Wal-Mart Abroad | How a retail giant fueled growth with bribes
The Bribery Aisle: How Wal-Mart Used Payoffs to Get Its Way in Mexico
Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited, an examination by The New York Times found.
Josh Haner and Brent McDonald/The New York Times
A preview of a New York Times investigation revealing
bribery by Wal-Mart as it sought to build in the shadow of Mexico's
most revered cultural landmark, the pyramids of Teotihuacán.
By DAVID BARSTOW and ALEJANDRA XANIC von BERTRAB
Published: December 17, 2012 204 Comments
SAN JUAN TEOTIHUACÁN, Mexico — Wal-Mart
longed to build in Elda Pineda’s alfalfa field. It was an ideal
location, just off this town’s bustling main entrance and barely a mile
from its ancient pyramids, which draw tourists from around the world.
With its usual precision, Wal-Mart calculated it would attract 250
customers an hour if only it could put a store in Mrs. Pineda’s field.
One major obstacle stood in Wal-Mart’s way.
After years of study, the town’s elected leaders had just approved a new
zoning map. The leaders wanted to limit growth near the pyramids, and
they considered the town’s main entrance too congested already. As a
result, the 2003 zoning map prohibited commercial development on Mrs.
Pineda’s field, seemingly dooming Wal-Mart’s hopes.
But 30 miles away in Mexico City, at the headquarters of Wal-Mart de
Mexico, executives were not about to be thwarted by an unfavorable
zoning decision. Instead, records and interviews show, they decided to
undo the damage with one well-placed $52,000 bribe.
The plan was simple. The zoning map would not become law until it was
published in a government newspaper. So Wal-Mart de Mexico arranged to
bribe an official to change the map before it was sent to the newspaper,
records and interviews show. Sure enough, when the map was published,
the zoning for Mrs. Pineda’s field was redrawn to allow Wal-Mart’s
store.
Problem solved.
Wal-Mart de Mexico broke ground months later, provoking fierce
opposition. Protesters decried the very idea of a Wal-Mart so close to a
cultural treasure. They contended the town’s traditional public markets
would be decimated, its traffic mess made worse. Months of hunger
strikes and sit-ins consumed Mexico’s news media. Yet for all the
scrutiny, the story of the altered map remained a secret. The store
opened for Christmas 2004, affirming Wal-Mart’s emerging dominance in
Mexico.
The secret held even after a former Wal-Mart de Mexico lawyer contacted
Wal-Mart executives in Bentonville, Ark., and told them how Wal-Mart de
Mexico routinely resorted to bribery, citing the altered map as but one
example. His detailed account — he had been in charge of getting
building permits throughout Mexico — raised alarms at the highest levels
of Wal-Mart and prompted an internal investigation.
More in the Series Wal-Mart Abroad »
Part 1: At Wal-Mart in Mexico, a Bribe Inquiry Silenced
But as The New York Times revealed in April,
Wal-Mart’s leaders shut down the investigation in 2006. They did so
even though their investigators had found a wealth of evidence
supporting the lawyer’s allegations. The decision meant authorities were
not notified. It also meant basic questions about the nature, extent
and impact of Wal-Mart de Mexico’s conduct were never asked, much less
answered.
The Times has now picked up where Wal-Mart’s internal investigation was
cut off, traveling to dozens of towns and cities in Mexico, gathering
tens of thousands of documents related to Wal-Mart de Mexico permits,
and interviewing scores of government officials and Wal-Mart employees,
including 15 hours of interviews with the former lawyer, Sergio Cicero
Zapata.
The Times’s examination reveals that Wal-Mart de Mexico was not the
reluctant victim of a corrupt culture that insisted on bribes as the
cost of doing business. Nor did it pay bribes merely to speed up routine
approvals. Rather, 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.
The Times then matched information about specific bribes against permit
records for each site. Clear patterns emerged. 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.
The Sam’s Club near the Basílica de Guadalupe, one of Mexico City’s most densely populated neighborhoods.
Josh Haner/The New York Times
Thanks to eight bribe payments totaling $341,000, for example, Wal-Mart
built a Sam’s Club in one of Mexico City’s most densely populated
neighborhoods, near the Basílica de Guadalupe, without a construction
license, or an environmental permit, or an urban impact assessment, or
even a traffic permit. Thanks to nine bribe payments totaling $765,000,
Wal-Mart built a vast refrigerated distribution center in an
environmentally fragile flood basin north of Mexico City, in an area
where electricity was so scarce that many smaller developers were turned
away.
But there is no better example of Wal-Mart de Mexico’s methods than its
conquest of Mrs. Pineda’s alfalfa field. In Teotihuacán, The Times found
that Wal-Mart de Mexico executives approved at least four different
bribe payments — more than $200,000 in all — to build just a medium-size
supermarket. Without those payoffs, records and interviews show,
Wal-Mart almost surely would not have been allowed to build in Mrs.
Pineda’s field.
The Teotihuacán case also raises new questions about the way Wal-Mart’s
leaders in the United States responded to evidence of widespread
corruption in their largest foreign subsidiary.
A view of Wal-Mart’s distribution center north of Mexico City, in the municipality of Cuautitlán Izcalli.
Josh Haner/The New York Times
Wal-Mart’s leadership was well aware of the protests here in 2004. (The
controversy was covered by several news outlets in the United States, including The Times.)
