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Blog: Walmart's Legal Bribery

Will Altadena join the growing movement to stop Wal-Mart?

Will Altadena join the growing movement to stop Wal-Mart? Everyone knows about the recent scandal over Wal-Mart's illegal bribes in Mexico, but the bigger scandal is Wal-Mart's LEGAL bribes -- campaign contributions, lobbying, support for pro-business think tanks, and philanthropy -- in the United States, including in Los Angeles, There's now a battle raging over Wal-Mart's plans to open a store in Chinatown. Donald Cohen and I have exposes Wal-Mart's widespread legal bribery in this country in our article yesterday in Huffington Post, which is also reposted below:

Last month Wal-Mart became the latest company to drop its membership in the American Legislative Exchange Council in response to public outrage over ALEC's aggressive support for "Stand Your Ground" laws (which are implicated in the death of Trayvon Martin, among others). Wal-Mart won some kudos for leaving ALEC, but its shrewd move was nothing more than an attempt to divert attention from the retail giant's current troubles and its multimillion dollar effort to burnish its image, peddle its influence, and increase its market share.

The uproar over the Wal-Mart bribery scandal in Mexico uncovered last month evokes the famous distinction between "dishonest graft" and "honest graft" made by George Washington Plunkitt, a Tammany Hall politician in the early 1900s. Dishonest graft, Plunkitt explained, involves bribes and blackmail. Honest graft, in contrast, involves using one's political and business connections, and inside knowledge, to make a fortune. Plunkitt described the principle behind "honest graft" in his motto: "I seen my opportunities and I took 'em."

In Mexico Wal-Mart was awash in "dishonest graft" -- bribes given to local officials to grease the process for opening new stores. According to a recent front-page New York Times story, the company's own internal investigation, conducted in 2005, uncovered more than $24 million in payments to planning officials, local politicians, and others that could help, or hinder, Wal-Mart's expansion plans.

The influence-peddling paid off. Wal-Mart is now Mexico's largest private employer, with 209,000 employees in more than 1,000 stores. Perhaps that's why top officials at Wal-Mart's Arkansas headquarters, when informed of the widespread bribes, shut down the investigation rather than address the problem. Moreover, the company promoted Eduardo Castro-Wright, the head of Wal-Mart's Mexico operation, to executive vice-president three years after Bentonville found out about the pattern of bribes.

Wal-Mart has come under intense criticism since the Times exposé. The company's stock price fell sharply soon after the story appeared, and at its annual shareholder meeting on June 1, several of the nation's largest public pension funds, including California's and New York City's, challenged the re-election of the current board members, including CEO Lee Scott and Chairman Robson Walton, a member of Wal-Mart's founding family. Two influential proxy advisers -- Institutional Shareholder Services Inc. and Glass, Lewis & Co. -- encouraged institutional investor clients to do the same. Because Walton family members own over half of the Wal-Mart stock, these pension fund revolts didn't force the removal of any company executives, but they added momentum to the growing political and public opinion backlash against the giant corporation.

Wal-Mart's single-minded goal in the United States is the same as it is in Mexico: open more stores and generate more revenue -- especially in urban areas, the company's next frontier. But it hasn't been easy. Even before the Mexican bribery scandal, Wal-Mart was taking heat for a variety of corporate practices.

Wal-Mart's recent record on labor practices has been abysmal. Recently, for example, the U.S. Department of Labor ordered Wal-Mart to pay $4.8 million in back pay and fines to thousands of employees who were illegally denied overtime. Just a few years earlier, Wal-Mart was ordered to pay nearly $34 million in back pay to 87,000 employees. Clergy and community groups have complained that Wal-Mart pays many of its employees poverty-level wages, insists that many employees work part-time, and provides few employees with affordable health insurance. The company's low-paid employees are forced to apply, with direct assistance from Wal-Mart, for publicly funded benefits like food stamps and Medicaid. A report released last month by the National Employment Law Project uncovered widespread abuse of low-paid temporary laborers who work in warehouses and transport goods to Wal-Mart's stores. And human rights groups criticize Wal-Mart for its use of sweatshop labor, in China and elsewhere, to manufacture the clothing and toys it sells.

The problems don't stop there. Last year Wal-Mart beat a class-action suit by thousands of its female employees on a technicality, but the documents revealed that the company routinely discriminates against women when it comes to pay and promotion. In 2005 the company was not so lucky, paying an$11 million fine for mistreating immigrant employees. Moreover, many communities have challenged Wal-Mart's attempts to open new stores, worrying that smaller businesses will be forced out, as has frequently happened when the giant retailer moves nearby. These challenges, along with an upsurge of anti-Wal-Mart books and Robert Greenwald's 2005 documentary, The High Cost of Low Prices, have damaged the company's reputation and, its executives fear, undermined its political clout.

