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Bribery probe against Walmart inconclusive, but no clean chit to US retailer -Anandita Singh Mankotia
-The Economic Times


NEW DELHI: Terming some of the answers provided by Walmart as "incomprehensible" and parts of the deposition by its just departed India boss Raj Jain as "ambiguous", a government committee set up to look into whether the US behemoth indulged in bribery in India, has refused to give it a clean chit, complicating its efforts to draw a line under the episode.

The one-man committee under Justice Mukul Mudgal has said in its final report that it was unable to reach a definite conclusion on the matter because of a lack of "investigative" or "summoning power", and suggested that the government keep open the option to investigate the company depending on what disclosures Walmart makes in the future to the US Congress.

"Walmart has not furnished the documents and information to the US Congress till date and has not provided this committee with full details sought by it. However, as and when Walmart replies to the queries of the US Congress fully and an adverse report or disclosure indicating violations of Indian laws is made, the investigation should be carried out by the government," the report, whose contents were shared with ET, has concluded. The 32-page report was submitted to Corporate Affairs Minister Sachin Pilot.

It was submitted last month and now has to be tabled in Parliament. The Arkansas, US-based world's biggest retailer first got enmeshed in a bribery scandal in Mexico, which later spread to a raft of countries, including India, after it announced late last year that it has expanded an ongoing internal investigation into potential violations of the US Foreign Corruption Practice Act (FCPA). This announcement, made at a time India was already seeing widespread protests over the government's decision to open up the supermarkets sector to firms such as Walmart, had the effect of adding fuel to the fire and culminated in the government ordering an enquiry under Justice Mudgal.

The judge, a former chief justice of the Punjab and Haryana High Court, also expressed his displeasure at the company's refusal to give a break-up of so called lobbying expenses on grounds it was closely held proprietary information.

Summarising his report in several points, Justice Mudgal said the company refused to disclose money spent on external consultants and this made it difficult for him to conclusively investigate the matter. The committee had asked for a break-up of the payments after Walmart Asia CEO Scott Price categorically refuted charges of incurring any lobbying expenses in India. Instead he said that the company didn't hire any external lobbyists and Walmart acted as its own lobbyist. "We do hire advisors, we do not hire lobbyists. We do not have individual third-party intermediaries," he said, while testifying before the committee last March.

While Walmart apparently refused to share the details of these expenses, its explanation has failed to cut ice with the committee, which labeled it "incomprehensible and tends to obfuscate the information provided to the committee". The report also termed the answers provided by Walmart India's former chief Raj Jain on the role played by an entity called Cedar Services as "ambiguous". It said that while in his oral testimony Jain had said that Cedar Support services was incorporated only in 2010 and did not exist before that, in his supplementary answers filed later with the committee, he noted that the objects of Cedar Support Services were changed in 2009.

"Thus it is apparent that prior to 2009, the company existed," the report has noted. Walmart declined to comment on the report. "We have not seen the report and cannot comment," a Walmart India spokesperson said. The committee, which was constituted following an uproar in Parliament over Walmart's disclosure that it had spent $25 million on lobbying since 2008, including on issues related to "enhanced market access for investment in India", also suggested in its report that operations of its retail joint venture Bharti Retail had violated India's FDI policy by sourcing more goods than prescribed from its wholesale cash and carry venture.

The committee's findings could hand fresh ammunition to Walmart's critics in India and complicate Walmart's efforts to put this controversy behind it and resume its expansion, which was frozen last year after the bribery and lobbying controversy erupted. It could also affect the government's efforts to lure greater investments into the sector, where, despite the landmark opening up of the business, not one foreign supermarket group has announced entry plans.