From the start, protest leaders insisted that corruption surely played a
role in the store’s permits. Although woefully short on specifics,
their complaints prompted multiple investigations by Mexican
authorities. One of those investigations was still under way when
Wal-Mart’s top executives first learned of Mr. Cicero’s account of
bribes in Teotihuacán (pronounced Tay-o-tea-wah-KHAN).
But Wal-Mart’s leaders did not tell Mexican authorities about his
allegations, not even after their own investigators concluded there was
“reasonable suspicion” to believe laws had been violated, records and
interviews show. Unaware of this new evidence, Mexican investigators
said they could find no wrongdoing in Teotihuacán.
Wal-Mart has been under growing scrutiny since The Times disclosed its
corruption problems in Mexico, where it is the largest private employer,
with 221,000 people working in 2,275 stores, supermarkets and
restaurants.
In the United States, the Justice Department and the Securities and Exchange Commission are investigating possible violations
of the Foreign Corrupt Practices Act, the federal law that makes it a
crime for American corporations or their subsidiaries to bribe foreign
officials. Mexican authorities and Congressional Democrats have also
begun investigations, and Wal-Mart has been hit by shareholder lawsuits
from several major pension funds.
Wal-Mart declined to discuss its conduct in Teotihuacán while it is continuing its own investigation.
The company has hired hundreds of lawyers, investigators and forensic
accountants who are examining all 27 of its foreign markets. It has
already found potentially serious wrongdoing, including indications of
bribery in China, Brazil and India. Several top executives in Mexico and
India have been suspended or forced to resign in recent months.
Wal-Mart has also tightened oversight of its internal investigations. It
has created high-level positions to help root out corruption. It is
spending millions on anticorruption training and background checks of
the lawyers and lobbyists who represent Wal-Mart before foreign
governments. The company has spent more than $100 million on
investigative costs this year.
Wal‑Mart’s Response
“We are committed to having a strong and effective global anticorruption
program everywhere we operate and taking appropriate action for any
instance of noncompliance,” said David W. Tovar, a Wal-Mart spokesman.
In Mexico, a major focus of Wal-Mart’s investigation is none other than
the boxy, brown supermarket in Mrs. Pineda’s alfalfa field.
Eight years later, it remains the most controversial Wal-Mart in Mexico,
a powerful symbol of globalism’s impact on Mexican culture and
commerce.
Wal‑Mart’s Reforms
Here is Wal‑Mart’s description of how it is strengthening its anti-corruption efforts in Mexico and around the world
As it turns out, the store also took on symbolic importance within
Wal-Mart de Mexico, Mr. Cicero said in an interview. Executives, he
said, came to believe that by outmuscling protesters and building in the
shadow of a revered national treasure, they would send a message to the
entire country: If we can build here, we can build anywhere.
City of the Gods
In ancient times, Teotihuacán was a sprawling metropolis of perhaps
150,000 people. The “city of the gods,” as the Aztecs called it, rose up
around a vast temple complex and two great pyramids, the Sun and the
Moon. The ancient city is long gone, buried under farm fields, small
pueblos and the detritus of bygone civilizations. But the temple complex
and pyramids remain, which is why Teotihuacán is so central to Mexico’s
cultural patrimony.
Teotihuacán’s leaders naturally wanted to protect this legacy as they
began work on a new zoning plan in 2001. To keep the town attractive as a
tourist destination, they decided to limit development in the
“archaeological zone,” a buffer of protected land that encircles the
pyramids. At the same time, they wanted a plan that would lure more
tourists into the town’s central square.
“People complained tourists didn’t go into town,” said Víctor Ortiz, a
partner in the consulting firm the town hired to draw up its new zoning
plan.
By early 2003, just as Mr. Ortiz’s firm was finishing its work, Wal-Mart
de Mexico had settled on Teotihuacán as a ripe target for expansion.
Its population, nearly 50,000, was growing fast, and its commerce was
dominated by small neighborhood shops and a traditional public market in
the central square — exactly the type of competition Wal-Mart de Mexico
had vanquished in town after town.
Mr. Cicero, a trim, sharp-featured man, recalled how Mrs. Pineda’s
alfalfa field jumped out as Wal-Mart’s real estate executives scoured
aerial photographs of Teotihuacán. By putting one of Wal-Mart’s Bodega
Aurrera supermarkets at the town’s main entrance, they could create a
choke point that would effectively place the town off limits to
competitors. There was also space to add other types of Wal-Mart stores —
restaurants or department stores — down the road. “We would be slamming
the gate on the whole town,” he said.
But Wal-Mart officials got a cold reception when they began to inquire
about permits at Teotihuacán’s municipal offices. Saúl Martínez, an
employee in the urban development office, recalled telling Wal-Mart’s
representatives that a supermarket could not be built in Mrs. Pineda’s
field, because the field was zoned for housing. Wal-Mart would need a
zoning change. But a supermarket, he told them, was sure to generate
strong opposition because of the traffic chaos it would create.
“Go look for something else,” he recalled telling Wal-Mart.
At first, Mr. Cicero’s team thought it had found a perfectly legal
solution to the zoning problem. Only a narrow strip of land separated
Mrs. Pineda’s field from Hidalgo Avenue, the main road into town. If
Wal-Mart could build an entrance across that strip, zoning rules would
let it rely on Hidalgo Avenue’s zoning, which allowed commercial
development. But Wal-Mart could not get a right of way, despite months
of trying.