To overcome these obstacles and get its way in the United States, Wal-Mart has resorted to "honest graft." Its strategy includes giving campaign contributions to politicians, hiring well-connected lobbyists to do its bidding, mounting expensive PR and ballot campaigns to win public support, and buying the support (or at least neutrality) of nonprofit organizations through philanthropy. Why this form of influence-peddling, unlike Wal-Mart's bribery in Mexico, isn't a scandal is worth pondering.

In the past decade, Wal-Mart, the largest corporation in the world in terms of sales ($447 billion), and the Walton family (heirs to company founder Sam Walton, worth a combined $100 billion) have contributed more than $11 million to candidates for president and Congress, political action committees (PACs), and political parties, according to data compiled by the Center for Responsive Politics. They spent $2.3 million in the 2010 election cycle alone. Three members of the Walton family have together given over $550,000 to Super PACs -- $400,000 the pro-Romney group Restore our Future and $150,000 to Jon Huntsman's Super-PAC, Our Destiny.

Wal-Mart has also pumped millions of dollars into influential conservative think tanks and lobbying organizations such as the Cato Institute, the Heritage Foundation, and the American Legislative Exchange Council. Wal-Mart may have left ALEC over the "Stand Your Ground" controversy, but company executive Janet Scott was the co-chair of an ALEC committee that encouraged state legislators to enact the very same controversial pro-gun laws. This shouldn't be surprising. Wal-Mart is the country's biggest seller of shotguns and ammunition.

With support from Wal-Mart funds, the U.S. Chamber of Commerce is currently leading a campaign to weaken the Foreign Corrupt Practices Act, which outlaws American companies bribing foreign officials. Congress members Henry Waxman and Elijah Cummings have called for an investigation into Wal-Mart's involvement with the Chamber's lobbying campaign, and the U.S. Department of Justice and the U.S. Securities and Exchange Commission have opened investigations into Wal-Mart's potential violations of that act. Not surprisingly, the Cato Institute recently published an article critical of the anti-bribery law.

Last year Wal-Mart invested $7.6 million in lobbying federal officials, utilizing its own in-house lobbyists and paying influential Beltway lobbying firms such as Patton Boggs and the Podesta Group. But it is at the state and local levels -- where government officials can most directly expedite Wal-Mart's expansion plans -- that the company has devoted the most influence-peddling resources. Since 2003 Wal-Mart and the Waltons have spent more than $15 million at the state level on candidates, PACs, and ballot initiatives, according to the National Institute on Money in State Politics.

Nobody knows how much the Arkansas behemoth and its founding family have given to local politicians, but it is obviously another Wal-Mart standard practice. In one of the more blatant examples, Wal-Mart -- eager to open a new store in one of Chicago's African-American neighborhoods -- lavished campaign contributions on Alderwoman Emma Mitts and feted her at the gala held during its annual stockholders meeting. Mitts has become a prominent spokesperson for the company, flacking for Wal-Mart in a Washington Post op-ed and even referring to the company as "we" on a local Chicago television show.

Nowhere has the battle over Wal-Mart been as intense as in the Los Angeles area. Eager to gain a foothold in the area a decade ago, Wal-Mart proposed building a mega-store in Inglewood, a mostly African-American and Hispanic working-class suburb. In 2004 the company spent about $1 million to mount a ballot initiative that would change the city's zoning laws to allow Wal-Mart to build its supercenter. Despite being outspent ten-to-one, a local community coalition defeated the ballot measure by a two-to-one margin. That same year, the Los Angeles City Council enacted a big-box law making it difficult for Wal-Mart to open new stores.

Wal-Mart retreated, but in the past year it has returned to Los Angeles with a vengeance, attempting to open a store in the city's Chinatown neighborhood. It has hired three powerful lobbying firms -- Ek & Ek; Manatt, Phelps & Phillips; and Mercury Public Affairs (where former California Assembly Speaker Fabian Núñez is a partner) -- to help the company get the approvals it needed.

To gain the support (or silence) of community groups, Wal-Mart dramatically increased its charitable philanthropy, as it has done elsewhere. Its total giving in the United States rose from $270 million in 2007 to $873 million last year. In Los Angeles, the company hired the politically connected Javier Angulo -- former employee at the Mexican American Legal Defense and Educational Fund and the National Association of Latino Elected and Appointed Officials -- to coordinate its local philanthropic program. Wal-Mart recently donated several million dollars to dozens of local nonprofits, including the NAACP, the Urban League, Homeboy Industries, California Charter Schools Association, Los Angeles Parents Union, Goodwill, Catholic Charities, Salvation Army, Union Rescue Mission, Meals on Wheels, Chrysalis, Children's Hospital, and the Mexican American Opportunity Foundation, as well as several Asian American organizations, including Little Tokyo Service Center, Korean American Coalition, the Center for Asian Americans United for Self-Empowerment, and Chinatown Service Center. Angulo makes sure that whenever Wal-Mart hands over a check to one of these groups, elected officials are there for the photo-op.

