Last fall in this space I described the Foreign Corrupt Practices Act as “a feel-good piece of overcriminalization” that Congress should never have passed. Over the weekend a front-page New York Times investigation alleged that Wal-Mart’s Mexican subsidiary had paid millions in bribes to local officials for permission to build stores around the country. Worse, when executives in America learned of the payments, they chose to sweep the matter under the rug rather than pursue an investigation, and that choice may have implicated high-level company execs in FCPA violations. [WSJ summary; Wal-Mart written statement and video]

I’m writing up a longer piece on the controversy. In the mean time, a few points:

• The original payments to Mexican officials are said to have exceeded $24 million; meanwhile, $12 billion in stock market value, or 500 times that sum, was vaporized in one day on Monday. Wal-Mart’s high legal exposure arises through the interaction of various FCPA provisions with each other and with other federal and state laws, including possible liability under state corporate law and Sarbanes-Oxley. Collateral costs, such as executive distraction and probes into its operations in other countries, could debilitate the largest U.S. retailer for some time.
• A good place to begin on the legal issues is Mike Koehler’s FCPA Professor with coverage here and here.
• According to Peter Henning at NYT DealBook, it may be too late for the feds to file criminal charges against individual defendants over the original payments because of FCPA’s five-year statute of limitations. On the other hand, DoJ will have various theories to go after the company itself: it can claim that later financial results are misstated, or that there was a conspiracy at least one step of which was taken within the last five years, or that records were destroyed which could serve as an obstruction of justice charge under Sarbanes-Oxley. If the original wrongdoers wind up walking free while managers who arrived on the scene later take a full legal hit, well, that wouldn’t be the first time.
• Some proponents of the FCPA are claiming vindication: how can the Cato types be right in calling this law vague and punitive when it failed to deter a cover-up at a company as big and image-sensitive as Wal-Mart? UCLA corporate law specialist Stephen Bainbridge has a nice riposte: “In other words, the FCPA imposes huge burdens and liability risks on honest companies, but fails to deter dishonest ones, so we’re going to leave it on the books as is. I’m left scratching my head in wonderment at the folly of it all.”
• Daniel Fisher at Forbes scores an interview with the eminent Yale management professor Paul MacAvoy whose analysis of the case follows:
  

  …all large U.S. corporations operating abroad must play a dangerous game in order to obtain the permits and permissions they need. MacAvoy, who has served on the boards of Chase Manhattan, American Cyanamid and Alumax, said Wal-Mart’s mistake was steering all the payments to a pair of lawyers who allegedly were friends of the company’s Mexico counsel. That concentrated the risk and the likelihood of a big, crater-the-company scandal instead of a series of small ones.

  From my experience, he said, most companies have “local representatives involved in negotiations and they pay the local reps a fee for the representation without asking how that fee gets redistributed.”

  “The consultant does the dirty work,” he said. “This case went wrong by the concentration of the funds and the coverup of the process.”