By then, the municipality was rushing to complete its new zoning plan.
Officials were already holding public meetings to present the plan and
solicit feedback. A final vote was scheduled for Aug. 6, 2003.
The Times obtained four different copies of the new zoning map as it
existed on the eve of the vote. All four, including two found in the
town’s urban development office, confirm that housing was the only kind
of development allowed on Mrs. Pineda’s field. There is no record of
Wal-Mart seeking a last-minute change, and nine officials closely
involved in drafting the plan all said in separate interviews that they
were certain Wal-Mart made no such request.
“I would remember,” said Humberto Peña, then the mayor of Teotihuacán.
“And if they would have asked that, my answer would have been no.”
After two years of painstaking work, Mr. Peña and the municipal council
unanimously approved Teotihuacán’s new zoning plan on Aug. 6
The next day Mr. Peña sent the new map to the state’s Office of Urban
and Regional Planning, a bureaucratic outpost of roughly a dozen
employees in Toluca, the State of Mexico’s capital. The office’s main
job was to verify that local zoning plans fit the state’s development
goals. It also handled the critical final step — arranging publication
of completed plans in the state’s official newspaper, the Government’s
Gazette.
An Altered Map
If the council’s vote seemingly dashed Wal-Mart’s hopes for Teotihuacán,
Wal-Mart de Mexico’s executives certainly acted as if they knew
something the rest of the world did not.
On Aug. 12, records show, they asked Wal-Mart’s leadership in the United
States to approve their plan to spend about $8 million on a Bodega
Aurrera in Mrs. Pineda’s field. The request was approved by Wal-Mart’s
international real estate committee, made up of 20 or so top executives,
including S. Robson Walton, the company’s chairman.
The committee’s approval, records show, was contingent on obtaining “zoning for commercial use.”
By law, the state Office of Urban and Regional Planning could not make
zoning changes on maps it reviewed. If there were problems, it was
supposed to send the map back to the town for revisions. Teotihuacán’s
plan, however, was quickly approved and then sent to the Government’s
Gazette on Aug. 20.
It typically took the Gazette a few weeks to publish a new zoning plan.
Only then did it become law. But even before Teotihuacán’s map was
published, Wal-Mart de Mexico did two very curious things: First, it
began an expensive soil mechanics study of Mrs. Pineda’s field, which it
would later lease. Second, it submitted an application to the Business
Attention Commission, a state agency that helps developers get permits.
The application and the soil study would have been a foolish waste of
time and money, assuming the soon-to-be-published map matched what the
Teotihuacán council approved on Aug. 6. It made perfect sense, though,
for a company that had reason to believe the map would be published with
a single strategically situated change.
The Times found evidence of that change on a computer disc stored in a
shoe box inside the Office of Urban and Regional Planning. The disc,
created by a senior official in the office, held a copy of Teotihuacán’s
zoning map as it existed on Aug. 20, the day it was sent to the
Government’s Gazette.
Zoning Bribe: $52,000
The biggest hurdle was Teotihuacán’s zoning map. It clearly prohibited commercial development where Wal-Mart wanted to build. Wal-Mart de Mexico authorized a $52,000 bribe payment to have the map altered, records and interviews show.
In the original map, the plot’s zoning designation, H500A, only allowed houses to be built there.
On the map, the zoning on Mrs. Pineda’s field had been changed to allow a commercial center.
“One thing I am sure of — this was altered,” Alejandro Heredia, a
partner in the consulting firm that created Teotihuacán’s zoning map,
said when he was shown that Aug. 20 map.
“It was surgical work,” he said, adding, “It would be quite a gift to someone who wanted to do something here.”
It was a safe bet that a single small change would not be noticed by
Teotihuacán’s municipal council. Because of term limits, the entire
council left office after the Aug. 6 vote. A new mayor, Guillermo
Rodríguez, was sworn in with a new council on Aug. 17. In interviews,
Mr. Rodríguez and members of the new council said they had no idea
Wal-Mart had its eye on Mrs. Pineda’s field when they took office.
“They must have had to bribe somebody in order to make the illegal
legal,” Mr. Rodríguez said when he was shown both the Aug. 20 map and
the map approved on Aug. 6.
“Whatever happened here must be explained,” Jesús Aguiluz, a former
high-ranking state official whose domain included the Office of Urban
and Regional Planning, said when he was shown both maps. Only one
person, he said, could explain what happened — Víctor Manuel Frieventh,
then the director of the urban planning office.
“He was in charge totally,” Mr. Aguiluz said.
In interviews with The Times, people who worked in Mr. Frieventh’s
office recalled a steady parade of favor-seekers — housing developers,
wealthy landowners, politically wired businessmen — all hoping Mr.
Frieventh would use his influence to shape zoning plans to favor their
interests. Wal-Mart de Mexico, they said, was part of the parade.
During a two-hour interview with The Times, Mr. Frieventh jovially
described how his predecessors had taken bribes to shift zoning
boundaries. But he insisted he never met with anyone from Wal-Mart, and
said he had nothing to do with the change to Teotihuacán’s map.
“It’s very strange,” he said, looking intently at the altered map.
The formal order to publish Teotihuacán’s new zoning plan was received
by the Government’s Gazette on Sept. 11, 2003. The next day, internal
Wal-Mart de Mexico records show, Mr. Cicero authorized five bribe
payments totaling $221,000. According to the internal records, the
bribes were for obtaining zoning changes to build five supermarkets. One
of the payments, for $52,000, was for the Bodega Aurrera in
Teotihuacán, Mr. Cicero said in an interview.
