). Last Christmas, Wal-Mart registered very slim sales growth, partly due to the faltering economy, but partly due to what the media is now highlighting as a Wal-Mart "image problem." In the retail industry, if sales are not rising year on year, there is a problem.



To counterattack, Wal-Mart's officers, led by chairman Rob Walton, made a strategic decision to bring out their ultimate weapon—the Sam Walton myth—in the hope that this will dazzle and disarm people. The myth has two components. First, Wal-Mart founder Sam Walton (1918-92) is portrayed as a folksy, ol' country boy, concerned about the welfare of his workers. According to this myth, Sam drove around in a pick-up truck, when he could have been chauffeured in a limousine. Mr. Sam, as he liked his underlings to call him, didn't care a hoot about money, but only about following his dream.



The second part of the myth is that Mr. Sam disdained Wall Street, building his company through his own native genius and hard work.



By extension, this myth is stretched to cover the rest of the Walton clan. They are a chip off the block of ol' Mr. Sam. They use their money to help people. Their savage amassing of a $100 billion fortune hasn't changed them; they're just like you and me.



No one should be dazzled by this myth. The truth is that Wal-Mart made its money by crushing its employees, its competitors, its suppliers, and foreign nations. It grew only through the aid and massive funding of Wall Street, which admires Wal-Mart as the paradigm of what it wants to achieve in a post-industrial society. Two examples of this—the 1970 financing when, Wal-Mart went public to pay off its debts; and the "Wal-Mart decade" (actually 1990 to 2002), when Wal-Mart grew to unprecedented size—make the point.
Sam 'Hustler' Walton

Sam Walton was born in Kingfisher, Oklahoma in 1918, graduating from the University of Missouri with an economics degree in 1940. His college fraternity brothers gave him the nick-name "Hustler," which stuck.



During World War II, he served as a lieutenant and then captain in U.S. Army Intelligence, supervising security for aircraft plants and Prisoner of War camps in California, and other locations—an intelligence background far above what you would expect for the normal "country boy" soldier, although official and unofficial biographies shed no further light on his intelligence activities.



Walton's 1943 marriage to Helen Robson, the daughter of L.S. Robson, a prosperous banker and rancher of Claremore, Oklahoma, was more than fortuitous. L.S. Robson lent Walton $20,000, four-fifths of what Sam needed to buy his first store, a Ben Franklin variety store in Newport, Arkansas, in 1945. By 1962, Walton owned and operated 16 Ben Franklin franchise variety stores, mostly based in Arkansas (with a few in Missouri and Kansas).



On July 2, 1962, in Rogers, Arkansas, Walton opened his first discount store, under the Wal-Mart name. The idea of a discount store is to sell a lower line of goods than a regular department store, but also to sell many of the same goods as regular department stores, at a cheaper price. How would that be possible? It required cost-accounting "savings." The discount store could find some efficiencies of scale, and also operate at a lower profit margin per unit good than a regular department store. But primarily, Walton used two tactics, with regard to labor and suppliers.



First, he resolved to pay his workers less, ferociously resisted any unionization, and restricted most of his workers to working no more than 28 hours per week, which would mean they would not qualify for employee benefits—and would never be able to earn a living wage. He offered some of them health benefits, but most did not earn enough to purchase the health insurance. Though the myth arose that this policy became prevalent only after Walton's April 1992 death, the fact is that Mr. Sam enforced it from day one. Wal-Mart workers earn wage and benefit packages that are 12-30% below those paid to workers in comparable jobs at unionized companies, depending on the job classification. During most of Sam Walton's reign, Wal-Mart had a worker turnover rate of an incredible 35-45%.
Second, Walton instituted a policy that suppliers would have to sell goods to Wal-Mart at constantly lower prices, forcing them to cut expenses, which frequently meant cutting wages of their own workers and/or layoffs. Eventually, this led to these suppliers outsourcing their production to overseas sweatshops, a policy that started to gain steam in the 1980s under Sam Walton's direction.
By 1969, Wal-Mart had grown to $30.8 million in annual sales. It operated 32 stores, most within a 200 mile radius of Bentonville. But to grow this quickly, it had to borrow heavily, and soon had significant debt.
Wall Street Cash Infusion

Wal-Mart faced a financing crunch. We look at two examples from Wal-Mart's history, which crucially demonstrate that, contrary to its own public relations fairy tales, Wal-Mart would not exist without Wall Street's direction and ample financial backing.