Earlier this month, the day before the City Council was to vote on an ordinance that would have put the construction on hold, Mayor Antonio Villaraigosa's office pushed through permits to allow Wal-Mart to move forward on its Chinatown store. Hoping to stop the project, community and labor groups are fighting back. They've produced a "No Wal-Mart in Chinatown" video, lobbied council members to override the mayor's efforts, and scheduled a large protest march for June 30 at a state park near Chinatown.

IN the wake of the Supreme Court's Citizen's United ruling removing corporate political spending limits, there's more money from big businesses flowing into American politics than ever before. Americans increasingly feel that government decisions are made in the interest of the wealthy and powerful. According to a Pew Research Center national survey released in mid-December, most Americans (77 percent) -- including a majority (53 percent) of Republicans -- agree that "there is too much power in the hands of a few rich people and corporations."

You can't blame them. Although U.S. companies have been known to hand under-the-table cash to American politicians, the vast majority of corporate America's influence-peddling is perfectly legal. As the case of Wal-Mart shows, that's the real scandal.

Peter Dreier is the E.P. Clapp Distinguished Professor of Politics at Occidental College, chair of its Urban & Environmental Policy Department, and author of The 100 Greatest Americans of the 20th Century: A Social Justice Hall of Fame, which Nation Books has just published. Donald Cohen is the chair of In the Public Interest, a national resource center on privatization and responsible contracting, and the director of the Cry Wolf Project. This article was originally published in Dissent magazine.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Lori A. Webster June 22, 2012 at 10:58 PM
Excellent, Peter - thank you for taking the time to compile this information!
karen b June 23, 2012 at 12:45 AM
OMG. I am totally NEVEEEERRRR GOING TO WALMART. I can't believe they work their employees hard. I only shop at Macys. They are the only ones that sell 700-count microcotton duvets (and for only $400!). Did you know that walmart tests its products on ANIMALS? I didn't know that. The only people that will shop there are the nasty poor people. They won't get my business. LETS RALLY PEOPL!!!!!
terry Morris June 23, 2012 at 09:28 PM
This is just the kind of company we need in Altadena. Let's trust and believe everything they say.
pusddad June 24, 2012 at 06:07 PM
Is Walmart the only foreign company to bribe a mexican official? Do the unions opposing walmart refrain from "legally bribing" officials and community groups?
terry Morris June 24, 2012 at 06:43 PM
I doubt they're the only company to bribe Mexican officials. many Many entities that get involved in corruption. There are many culprits across a widespread arena. Some companies have charges like the ones made against Walmart, over and over. After a while it becomes clear there will be no change, and after decades, it is the character of that company. The idea that because corruption is insidious and found pretty much everywhere, one should take no action against some of the worst offenders, I find baffling. 
It is everywhere, so why do anything? I have never understood that approach. Imagine a world where that was the only approach. 
If they won't let you sit at that lunch counter, just go somewhere else. If your country is under the thumb of an oppressive dictator, move to another country. 
I just don't get that attitude. I find it lazy. Brings me back to the question I keep asking. At what point are we our brothers keeper? What line do we draw in the sand? Is there any policy that we find in such contradiction to our own ethical standards that we object, and maybe take action to stop it? But I often wonder if people have ethical standards. Maybe not. Maybe it's all about what works best for them, just who has the lowest prices, or is the most convinient and nothing beyond that. 
But we live in a world where a sex tape can make you a television star worth tens of millions of dollars, so ...
Lisa Maiorana June 25, 2012 at 03:56 AM
WOW Karen, "nasty poor people" huh? ok, I hope the economy has found you in a much better financial position that 98% of the population right now. I hope you never find that when it comes down to feeding your family for the week or buying 700 count microcotten duvets that you feed your family. Some people might not be as fortunate as you and have to save every penny they make and make it stretch until the end of the month. As I've said before, if it comes down to being able to feed my family, I will shop at Walmart, food for less and superking rather than the local markets and will never apologize for that decision.
Lisa Maiorana June 25, 2012 at 03:58 AM
If only Kim Kardassian would open up a local store I'm sure everyone would go there, unless of course she sells 700 count duvet's ;)
terry Morris June 25, 2012 at 03:09 PM
Lisa, I wouldn't take what Karen posted as serious, I believe she's being sarcastic.
Lisa Maiorana June 25, 2012 at 03:18 PM
I believe she's being honest and that's fine, she's entitled to her opinion, however, unfortunately, I think that's the general consensus regarding how people feel about the people of walmart. It goes along with all the other stereotypes, intolerance and prejudices that we teach our children. The last time I checked, Macy's didn't sell groceries, although I'm sure if they did - people would be lining up for them?
troubles June 27, 2012 at 08:08 PM