Wal-Mart de Mexico officials did not themselves pay bribes. Records and
interviews show that payoffs were made by outside lawyers, trusted
fixers dispatched by Mr. Cicero to deliver envelopes of cash without
leaving any trace of their existence. Wal-Mart de Mexico’s written
policies said these fixers could be entrusted with up to $280,000 to
“expedite” a single permit. The bribe payments covered the payoffs
themselves, a commission for the fixer and taxes. For some permits, it
was left to the fixers to figure out who needed to be bribed. In this
case, Mr. Cicero said, Mr. Frieventh was the intended recipient.
Mr. Frieventh, the son of a shoe-store owner, earned a government salary
of less than $30,000 in 2003. However modest his pay, he was in the
midst of amassing an impressive real estate portfolio. From 2001 to
2004, property records show, he bought up most of a city block in
Toluca. The land costs alone were nearly 65 percent of his government
pay during those years.
Asked if he had ever accepted anything of value from a Wal-Mart
representative, Mr. Freiventh shook his head, chuckled and extended a
hand, palm up. “Bring him to me so he can pay me, no? Have him bring it
to me.”
Even with the right zoning, Wal-Mart still needed at least a dozen
different permits to begin construction. But to apply for them, Mr.
Cicero’s team first had to get a zoning certificate, which verified that
a plot’s zoning was consistent with the proposed development.
Zoning certificates did not come from Mr. Frieventh’s office. They were
issued by the state Office of Urban Operations, and Wal-Mart’s request
went to Lidia Gómez, a career civil servant known as a stickler for
rules. Ms. Gómez rejected Wal-Mart’s request. Wal-Mart tried again a few
months later, and again Ms. Gómez said no, saying that even with
Teotihuacán’s new map, a Bodega Aurrera would still run afoul of a
rarely enforced federal guideline. Wal-Mart was dead in the water.
With help from Mr. Frieventh, Mr. Cicero’s team found a way around Ms.
Gómez, and the law. Mr. Frieventh had no legal authority to overrule Ms.
Gómez. But at Wal-Mart’s request, records show, Mr. Frieventh wrote a
letter on government letterhead on March 9, 2004, that directly
contradicted Ms. Gómez’s rulings. Citing the altered map, he wrote that
Wal-Mart’s supermarket was indeed compatible with the zoning for Mrs.
Pineda’s field.
Mr. Frieventh said he did not recall the letter, or why he wrote it. But
Wal-Mart de Mexico immediately put the letter to work. It began
applying for other permits, each time submitting the letter as if it
were a valid zoning certificate.
One of its first applications was to the state agency that regulates roads.
Traffic Bribe: $25,900
Wal-Mart wanted to build by the main entrance into Teotihuacán, in a spot already choked with traffic. Wal-Mart de Mexico authorized a $25,900 bribe payment to gain the approval of local traffic authorities, records and interviews show.
There were obvious reasons for traffic regulators to balk at Wal-Mart’s
permit request. Traffic, of course, was one of Teotihuacán’s biggest
headaches, and a supermarket at the main entrance would only make
matters worse. But there was a far bigger complication. The town had
recently approved a long-term plan to ease congestion. The plan called
for building a bypass road through Mrs. Pineda’s alfalfa field.
According to internal Wal-Mart records, Mr. Cicero authorized a $25,900
bribe for the permit, which was issued in less than two weeks. The
paperwork approving it did not even mention the bypass road.
A Helpful Mayor
Teotihuacán’s municipal council had just finished its regular meeting on
June 11, 2004, when the mayor, Guillermo Rodríguez, made an unusual
request. He asked the council members to stick around and meet privately
with some people from Wal-Mart. Instructions were given to turn off the
video camera used to record public meetings. But the video operator
disregarded the instructions, and the camera continued to roll.
“They are going to explain what they want to do here,” the mayor told his colleagues.
To build in Mrs. Pineda’s field, Wal-Mart now needed a construction
license from Teotihuacán. Construction licenses were issued by Hugo
Hernández, the town’s director of urban development. Yet Mr. Hernández
had thus far declined to give Wal-Mart a license because it still lacked
several approvals — an environmental permit, for example.
But Wal-Mart de Mexico had found a friend in Mayor Rodríguez, who now,
in private, explained to the council why it was essential to act with
speed and flexibility to help Wal-Mart build, regardless of the
inevitable opposition.
“They say that if we don’t solve this quickly, they will leave,” he told
the council members. Wal-Mart, he revealed, had raised the possibility
of a donation. “They asked me, ‘What are you going to ask from us?’ I
said, ‘Pay your taxes, reach an agreement, help the community.’ ”
Then he summoned Wal-Mart’s team, led by Jorge Resendiz, one of Mr. Cicero’s deputies.
Mr. Resendiz got to the point. In exchange for bringing jobs and low
prices to Teotihuacán, Wal-Mart wanted something extraordinary. It
wanted the council members to let Wal-Mart start construction even
though it did not have all the required permits. And it wanted them to
do it then and there, in private, without public hearings. Wal-Mart was
in a rush to open for Christmas shopping. “Time is precious for us,” he
said. “If we don’t start this unit in the coming days, we will have a
delay.”