After Sam Walton started Wal-Mart in 1962, he flew around the American Southeast, Southwest, and Midwest to line up loans for his company. Republic Bank, based in Dallas, Texas, and known for its smarmy dealings, was one of the first lenders to him in the 1960s. But Republic Bank and other banks that lent money to Wal-Mart, set a limit on how much they would lend. Walton revealed in his autobiography, Sam Walton: Made in America, that in 1969, "we weren't generating enough profits both to expand and pay off our debts.... We really needed the money, pure and simple."



Walton and his eldest son, S. Robson (Rob) Walton (who is now chairman of Wal-Mart), figured that the only way they could come up with the money to pay their debts, was an Initial Public Offering (IPO), issuing shares of stock to the public.



But there was one catch: A commercial or industrial company cannot conduct an IPO by itself; it must be done by a financial institution. To handle the job, Sam Walton hired two of the world's most criminally-connected, dirty-money investment banks.



The first was the Little Rock, Arkansas-based Stephens, Inc., which is the largest private investment bank west of the Mississippi. Its founder was Jackson Stephens, who had worked intensively with such dirty operations as the Bank of Credit and Commerce International (BCCI), an intelligence cut-out for the financier oligarchy, which financed illegal weapons and drug trade. In 1990, the BCCI was convicted in Miami, of money laundering for the Colombia cocaine cartels. Published reports have also linked Stephens to work with the U.S. National Security Agency.



The second firm Sam Walton selected to handle his IPO, was the investment bank White Weld. White Weld operates on Wall Street, but its headquarters are in Boston. Walton wrote in his autobiography, "I thought we needed a Wall Street underwriter." So much for his alleged independence from Wall Street. The founders of White Weld descended from Boston Brahmin families that had been involved in a treasonous plot, the Hartford Convention of 1814, to split apart the United States. Through a series of corporate marriages, White Weld would merge with both the Swiss banking giant Crédit Suisse, as well as the First National Bank of Boston, eventually becoming Crédit Suisse White Weld, one of the world's largest drug-money laundromats. On Feb. 7, 1985, Federal agents caught Crédit Suisse in a multi-billion-dollar money laundering scheme, for which they were convicted.



These two sinister firms raised more than $4.5 million for Wal-Mart through the Oct. 1, 1970 IPO, and a grateful Mr. Sam placed Jackson Stephens on the board of directors of Wal-Mart.
The 'Wal-Mart Decade'

The second instance of Wall Street's massive financing and guiding of Wal-Mart, involves the company's spectacular growth during 1990-2002.



The bankers loved Wal-Mart because it fulfilled their policy of a post-industrial society, whereby America's productive capacities were ravaged; the nation no longer produced quality goods at decent prices, with a well-paid productive labor force. Instead, it became a consumer society, purchasing goods, produced first at runaway sweatshops in the U.S. South, and eventually at overseas concentration-camp production facilities. Wal-Mart would be the prime seller of these goods. Soon its ferocious methods became the "norm" for America; other retail firms, as well as manufacturers, either adopted the methods of Wal-Mart, or they were gone.



