Thus far, the Department of Justice probe into whether Walmart paid bribes in Mexico to expand its operations there is focusing on violations of the Foreign Corrupt Practices Act. As the name of the law suggests, it covers alleged crimes committed by American companies in foreign countries.But the investigation could potentially open a domestic can of worms for Walmart if the feds become interested in old allegations filed in federal court by a former Walmart ad exec. She claimed former CEO H. Lee Scott and his subordinates took yachts, diamonds, private jet rides, sweetheart deals and concert tickets from various contractors and vendors to the company.
None of them were accused of breaking the law, merely violating Walmart’s internal ethics policy. The suit in which the allegations came was dropped after the plaintiff cited the “financially draining” cost of pursuing her claims, and Walmart agreed to drop its counterclaims against her.
The fall of Roehm
The allegations were made by Julie Roehm (pictured), the colourful former Chrysler ad chief who joined Walmart for 11 months in 2006 in order to bring a little spice to a company known for its rote discount advertising.
Roehm famously fell out with management there when she staged a search for a new ad agency on the $580 million ad account. During that review, she was spotted sitting on the lap of an executive at one of the contenders for the business, DraftFCB, while having dinner at Nobu 57, a fancy restaurant in New York.
Internally, Walmart executives accused her of taking gifts from the agencies seeking her business, including a case of Effen vodka and an MP3 player. Walmart fired her for violations of its ethics policy, which famously forbids employees from taking any type of gift or food from contractors, no matter how trivial. Roehm, in legal papers she filed when she sued Walmart for wrongful dismissal, said she paid the agencies back for those gifts.
Yachts and diamonds
In the lawsuit, Roehm made several allegations that former CEO Scott had an ongoing relationship with an unsold goods liquidator, Jacobs Trading Co., during which Jacobs gave Scott “a large pink diamond for his wife at a preferential price” and “a number of yachts at preferential prices.” (Jacobs owned a dozen boat manufacturing companies, Roehm alleged.)
Walmart denied the allegations at the time and the case was ultimately dropped in a settlement. Roehm is now svp/marketing and “chief storyteller” at SAP. Walmart did not immediately return a message requesting comment.
Scott, of course, was the CEO who is currently accused of trying to coverup allegations that Walmart’s expansion in Mexico was facilitated by the systematic payment of bribes to government officials in that country. The time period of the alleged Mexican bribes is concurrent with Roehm’s tenure at the company.
- You can download a PDF of Roehm’s allegations here.
What Roehm alleged
Below, read excerpts from Roehm’s case against Walmart that discuss management’s relationships with vendors (emphasis added). Again, it should be made clear that none of the people named in Roehm’s suit were formally accused of breaking the law, and many of them were not given the opportunity to rebut Roehm’s claims before the suit was settled. They remain the allegations of a disgruntled former employee:
H. Lee Scott, the current President and Chief Executive Officer of Wal-Mart, initiated (at a time when Mr. Scott was the Vice-President of Merchandising) an association with entrepreneur Irwin Jacobs, allowing Mr. Jacobs’ business, Jacobs Trading Company (JTC), the exclusive right to purchase unsold Wal-Mart merchandise.
Mr. Jacobs also owns or owned interests in approximately 12 boat manufacturing companies, and as part and parcel of Mr. Scott’s relationship with him, over the span of several years, Mr. Scott has purchased from Mr. Jacobs’ companies a number of yachts at preferential prices. Upon information and belief, Mr. Scott also was also able to purchase, through his relationship with Mr. Jacobs, a large pink diamond for his wife at a preferential price.
Mr. Scott was provided jet aircraft travel (for his own personal use) on private aeroplanes provided by Mr. Jacobs. The private aeroplanes frequently were used for Mr. Scott and his wife to travel to their residences in Longboat Key, Florida and Las Vegas, Nevada.
Mr. Scott’s son, Eric S. Scott, who initially was employed by Wal-Mart as a buyer, ultimately left Wal-Mart for employment with Jacobs Trading Company, a company which purchases unsold Wal-Mart merchandise from Wal-Mart and which is owned by Mr. Jacobs, whose relationship with Mr. Scott is described above. Wal-Mart has chosen to ignore the fact that Mr. Scott’s circumstances create “[t]he appearance of conflict [which] may be just as damaging to Wal-Mart’s reputation as an actual conflict.”
E. Stanley Kroenke is a cousin by marriage to a descendant of Wal-Mart founder. Mr. Kroenke, a former director of Wal-Mart, owns approximately 55 Wal-Mart stores around the country. Many of the leases for the Wal-Mart stores Mr. Kroenke owns – and leases back to Wal-Mart – are at preferential rates.
Thomas Seay, Wal- Mart’s former Executive Vice President of Real Estate, also owned Wal-Mart stores while employed as a Wal-Mart executive, and his subordinate Wal-Mart employees were put in the position of having to “negotiate” lease terms for Wal-Mart stores with him. Mr. Seay, when he left Wal-Mart, entered into numerous joint ventures with Mr. Kroenke related to Wal-Mart stores.
… in June of 2006, John Fleming, Wal-Mart’s Executive Vice President of Marketing, Steve Bratspies, its Vice President of Marketing, David Porter, its Vice President of Merchandising, Raul Vazquez, its Vice President of Wal-Mart.com, and Greg Hall, its Director of Electronics Marketing, flew to Barcelona, Spain to meet with representatives from Tyson Foods, Hanes, other vendors, and Irving Azoff, the entertainment manager of the Eagles. Wal-Mart officers were given tickets for an Eagles concert (with a face value of $300.00 per ticket), along with back stage passes and souvenirs. Upon information and belief, none of the officers ever returned “[a]ny gift or gratuity received … with an explanation of this policy.”
Robert Rhoads was variously a Vice President and Senior Vice President, General Counsel, and Corporate Secretary for Wal-Mart from 1988 through 2002. Mr. Rhoads had an affair with Lauren Beamon, a subordinate employee in the Wal-Mart legal department. Mr. Rhodes paid for her apartment and college tuition, divorced his wife, and subsequently married Ms. Beamon. Mr. Rhoads was not subject to “immediate termination,” even though it was known that he and Ms. Beamon had married and that he had been her supervisor at Wal-Mart.
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