Mr. Rodríguez assured Mr. Resendiz that the council would give its approval the next week.
The mayor’s aggressive activism was out of character. In interviews,
former aides and colleagues described Mr. Rodríguez as “insecure,”
“easily manipulated” and “passive.” He was frequently absent during
working hours. “My persistent thought was that I was disappointed by
him,” said Mr. Peña, the former mayor who had been Mr. Rodríguez’s
political mentor.
But according to Mr. Cicero, there was nothing accidental about Mr.
Rodríguez’s enthusiasm. Wal-Mart de Mexico, he said, bribed Mr.
Rodríguez to secure his support and that of his allies on the town
council. The decision to bribe Mr. Rodríguez, he said, was blessed by
Wal-Mart de Mexico’s leaders.
Political Bribe: $114,000
Facing certain opposition from local merchants and residents, Wal-Mart de Mexico executives agreed to pay $114,000 in bribes to guarantee the support of Teotihuacán’s mayor and his allies on the municipal council, records and interviews show.
The
ex-mayor of Teotihuacán, Guillermo Rodríguez, poses for a portrait
outside the walls of his home near the pyramids of Teotihuacán.
Josh Haner/The New York Times
“I didn’t receive any money from Wal-Mart — no money,” Mr. Rodríguez
insisted during two lengthy interviews with The Times.
But he struggled to explain why he began to spend tens of thousands of
dollars in June 2004, the same month he emerged as Wal-Mart’s champion.
The spending is described in financial disclosure reports Mr. Rodríguez
prepared himself under oath. The reports, obtained by The Times, show
that he spent $30,300 to begin building a ranch on a hill overlooking
the pyramids. He spent $1,800 more on a used Dodge pickup. He paid cash
in both transactions.
As mayor, Mr. Rodríguez was paid $47,000 a year. His wife made $23,000
more working for the municipality. His spending spree in June nearly
equaled their entire pay for the first half of 2004.
Even more remarkable was what happened six months later. Mr. Rodríguez
swore in his disclosure reports that he had no savings as of Dec. 31,
2004. Yet on Jan. 1, 2005, he and his wife spent $47,700 in cash on
improvements to their ranch, his reports show.
Before becoming mayor, Mr. Rodríguez had been the town comptroller,
responsible for making sure municipal officials completed their
financial disclosure reports correctly. Yet in the interviews, Mr.
Rodríguez claimed over and over that the amounts he reported were
“mistakes” or “approximate figures” or “generalized.”
He tried to be precise, he explained. “I now see it wasn’t so.”
But he did not dispute the overall spending pattern. From June 2004 to
June 2005, he acknowledged, he spent “approximately” $114,000 building
and furnishing his ranch, all in cash.
Wal-Mart’s investigators would ask Mr. Cicero how much Wal-Mart de
Mexico had paid to bribe the mayor. About $114,000, he said.
Teotihuacán’s council members met again on June 18, 2004, a week after
Mr. Rodríguez first introduced them to Wal-Mart. It was just after 7
a.m. and Mr. Resendiz took a seat up front. Item 7 on the agenda was
Wal-Mart.
It was the first and only public airing of Wal-Mart’s plans. The council
members spent 15 minutes discussing one of the largest construction
projects in the town’s modern history.
Mr. Rodríguez announced they were there to give a “favorable or
unfavorable opinion” of Wal-Mart’s supermarket. When a council member
pointed out that Wal-Mart had not even submitted a formal written
request, the mayor waved away the problem. “That’s a detail we omitted,”
he said.
Mr. Hernández, the town’s urban development director, noted that
Wal-Mart still did not have several permits it needed before the town
could issue a construction license. He urged the council to stick to the
rules.
Mr. Resendiz objected, saying Wal-Mart did not have time to spare.
The mayor pushed for a vote, suggesting that all they were doing was
indicating general support while Wal-Mart rounded up its missing
permits. He gave no indication that the vote constituted a final
approval.
In interviews, council members said they viewed Wal-Mart’s proposal
through the prism of lingering resentments toward their public markets.
Residents had long complained about vendors inflating prices and rigging
scales. They liked the way Wal-Mart challenged the old irritants of the
Mexican shopping experience — stores that do not list prices; stores
with no parking; stores with musty display cases.
The vote was unanimous for Wal-Mart. Days later, construction began.
Getting By the Guardians
Wal-Mart and the Pyramids
In
2004, Wal-Mart de Mexico built a supermarket by the pyramids of
Teotihuacán, a cultural landmark in Mexico. The project was
controversial from the start, provoking months of protests. In 2005, a
former Wal-Mart de Mexico attorney told Wal-Mart executives in the
United States about a series of bribes that he said had secured crucial
permits and approvals necessary to build the store. Wal-Mart’s leaders
did not report this information to authorities, even though the
company’s internal investigation corroborated many of his allegations.
The appearance of heavy excavation equipment in Mrs. Pineda’s field
quickly aroused suspicion around town. The suspicions stemmed from
Teotihuacán’s fraught relationship with the National Institute of
Anthropology and History, or INAH, the official guardian of Mexico’s
cultural treasures.
Because of the pyramids, INAH (pronounced EE-nah) is a major presence in
Teotihuacán. Its approval is required to build anything inside the
protected archaeological zone. Its officials patrol town looking for
signs of illegal construction, and it is not hard to find stories about
zealous inspectors stopping a homeowner from extending a kitchen a few
feet.