In the late 1980s, the Wall Street-City of London financiers needed greater volumes of loot to prop up the collapsing world speculative bubble. They gouged huge amounts of loot out of the developing sector, under the globalization typified by the North American Free Trade Agreement (NAFTA), which was rammed through the U.S. Congress in 1993, and implemented the following year. Wal-Mart became the ideal vehicle for free-trade and globalization: marketing the goods that developing countries had produced, but for which these countries were paid only a fraction of their real production costs.
Wal-Mart was pumped up to enormous size, accompanied by structural changes, with Wall Street pumping in the money by snapping up Wal-Mart's corporate bonds.
For most of its existence, Wal-Mart had built only one kind of store, an enormous facility occupying approximately 70,000 square feet in sales space (other department chains' stores averaged 40,000 square feet). But now, even these stores were no longer big enough. With globalization going through, the United States would receive a flood of imported goods. Both for this, and for advantage against its competitors, Wal-Mart, starting 1987, began to build supercenters, stores with an amazing 180,000 to 200,000 square feet, which sold everything from hard goods to fresh food.
Figure 1 documents the shift in policy. The number of Wal-Mart regular stores rose between 1985 and 1995, although after 1990, the rate of growth slowed. In 1995, the number of Wal-Mart regular stores peaked at 1,995; in the ensuing seven years, the number contracted by more than 400. There were no supercenters in 1985, only five in 1990, but by 2002, there were 1,268—a staggering growth of 25,000% since 1990.
As the second prong of the globalization strategy, Wal-Mart established stores abroad, regimenting foreign markets using the same methods as it did in the United States, thus destroying those countries' economies. Figure 2 shows that the number of stores that Wal-Mart has built in foreign countries has risen from 1 in 1990, to 1,288 in 2002. Wal-Mart is now the number one retailer in Mexico, Canada, and other countries. The trajectory of the curves of building Wal-Mart international stores, and of building domestic Wal-Mart supercenters are virtually the same, arising from a single policy.



The furious pace of expansion of Wal-Mart's operations—a combined total of 2,540 new domestic and international stores since 1990—directly comes from the bankers' mobilization to expand the process of globalization looting, and from the related policy of the Roman Imperial model. There was an immense cost to carry out the construction, in the tens of billions of dollars. Wal-Mart's cash flow could not have covered the cost.



Now we see the hand of Wall Street and the City of London, which both shaped the policy initially, and made it work. Figure 3 shows the level of Wal-Mart's long-term debt, most of which is in the form of bonds. In 1990, Wal-Mart had $740 million in long-term debt; by 2002, it owed $16.6 billion in long-term debt. Notice that this debt curve directly mirrors that of the number of Wal-Mart supercenters, and Wal-Mart international stores. Wal-Mart could only issue this debt due to the fact that the largest Wall Street and London firms were willing to underwrite, market, and sell Wal-Mart's bonded debt, which ended up in the portfolios of several of these banks, as well as of mutual funds, insurance companies, etc. (Add to this several billion dollars of Wal-Mart's short-term debt, in the form of commercial paper. Wal-mart's annual reports do not provide sufficient data to construct a series.)



Contrary to Wal-Mart's assertions of its independence from Wall Street, reverse the process. It was the Wall Street-imposed paradigm-shift of the post-industrial society since 1963, pushed through Congress, pushed through credit policy administered by the Federal Reserve Board, pushed through the banks swallowing billions of Wal-Mart bonds, that made Wal-Mart what it is, conferring on the company its enormous leverage to loot.
The Family Fortune

Wal-Mart operated like a large funnel, sucking in the loot from the application of its genocidal austerity policies, both domestically and internationally. This loot has been siphoned off by the Walton family, which owns more than one-third of the company's stock. On Forbes magazine's 2002 list of America's ten richest people, numbers 5 through 9 are occupied by a member of the Walton family: Sam's widow Helen; son Rob, who is chairman of Wal-Mart; son John, who is chairman of the family's bank, Arvest; son Jim; and daughter Alice. The value of Wal-Mart stock had risen, so that Wal-Mart has the third largest market capitalization of any American company.



Figure 4 demonstrates that in 1992, the family was worth approximately $8 billion. Today, it is worth $102.5 billion. Upon these assets, the Waltons earn—mostly from stock dividends—half a billion dollars a year. This money was accumulated from the process of destroying the world economy and its labor force.



Having a bigger fortune than any family in the history of mankind, the Waltons are deploying it for evil purposes. First, of course, through their controlling share of stocks in Wal-Mart, the family plans to continue and enlarge upon Sam Walton's murderous policy for the comany itself. But there is more.



According to the Walton Family Foundation, Inc.'s annual tax returns (form 990-PF), it funds some of the leading forces of the neo-conservative movement, which are part and parcel of Vice President Dick Cheney's Synarchist apparatus: the Cato Institute, the Heritage Foundation, the Hudson Institute (a Cheney base of operations), the Manhattan Institute, the Landmark Legal Foundation, the National Right to Work Legal Defense & Education Foundation, and others. It also funds environmental groups, which, though identified as liberal, seek to tear down modern industrial society, such as the National Wildlife Foundation and the Nature Conservancy of Arkansas and of California.