I feel sorry for Walmart. They provide people who are price conscious (disproportionately represented by those who are of limited means and need their dollars to go as far as possible) with what they want and need: a large variety of goods at affordable prices; they provide entry-level employment with health insurance available to the segment of the population that suffers the highest and most intractable rates of unemployment and lack of access to health insurance, and are willing to open a site in a location that no other major retailer is willing to touch. For that, they get slimed. We can all raise hell about a Company we don't want to work for or shop at (and are not required to do either) or be thankful that a reputable company is willing to invest in a distressed neighborhood and provide products the neighborhood wants at prices they can’t get anywhere else and maybe throw in a few jobs to boot. Maybe Walmart will heed your complaints and go somewhere else, freeing up a location for another liquor store or vacant building on North Lincoln Avenue.
Lisa Maiorana June 28, 2012 at 04:17 AM
Very, very well said Troubles...I like your style and you are EXACTLY right! Maybe they'd like to see a sprouts or Trader Joe's (not going to happen) if this area is not ritzy enough for them maybe they need to move to La Canada or San Marino.
Peter Dreier June 28, 2012 at 05:36 AM
Several people have commented that Walmart provides consumers with low-cost food and other items and thus should be welcome in a community like Altadena. In fact, there's considerable research about Walmart's impact on a community. Here's what happens when Walmart invades a community: 1. Small family-owned stores go out of business, costing jobs 2. Wages for employees in other business decline because Walmart's poverty-level wages sets a new (low) standard 3. More people apply for food-stamps, housing subsidies, Medicaid, and other government benefits because the poorly-paid Walmart employees (who also can't afford health insurance) can't make ends meet 4. Good-paying manufacturing jobs disappear because almost all the non-food items sold in Walmart stores (such as clothing and food) are made in China and other countries, typically in awful sweatshops
troubles June 28, 2012 at 03:13 PM
Walmart is not a foreign occupier. Arkansas is not a foreign power - even to a native Californian like me. They can not "invade" a community. I have seen what Walmart "does" to small communities - and the effect on many of the small businesses is not pretty. Granted. But those small business generally provide jobs with wages not much higher than minimum wage - not a new standard set by Walmart. I also have news for you: Walmart did not discover China and Chinese-manufactured goods. They are everywhere because consumers - patriots though they claim to be - seem to prefer price to a "made in the USA" label everywhere they shop. What you seem to chafe at is that Walmart - which started out as a small store in Arkansas - has dialed into what the American consumer REALLY wants - and is presently the most successful at meeting that want. Let's face it: the United States has historically been a relatively free country. If Walmart was such an atrocious place to work, it would not be able to attract its employees (I believe Walmart is the largest private employer in the country). And if Walmart did not give a much larger constituency - its customers - what it wants, it would not be the leviathan that it is. Period. I am not a big fan of Walmart or how it seems to be accelerating changes I don't particularly like and I really don't like the proximity of the store to a very busy intersection, but Walmart plays by the rules and the neighborhood needs what Walmart offers.
Michael Brand June 29, 2012 at 04:36 PM
I spent a week working on a movie in Altadena. I drove Altadena Drive from Washington to FairOaks. The route looked more like a 1% neighborhood than a neighborhood of working Americans. I bet none of those people have ever gone to wamart and besides the non-white housekeepers/gardeners they hire, those 1% homeowners probably don't even know anyone that would shop at walmart. Walmart does not put mom/pop businesses out of business. It's poor people that finally have a choice that put mom-pop shops out of business. It's a class issue. All one has to do is compare the poor walmart shoppers and the rich walmart haters.
pusddad June 30, 2012 at 02:59 PM
Peter: would you agree that some communities have a different economic base than others. and that not all Walmart stores are supercenters? The Chinaton location is densely populated and devoid of a grocery store. Its not a Mayberry with a supercenter. Your arguments assume the second scenario.
pusddad June 30, 2012 at 03:43 PM
facebook like.
Steve Gerow July 11, 2012 at 12:37 PM
I'm looking forward to a similar article by Mr. Drier on the "Legal Bribery" of the public employee unions in California. Not holding my breath however.
Ivan G July 17, 2012 at 03:57 AM
That is the way I read it, too. She is mocking the wealthy Altadenans who object to Walmart.
Ivan G July 17, 2012 at 04:07 AM
Most significantly, these studies see to disregard the effect on consumers. Are consumers able to afford more food? Do they become able to afford to pay for their medication? Who are the sponsors of these studies? My bet would be labor unions and their allies. Do these studies relate to Walmart Neighborhood Markets? It does not sound like it.
Ivan G July 17, 2012 at 04:10 AM
Hear, hear! What have they done to our state's finances? They own our politicians.

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