It was also well known that INAH required excavations to be done with
picks and shovels to minimize damage if digging uncovered ancient ruins.
So the sight of bulldozers and backhoes stood out, especially when a
sign went up announcing that a Bodega Aurrera was coming. Why, residents
asked, should Wal-Mart get special treatment?
Among those who noticed was Sergio Gómez, an archaeologist and
researcher for INAH. Mr. Gómez knew that before the agency issued a
permit, it first had to officially “liberate” the plot by verifying that
construction would not destroy valuable archaeological remains. That
meant conducting a formal archaeological survey, with grid lines and
exploration holes.
For any developer, a survey was risky. If significant remains were
discovered, it could kill the project, or at least force lengthy delays.
Yet Mr. Gómez had not seen any sign of a survey, an odd thing since a
survey like this should have occupied a team of INAH researchers and
laborers for a good six months. This, too, was a red flag.
Mr. Gómez was concerned enough to follow trucks from the site one day.
When they dumped their loads, he could see fragments of pottery and
other evidence of ancient remains. “I didn’t need to scratch the ground
to see it,” he said in an interview.
Iván Hernández noticed, too. He was one of five INAH archaeologists who
did surveys to liberate land for construction in the protected zone. He
knew every major project in town, but nothing of this one.
Residents were also calling INAH to complain. The calls went to Juan
Carlos Sabais, the agency’s top lawyer in Teotihuacán. He would have
been the one to review the permit paperwork and prepare the official
liberation letter for this plot. “We didn’t have a clue,” he recalled.
“People were saying this was Wal-Mart, and we didn’t know a thing.”
Mr. Sabais led a party of INAH officials to the site to find out what
was going on. They passed through a small crowd of angry residents. It
was July 16, and construction was already well under way. There were
several large excavations, one as deep as 16 feet, records show. Workers
claimed they had an INAH permit, just not on site as the law required.
Mr. Sabais ordered them to stop construction.“The crowd started
clapping,” he said.
By the time Mr. Sabais returned to his office, senior INAH officials
were calling from Mexico City demanding to know why he had halted
construction. Only then, he said, did he discover that Wal-Mart had
somehow managed to get a permit without a survey, or a liberation
letter.
This bureaucratic miracle, Mr. Cicero would explain to Wal-Mart
investigators and The Times, was made possible by another payoff. As Mr.
Cicero described it, senior INAH officials had asked for an “official
donation” of up to $45,000 and a “personal gift” of up to $36,000 in
exchange for a permit.
Wal-Mart’s permit was signed by Mirabel Miró, then the agency’s top
official in the State of Mexico. According to Ms. Miró, it was Wal-Mart
de Mexico that made an improper offer of money. Her chief architect, she
said, told her that Wal-Mart had approached him with an offer of a
sizable “donation.” He wanted to accept, she said.
Archaeology Bribe: Up to $81,000
Wal-Mart could not build by the pyramids without a permit from the agency that protects Mexico’s cultural landmarks. Wal-Mart de Mexico offered a “donation” of up to $45,000 and a “personal gift” of up to $36,000 in exchange for the permit, records and interviews show.
“I told him, ‘I don’t want a dime, not as a donation, not as anything,
because it may be interpreted as something else,’ ” she said.
Sergio Raúl Arroyo, the director general of INAH, recalled in an
interview that Ms. Miró had told him about Wal-Mart’s offer. He could
not recall any other instance of a company offering a donation while it
was seeking a permit. “That would have been totally irregular,” he said.
“It was obvious we had to be very careful with these people.”
“I told Miró to accept no donations,” he added. “Not even a pair of scissors.”
And yet in June 2004, three weeks after Ms. Miró signed the permit, Mr.
Resendiz spoke about a payment to INAH during his private meeting with
Teotihuacán’s council. “INAH itself is asking us for a considerable
contribution,” Mr. Resendiz said.
“We are going to formalize the contribution next Monday,” he added. “But it is a fact.”
Mr. Resendiz, who has been placed on administrative leave pending
Wal-Mart’s investigation, declined to comment. Every INAH official
interviewed, including Ms. Miró’s chief architect, Carlos Madrigal,
denied accepting money from Wal-Mart.
But Mr. Sabais, the agency’s top lawyer in Teotihuacán, knew nothing
about official donations or personal gifts on the day he stopped
construction. All he knew was that he was being summoned to INAH’s
headquarters in Mexico City. Over several tense meetings, he recalled,
his bosses confronted their embarrassing predicament: INAH had halted
construction even though Wal-Mart had the required permit. Yet the
agency had given Wal-Mart that permit without first conducting a survey
and liberating the land.
Fearing a public relations debacle, senior INAH officials concocted a
trail of backdated documents to hide its blunders, Mr. Sabais said. He
pointed to an INAH report dated April 2, 2004, seven weeks before the
agency issued its permit. The report suggested Wal-Mart’s plot had been
liberated after a 1984 survey. “This document,” Mr. Sabais said, “was
made later to justify what had not been done.”
INAH officials would later tell multiple government inquiries that
Wal-Mart’s plot had been liberated because of this 1984 survey.
The Times tracked down the 1984 survey. It had nothing to do with the
land where Wal-Mart was building. The survey was done on a different
plot several hundred yards away. The archaeologists who supervised and
evaluated the survey were appalled to learn that it had been used to
justify INAH’s permit for Wal-Mart. “This is a fraud,” Ana María
Jarquín, one of the archaeologists, said in an interview.