Further, the Walton family, particularly John Walton, who runs the family's Arvest bank, has functioned as a money pump for neo-conservative causes. Exemplary is its backing of Jeb Bush, the Republican governor of Florida and brother of President George Bush, who is a cog in Attorney General John Ashcroft's domestic fascist program. Jeb also heavily interfaces with right-wing Cuban networks based in Florida, who are involved in the drug trade. In 2002, when Democrat Bill McBride made a stiff challenge to Bush in Florida's gubernatorial race, the California-domiciled John Walton sent $325,000 to the Florida Republican Party, which money was whisked into Jeb Bush's campaign account. Bush won the election. Though not a Floridian, Walton was the largest single individual contributor to Bush during the Florida election. Florida is also a key state for the Republicans in the 2004 Presidential election.



The Waltons are using their money to build up a banking empire, which apparently would give them one of the largest banks in the United States and the world. They have anchored this quest, which is two decades in the making, upon Arvest Bank, which is family owned, and secondarily, through Wal-Mart Stores, Inc.



The Walton family has carefully shepherded its Arvest Bank Holding Company—which owns its Arvest Bank—into a bank with $6.6 billion in assets, and $5.4 billion in deposits. It is already one of America's 75 biggest banks, but that is not good enough for the Waltons. The bank is chaired by John Walton, and has grown through gobbling up other banks. For example, on Dec. 11, 2003, Arvest put the finishing touches on its acquisition of Superior Financial Corp, which has 22 locations in the state of Arkansas. Arvest now operates more than 200 branches in four states, and has the second highest bank market share in Arkansas and the sixth largest bank market share in Oklahoma. It is building on the same rapacious principles by which it built Wal-Mart, starting in Arkansas and neighboring states, and spreading out from there.



In addition, the Waltons' Wal-Mart Stores, Inc. has made attempts to buy banks in its own name.

The Walton Family Foundation is also the largest funder for the school privatization movement in America, which would dismantle the public education system (more on this in a forthcoming EIR).



The Walton family is a predatory bunch; the best way to eliminate their devastating effect on the United States and the world, would be to dismantle their Wal-Mart corporate empire, as LaRouche has demanded.
Wal-Mart's Walton Family: The Beasts of Bentonville

Then there is this:

Wal-Mart's Conspiracy to Break Immigration Law

Details emerge on natiowide scheme to hire undocumented immigrants and undercut wages of janitors

By Peter Shinkle
First published by the St. Louis Post-Dispatch , July 16, 2006

A local businessman masterminded a scheme in the late 1990s to bring illegal immigrants to clean floors at Wal-Mart stores across the country.

Wal-Mart paid at least $82.2 million over three years to shell companies set up by businessman Christopher Walters, federal agents discovered. Walters' companies in turn paid subcontractors who hired illegal immigrants from countries stretching from Poland to Mongolia.

When investigators dug into the scheme, Walters cut a deal and became a star cooperating witness in a criminal probe targeting Wal-Mart. He told investigators that a Wal-Mart executive told him to set up the shell companies, and he recorded conversations with scores of Wal-Mart employees.

"Walters created these dummy corporations, but he did so at the direction of Wal-Mart," said Jeff Demerath, Walters' attorney.

The investigation led to a landmark settlement in March 2005, when Wal-Mart agreed to pay $11 million to avoid charges that it employed illegal immigrants.

In return for his cooperation, Walters avoided criminal charges. But he agreed that 12 of his shell companies would plead guilty to conspiring to transport illegal immigrants into the country and would forfeit $4 million.

Now, more than a year later, the companies still have not paid the $4 million. Court records reflect payment of about $2 million. Federal officials say the amount forfeited so far is about $2.8 million.

Walters, 43, who lives in a mansion on a gated lane in Chesterfield, declined to comment. Demerath said he expected the companies to pay the $4 million.

Walters' pivotal role in the probe has left him persona non grata at Wal-Mart, which denies it knew of the illegal immigrants working for Walters' companies. "We feel like we were hoodwinked," said John Simley, Wal-Mart spokesman. As for the claims Walters made about the conspiracy and Wal-Mart's role, Simley said: "It's important to note that he was a cooperating witness. It's not like he volunteered to do this."

