NEW YORK (TheStreet) -- When I examined the 10th anniversary of the Enron scandal last week, I didn't expect it to be the first installment of a two-part series. But then came Wal-Mart and its headline-grabbing Mexican bribery scandal.
Is the Bentonville behemoth the new Enron? Will it be (if you'll pardon the Mexican metaphor) the most-thwacked piñata of the era? A poster child for corporate corruption? A whipping boy for society's revulsion with men in suits carrying out criminal acts?
These aren't rhetorical, pie-in-the-sky questions, in the wake of the brilliant New York Times exposé of Wal-Mart's alleged bribery of Mexican officials. The Enronization of Wal-Mart is a realistic possibility -- if, that is, the Obama administration has the will to make it happen.
The threshold question is simple: Will Attorney General Eric Holder go after Wal-Mart with the only tool that matters in situations like this -- a criminal prosecution? Bloomberg reported on Tuesday that a criminal probe is in the works, and let's hope that this report is true.
President Obama let Wall Street get off scot-free in the wake of the 2008 financial crisis, with no criminal prosecutions even at Lehman Brothers, despite the damning findings of the bankruptcy trustee (as CBS News' "60 Minutes" just pointed out on Sunday).
Having dropped the ball on Lehman and the Street's other miscreants, and BP as well in the wake of the Gulf of Mexico fiasco, Obama's Justice Department is getting another bite of the apple. It can make an example of Wal-Mart as part of a newly invigorated get-tough policy on corporate crime.
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What distinguished Enron from past (and future) corporate scandals was that its top execs went to prison. That has actually happened to violators of the Foreign Corrupt Practices Act, though not recently (here's one example dating back to 2001) -- only once in a blue moon and never to execs of a well-known company like Wal-Mart. But it could happen this time if the egregious acts set forth in the Times article are proven.
If so, it would be an important signal to Corporate America, if Obama is willing to make it, that despite his quest for campaign contributions and frustrating hesitancy to go to the mat with misbehaving corporations, Obama still has the soul of the agent of change we elected four years ago. He ought to grasp at the opportunity.
Enron and the Wal-Mart Mexican bribery scandal don't have very much in common, but they share the same stench of moral turpitude at the highest levels of the executive suite. No amount of spin-doctoring and crisis management is going to make this one go away. If Wal-Mart thinks that it can make its south-of-the-border horror show evaporate with an SEC disclosure and a press release, it's got another thing coming.
This is not a one-day story that only the New York Times is going to follow. Expect Congress to jump on the bandwagon as well. I can just see Capitol Hill piling on even in the Republican-controlled House of Representatives, with Wal-Mart execs sweating it out in front of the cameras in Capitol Hill hearing rooms, being chastised by the likes of Gary Ackerman. Wal-Mart's share price will continue to be hammered as everyone involved takes a chunk out of Wal-Mart's hide.
After all, even before this all happened, Wal-Mart was hardly the most warm and fuzzy of companies. Its thuggish behavior toward suppliers and employees is the stuff of legend, even though the atrocious publicity has died down from the feverish heights of a few years ago. They don't call it the "Bully of Bentonville" for nothing.
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Frantic counter-spin from Wal-Mart notwithstanding, it seems evident from the Times coverage that the company acted at the highest levels as if the FCPA was a stop sign at a deserted country intersection, to be driven past without stopping since no cop was likely to be within sight. Wal-Mart execs didn't seem to care that the FCPA authorizes criminal penalties that can be steep -- with potential penalties of as long as 20 years in prison for violators.
Well, why should they have? Wal-Mart execs knew perfectly well that bribing foreign officials wasn't likely to land them in the hoosegow. Obama's Justice Department -- surprise, surprise -- hasn't shown much stomach when it comes to criminal prosecutions of FCPA transgressors. When General Electric settled Securities and Exchange Commission charges in 2010 of committing bribery in Iraq, the Justice Department was conspicuously absent from the proceedings. The reason given at the time was an excruciatingly hair-splitting one -- that the bribes went to Iraqi ministries and not to actual officials in Iraq. Makes you wonder: Who staffs ministries in Iraq. Giraffes?
What the Obama Justice Department, and particularly Preet Bharara, the U.S. attorney in Manhattan, have disregarded is that civil penalties just don't have any deterrent effect. They're like the fines that motorists pay after they've been caught speeding. But how would you feel if the state trooper aiming that radar gun might throw you in jail for a few nights? Bharara needs only to look to his office's actions against microcap crooks a decade ago as evidence of the educational impact of a nice period of incarceration.
Thanks largely to a determined pattern of criminal prosecutions, microcap stock fraud of the "boiler room" variety has largely become a thing of the past. Sure, technological advances were one factor -- Internet stock fraud, that is -- but jail terms were one of the major reasons you don't hear much about new First Jersey Securities and new Blinder Robinsons coming on the scene.
Even if incarceration didn't have a deterrent effect, it would be, quite simply, the right thing to do. It would be justice. Perhaps Eric Holder ought to stand out on Pennsylvania Avenue one of these days and take a look at the building where he works. There it is, on a plaque right at the front door: "Department of Justice." Wal-Mart has a long and dreary record of acting like a bully and getting away with it. A little dose of justice seems long overdue.
Gary Weiss's most recent book is AYN RAND NATION: The Hidden Struggle for America's Soul, published by St. Martin's Press.