In interviews last week, top INAH officials acknowledged for the first
time that Wal-Mart’s plot had neither been surveyed nor liberated,
either in 1984 or any other time, before construction began. They also
made one other startling admission. The agency has long maintained no
ancient remains were destroyed during construction. But Verónica Ortega,
INAH’s top archaeologist in Teotihuacán, acknowledged it was indeed
possible ancient remains were destroyed during the excavation before Mr.
Sabais halted construction.
“I am not able to affirm categorically that no soil went out,” she said.
The work shutdown ordered by Mr. Sabais did not last long. Four days
later, INAH allowed Wal-Mart to resume construction. The agency did take
one precaution: it began an extensive survey, digging dozens of
exploration wells alongside Wal-Mart’s crews.
A Gathering Protest
By now a loose protest movement had begun to form. Its leaders all had
deep roots here. Lorenzo Trujillo owned produce stands in the public
market. Emmanuel D’Herrera, a teacher and poet, had celebrated his son’s
birth by tucking the boy’s umbilical cord in a crack atop the Moon
pyramid. Emma Ortega was a spiritual healer who cared for patients a
stone’s throw from the pyramid. “You feel that it’s part of you, and you
are part of it,” she said.
The protesters immediately suspected something “dirty” had taken place,
Ms. Ortega recalled. The first clue came on Aug. 1, 2004, when she and
other protest leaders met with Mayor Rodríguez. By now the supermarket’s
walls were being erected. They asked the mayor to show them the
construction permit. The mayor, nervous and evasive, admitted Wal-Mart
did not actually have one.
“So we were like, ‘Why are they there working?’ ” Ms. Ortega said. They
asked the mayor to halt work and hold hearings. The mayor said he would
think about it. Two days later, he issued Wal-Mart a construction
license.
He signed it himself.
In response, the protesters demanded his resignation and filed the first
of several legal challenges. Then they blockaded the construction site.
As word of the blockade spread, bells rang from a chapel in
Purificación, the neighborhood where Wal-Mart was building. It was the
alarm used to summon neighbors in an emergency. Residents marched toward
the blockade.
“We thought they were there to support us,” Ms. Ortega recalled. “No.
They were there to attack us.” The crowd descended on the small band of
protesters, pushing and yelling insults until the blockade was broken.
Wal-Mart
donated these computers to the elementary school in Purificación, the
neighborhood in Teotihuacán in which it built a Bodega Aurrera
supermarket.
Josh Haner/The New York Times
What Ms. Ortega did not know was that Wal-Mart had already bought the
support of Purificación’s neighborhood leaders. In interviews, several
of those leaders recalled being invited to Mr. Rodríguez’s office to
meet with the company’s representatives. The Wal-Mart people, the
leaders said, offered money to expand their cemetery, pave a road and
build a handball court. They offered paint and computers for
Purificación’s school. They offered money to build a new office for the
neighborhood leaders.
But the money came with strings: if there were any protests, they were
expected to be visibly and loudly supportive of Wal-Mart.
Protest leaders began to get anonymous phone calls urging them to back
off. In news conferences, the mayor dismissed them as a tiny minority of
gadflies and self-interested local merchants. He insisted the town
overwhelmingly favored Wal-Mart’s arrival, and as proof of his
incorruptibility, he boasted of how he had rejected Wal-Mart de Mexico’s
offer of a $55,000 donation to the municipal treasury.
But the tide turned as INAH’s archaeologists began to find evidence that
Wal-Mart was building on ancient ruins after all. They found the
remains of a wall dating to approximately 1300 and enough clay pottery
to fill several sacks. Then they found an altar, a plaza and nine
graves. Once again, construction was temporarily halted so their
findings could be cataloged, photographed and analyzed. The discoveries
instantly transformed the skirmish over Mrs. Pineda’s field into
national news.
Student groups, unions and peasant leaders soon joined the protests.
Opponents of other Wal-Marts in Mexico offered support. Influential
politicians began to express concern. Prominent artists and
intellectuals signed an open letter asking Mexico’s president to stop
the project. Many were cultural traditionalists, united by a fear that
Wal-Mart was inexorably drawing Mexico’s people away from the intimacy
of neighborhood life, toward a bland, impersonal “gringo lifestyle” of
frozen pizzas, video games and credit card debt.
A Leader in the Protests Against Wal-Mart
The
pyramids of Teotihuacán are one of Mexico’s most revered cultural
landmarks. When Wal-Mart de Mexico began building nearby, Emma Ortega, a
spiritual healer, lead hunger strikes, blockades, and protest marches
to stop the project.
Josh Haner and Brent McDonald/The New York Times
The support emboldened the protesters. When the mayor held a news
conference, they interrupted and openly accused him of taking bribes.
They blockaded INAH’s headquarters and marched on Wal-Mart de Mexico’s
corporate offices in Mexico City. “All we have found are closed doors
and an ocean of corruption around the authorizations for this Wal-Mart,”
Mr. D’Herrera told reporters with typical flourish.
Their allegations of corruption seeped into the news coverage in Mexico
and the United States. In September 2004, an article in The Times included this passage:
“How Wal-Mart got permission to build a superstore on farmland
supposedly protected under Mexican law as an archaeological site has
vexed the merchants here, who freely accuse the town, the state and the
federal Institute of Anthropology and History of corruption.”