The St. Louis raid
The scheme began after federal immigration agents raided a Wal-Mart in the St. Louis area in early 1997.

At that time, the cleaning company Walters inherited from his father, Intensive Maintenance Care Inc., was cleaning about two-thirds of all Wal-Mart stores in the country, according to an account by Walters cited by immigration officials. As a result of the raid, Wal-Mart fired Walters' company, according to both Walters and Wal-Mart.

Walters said that Leroy Schuetz, then a vice president in the operations branch at Wal-Mart headquarters in Bentonville, Ark., told him IMC had been fired because of its use of illegal workers.

But the Wal-Mart executive also gave him a very different message, Walters told agents of U.S. Immigration and Customs Enforcement. Schuetz "told him to create different companies" so that if one company was fired for employing illegal immigrants, Walters could still do business with Wal-Mart through the other companies, according to Walters.

Wal-Mart denies it recommended setting up the companies. "There's nothing in the evidence to indicate that," said Simley.

What's more, the employee Walters spoke with was Leroy Schuetts, not Schuetz, and he was a regional manager, not a vice president, Simley said. As for the claim that the Wal-Mart employee urged use of multiple companies, "Schuetts has denied it," Simley said. He said Wal-Mart would not make Schuetts available for an interview.

In July 1997, Walters established Express Corporate Services Inc., according to records filed with the Missouri Secretary of State. More than a year later, he established IMC Associates Inc. And on Dec. 14, 1998 , seven companies were established on a single day. They had names such as Comet Floor Care Associates Inc., World Clean Associates Inc. and Ironman Maintenance Associates. Walters had his employees' names put on the public filings; his own name seldom appeared on them.

Walters then hired subcontractors, and it was those subcontractors who hired the illegal workers, said Demerath, Walters' attorney.

Soon, cash from the world's largest retailer was gushing into Walters' companies. In 1999, Wal-Mart paid Intensive Maintenance Care and six other Walters companies $18.3 million, agents said. By 2001, that number had jumped to $37.8 million.

Wal-Mart paid those companies a total of $82.2 million from 1999 through 2001, but that might be only a fraction of the amount Wal-Mart paid because the six companies do not include a key company, Express Corporate Services, or several other of Walters' cleaning companies. Nor does it include the amounts paid to Walters' brother, who also had a company that provided cleaning services for Wal-Mart.

Walters bought a $2.4 million house in Ladue and an apartment complex in Fenton, also for $2.4 million. Other expenditures agents found included a $21,763 Rolex watch for Walters' wife, Jamie.

By then, a Russian had tipped off the feds.

The tip-off
In November 1998, an immigration agent interviewed Vladimir Blinov, a Russian who worked cleaning the Wal-Mart in Honesdale , Pa. He said his employer was a man named Stanley Kostek.

Blinov was in the country illegally because he had entered on a tourist visa and then had overstayed the term of that visa. Blinov had been told before he left Russia about the job he would get at Wal-Mart, Blinov told the agent, Julio Santana of the Philadelphia office of Immigration and Customs Enforcement.

This was the start of what would be a seven-year probe by Santana and other immigration agents of Wal-Mart's use of illegal immigrants. They called it Operation Rollback, a play on the retailer's ads for [supposedly] lowering prices. In early 2000, agent Santana discovered information that quickly expanded the probe to Wal-Mart operations nationwide.

A probation officer told Santana that the Honesdale Wal-Mart's manager identified the company that cleaned the store as Comet Floor Care and said that he believed the cleaning crew members were all illegal immigrants, Santana said in an affidavit filed in court in Pennsylvania . Immigration officials subpoenaed documents from Wal-Mart, and those documents revealed that Wal-Mart had paid Comet $8 million in 1999 to clean 82 stores throughout the United States, Santana said.

Santana also got information from a confidential informer, who set up recorded phone calls with Kostek. The informer worked for Kostek at the Honesdale Wal-Mart and lived in a trailer with cleaning crew members from the former Soviet republic of Georgia.

Armed with this information, immigration agents raided Wal-Mart stores in Honesdale, Harrisburg and two other cities in Pennsylvania on March 20, 2001 . They arrested 27 illegal immigrants from countries including Georgia, Russia, Hungary and Ukraine.