Open for Business
Back in Bentonville, Wal-Mart’s international real estate committee was
aware of the growing attention from the news media, former members said
in interviews. Some committee members cringed at the ugly optics of
Wal-Mart literally bulldozing Mexico’s cultural heritage. “I kept
waiting for someone to say, ‘Let’s just move sites,’ ” recalled one
member, who, like others on the committee, asked not to be identified
because of the continuing inquiry.
But top Wal-Mart de Mexico executives assured the committee that the
situation was under control. They portrayed the protesters as a fringe
group — “like they were from Occupy Wall Street,” another person
recalled.
Despite multiple news accounts of possible bribes, Wal-Mart’s leaders in
the United States took no steps to investigate Wal-Mart de Mexico,
records and interviews show.
Mr. Tovar, the Wal-Mart spokesman, said that while executives in the
United States were aware of the furor in Teotihuacán they did not know
about the corruption allegations. “None of the associates we have
interviewed, including people responsible for real estate projects in
Mexico during this time period, recall any mention of bribery
allegations related to this store,” he said.
In Mexico, government officials were looking for a way to quell the
controversy. Mr. Arroyo, INAH’s director general, urged Wal-Mart de
Mexico to build elsewhere. The state’s urban development ministry
quietly searched for alternate sites outside the archaeological zone.
Then, on Oct. 2, Mexico’s newspapers reported a major announcement:
Arturo Montiel, the state’s governor, was looking for another site “that
is better for all.”
With its supermarket more than half built, Wal-Mart de Mexico was not
eager to accommodate the governor. The company raced to complete
construction and mounted a public relations offensive. Executives argued
that Wal-Mart de Mexico had scrupulously fulfilled every legal
requirement: the zoning was correct, as confirmed by the map in the
Government’s Gazette; necessary approvals had been duly obtained from
INAH, traffic authorities and other agencies; the mayor himself had
signed the construction license.
Not even a week after Mr. Montiel’s announcement, his top deputy told
reporters there was, alas, no way to stop Wal-Mart. “We would be
violating the law since they can tell us they complied with all that is
required,” he explained.
The supermarket opened on Nov. 4, 2004. A year later, Mr. Cicero met
with Wal-Mart’s lawyers and told his story for the first time. His
allegations were shared with several of the same executives who were on
the international real estate committee, records show. If the
protesters’ vague allegations of corruption had been easy to dismiss,
now they were coming from the person responsible for obtaining Wal-Mart
de Mexico’s permits in Teotihuacán.
More important, Mr. Cicero’s allegations emerged as a comptroller for
the State of Mexico was wrapping up a lengthy investigation into whether
officials had acted unlawfully in granting permits to Wal-Mart de
Mexico.
But Wal-Mart did not share Mr. Cicero’s allegations with any authorities
in Mexico. “This is one of the areas we are reviewing as part of our
ongoing investigation,” Mr. Tovar said.
When the comptroller’s office subsequently announced it had found no
wrongdoing, it chided protesters for failing to present any specific
proof.
The comptroller had been the protesters’ last hope. Most moved on,
resigned to the idea that their struggle had been for nothing. But not
Mr. D’Herrera. He continued to visit government archives, seeking access
to Wal-Mart’s permit records. He kept appealing to public officials for
help. “I shall continue my hunger strike until Wal-Mart leaves or until
I die,” he wrote in a letter to Vicente Fox, Mexico’s president at the
time.
Despite the passage of time, Mr. D’Herrera never wavered in his
conviction that Wal-Mart must have paid bribes. He was appalled by the
store’s impact on Teotihuacán, and infuriated that so few seemed to
care. It did not go unnoticed when protest leaders were spotted shopping
contentedly in the Bodega Aurrera, where people can buy everything from
tortillas to tires, almost always at a substantial discount from local
shops.
Friends and relatives urged Mr. D’Herrera to let it go, but he refused.
“He became obsessed,” Ms. Ortega said. Mr. D’Herrera finally snapped. On
May 16, 2009, he entered the Bodega Aurrera and placed a crude homemade
bomb in a shopping cart. According to prosecutors, the bomb consisted
of a small juice can containing gunpowder and nails. Mr. D’Herrera
pushed the cart into the store’s home section, looked around to make
sure the aisle was empty, and then lit a fuse poking from the can. His
intent, he later wrote, was to kill himself and damage the store to draw
public attention back to Wal-Mart. But all the blast did was knock him
down and damage $68 worth of merchandise.
More in the Series Wal-Mart Abroad »
Part 1: At Wal-Mart in Mexico, a Bribe Inquiry Silenced
As he awaited trial from a prison cell, he continued his hopeless
campaign. He wrote more letters to politicians. He asked his wife to
publish his diatribes against Wal-Mart on an obscure poetry blog. Yet he
clearly recognized the precariousness of his circumstances. He was thin
and severely diabetic. His teeth were falling out. In early 2010, he
asked a cellmate to deliver a letter to his wife in case he died in
prison. A few months later, he had a brain hemorrhage and slipped into a
coma. Death quickly followed. He was 62.
In his final letter to his wife, Mr. D’Herrera tried to explain why he had battled so long at such grievous cost.
“I am not leaving material patrimony for you and our son,” he wrote.
“I’m leaving you a moral and political legacy, dying as I am for a
cause, in defense of the Mexican culture.”