They also searched the trailer in Honesdale where the informant said Kostek housed illegal workers who cleaned the local Wal-Mart.

"The aliens slept on the floor in sleeping bags, and the bathroom was abnormally dirty," Santana wrote.

Two days after the raids, the informer called immigration officers to tell them that Kostek, who owned a company called CMS based in Queensbury, N.Y., had moved him to Salem, N.H., to clean a different Wal-Mart, and from there to New Jersey .

Soon, the informer himself was in trouble. By April 2001, other workers had threatened him physically and suspected him of cooperating with immigration officials. Also, back in his home country of Georgia , family members of deported Georgians had threatened his family. He was taken out of the investigation, Santana said.

Violence reared its head when another man working with Kostek, Myroslav Dryjak, brought in some Armenians to replace the crew at the Honesdale store. When one of the Armenians, a man about 60 years old, complained that he wanted to work in New York , Dryjak and another man took him outside the trailer and assaulted him, the informant told immigration officials.

In fall 2001, immigration agents raided Wal-Marts in Pennsylvania , New York , Ohio and Missouri , arresting 68 illegal workers from countries including Poland , Lithuania and Mongolia .

At stores in St. Ann and O'Fallon, the agents arrested six Czechs and a Pole, all employed by a company called National Floor Management. Illegals at other stores worked for a string of other companies: Ironman Maintenance Inc., IMC, Comet, Champion, Precision Cleaning Inc. and Pinnacle Management Inc.

Santana began to scrutinize the companies. The public documents they filed offered limited information, but they kept leading back to St. Louis County . Investigators also discovered a pattern: Many of the companies had the same agent at the same address on South Florissant Road in Ferguson .

Immigration agents also obtained records from Wal-Mart revealing the $82.2 million that Wal-Mart paid the seven Walters companies. And from Normandy Bank in St. Louis County , Santana obtained records showing a web of payments linking the Walters companies to each other and to subcontractors.

On April 10, 2002 , agents raided the offices of Intensive Maintenance Care in Ferguson , CMS in Queensbury and one other subcontractor. The agents seized financial accounts holding $3 million in cash. They also filed forfeiture cases in federal court in Pennsylvania seeking to take control of the Walters' Ladue home and the Fenton apartment complex, claiming both had been bought with the proceeds of an illicit scheme to launder money and employ illegal immigrants.

Walters maintained that he never knew the subcontractors were hiring illegal immigrants, said Demerath, his attorney. But making that case stand up in court might be tough, Demerath acknowledged.

"We knew it was dangerous to go to trial on that because he probably did look the other way," Demerath said.

The deal
In July 2002, three months after his office was raided, Walters agreed to talk with the federal investigators - with his attorney present. It was then that Walters acknowledged that he had first learned of illegal workers used by his subcontractors as early as 1994, Santana said in his affidavit. He also told the story of how the 1997 raid led him to set up multiple companies.

But Walters did more than recount history to help the agents - much more. After the April 2002 raids, he had two of his employees call Wal-Mart stores and inform them that he was shutting down and going out of business. The employees recorded the calls. In July, Walters turned over the recordings to Immigration.

Demerath and prosecutors negotiated an agreement in which Walters' 12 companies would plead guilty to conspiracy to transport illegal workers into the country and would forfeit $4 million. In return, U.S. attorney Thomas Marino of Harrisburg, Pa., agreed not to pursue any charges against Walters, his wife, his father or his employees. "It was a good deal for him," Demerath said.

Walters signed the agreement in January 2003, but it would remain secret for more than two years. In that period, Walters cooperated with the federal probe extensively, recording more than 100 phone calls and arranging secretly recorded meetings with Wal-Mart employees.

On April 23, 2003, Walters wore a wire to a meeting with Steve Bertschy, whom immigration agents identified as a Wal-Mart vice president over store maintenance.

Walters said he wanted to help Wal-Mart replace illegal immigrants in its stores with legal workers, but Bertschy did not accept the offer, Santana said in an affidavit later filed in federal court in Arkansas .

Walters told Bertschy that he knew of as many as 1,000 illegal immigrants working at Wal-Mart stores. "We're trying to address that issue because people don't know exactly if there are illegal workers in our stores," Bertschy responded.

At another point, Walters said, "I know of at least 400 stores that had illegal aliens in them." Santana said Bertschy replied: "Don't repeat that."

Wal-Mart spokesman Simley acknowledged that Bertschy had made the comments attributed to him, but he said they were "out of context." Simley also denied that Bertschy was a vice president. His title was "manager, floor maintenance program," Simley said.

Later in 2003, Walters made recorded phone calls to 118 Wal-Mart stores to discover whether they employed contractors for cleaning services.

Armed with the recordings and other information provided by Walters, immigration agents obtained search warrants. On Oct. 23, 2003, agents raided the offices of Bertschy and other employees at Wal-Mart headquarters, taking away computer and e-mail data and 13 boxes of files and other papers. On the same day, agents arrested about 245 illegal immigrants employed at 61 stores in 21 states from New York to Arizona .

The settlement
On March 18, 2005 , Wal-Mart agreed to pay $11 million to settle allegations of hiring illegal immigrants, but the company denied any wrongdoing.

Walters' 12 companies agreed to a guilty plea and the $4 million forfeiture.

The settlement documents also pointed out that after the October 2003 raids, Wal-Mart notified the government that it intended to take action to ensure that independent contractors working for Wal-Mart comply with laws on employment of illegal immigrants.

Wal-Mart also agreed to a court order requiring it to train its managers on preventing the hiring of illegal immigrants, and to verify that its independent contractors are complying with immigration laws.

Walters and the Wal-Mart executives avoided any criminal charges, but prosecutors came down on others linked to the scheme. Three months after the settlement was announced, Walter Truszkowski, the owner of Deluxe Cleaning, pleaded guilty in federal court in Chicago of money laundering and conspiracy to conceal illegal immigrants.

Truszkowski admitted with his guilty plea that, through Walters' company Intensive Maintenance Care, he got "criminal proceeds in the form of Wal-Mart's payments." Last month, Truszkowski was sentenced to three years in prison and ordered to pay a $60,000 fine.

Truszkowski, of McHenry , Ill., admitted that he paid $247,319 as part of the conspiracy to an illegal immigrant from Lithuania, Algimantas Kondratavicius.

Kondratavicius, who was arrested in 2000 at a Wal-Mart in Valparaiso, Ind., pleaded guilty of importing illegal immigrants, admitting he obtained his workers from "alien smugglers" in Moscow and Tomsk, Russia. In 2004, he was sentenced to a year in prison.

Meanwhile, two other subcontracting firms, DJR Cleaning and CMS of Queensbury, got deals like Walters'. DJR owner Vincent W. Romano was not charged with a crime, but DJR itself pleaded guilty of conspiracy to transport aliens into the country and agreed to forfeit $200,000. Charges against CMS owner Stanley Kostek were dropped, but CMS pleaded guilty and forfeited $10,000.

Dryjak, who allegedly assaulted the Armenian while moving crews of illegal workers for CMS in the Northeast, pleaded guilty of conspiracy and was sentenced to probation.

Meanwhile, Walters' companies have yet to forfeit the full $4 million. Last September, federal prosecutors dropped their efforts to force Walters to forfeit the home in Ladue and the apartment complex in Fenton. Marty Carlson, first assistant U.S. attorney for the middle district of Pennsylvania, which investigated Walters, declined to discuss why the full forfeiture had not taken place. "We intend to move forward until we've secured the full $4 million," he said.

Amid all the Operation Rollback cases, what remains obscured is the fate of the hundreds of illegal immigrants arrested at Wal-Marts nationwide. Immigration officials have said many were deported, but it is unclear how many. Some disappeared during the investigation.

Some former Wal-Mart janitors have filed a lawsuit claiming Wal-Mart committed racketeering offenses in its failure to pay the minimum wage and Social Security taxes to janitors, including illegal immigrants.

James Linsey, an attorney who is seeking to make the case a class action on behalf of many Wal-Mart janitors, said immigrant janitors were "were working seven nights a week, 364 days a year," and in some cases were locked inside stores while they worked overnight. Wal-Mart has denied the claims and has asked a federal judge in New Jersey to dismiss the case.
© 2006 St Louis Post-Dispatch

Wal-Mart's Conspiracy to Break Immigration Law