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Mexico scandal pressures Walmart in US

Its moves get extra scrutiny

In the United States, Walmart aims to open more stories in big cities. Above, shoppers at a Walmart in Mexico City.
In the United States, Walmart aims to open more stories in big cities. Above, shoppers at a Walmart in Mexico City. Josh Haner/The New York Times/NYT

NEW YORK - In Los Angeles, a Walmart building permit is getting a once-over. In New York, the City Council is investigating a possible land deal with the retailer’s developer in Brooklyn. A state senator in California is pushing for a formal audit of a proposed Walmart in San Diego. And in Boston and its suburbs, residents are pressuring politicians to disclose whether they took contributions from the company.

All of it in the past week.

Walmart has worked hard to polish its reputation and give elected officials, community groups, and shoppers a reason to say yes to their stores. Now, the revelation of a bribery scandal involving the retailer’s Mexican subsidiary is giving critics a new reason to say no.

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“Overnight, the environment has shifted in terms of Walmart’s strategy in big cities, in winning over local politicians,’’ said Dorian T. Warren, a political science professor at Columbia University who is writing a book about Walmart’s efforts to expand into Chicago and Los Angeles.

Last week, The New York Times disclosed Walmart had found credible evidence that its Mexican subsidiary - the retailer’s biggest foreign operation - had paid bribes and that an internal inquiry had been suppressed at corporate headquarters in Arkansas. The Mexican government has begun investigations.

Felipe Calderon, Mexico’s president, said he was “indignant’’ about the company’s behavior, and some elected US officials joined the chorus of outrage.

Walmart last week took several steps intended to demonstrate it was serious about getting to the bottom of the scandal - and preventing anything like it from happening again - but the damage could be problematic, analysts said.

“It gives more power to critics, and that might prove to be the biggest negative of all,’’ said David Strasser, at Janney Montgomery Scott.

In the United States, Walmart has largely exhausted places in suburban and rural areas to build stores and is focusing on many of the nation’s biggest cities. That means a lot of red tape for approvals. In the last few years, Walmart has smoothed the way with donations to politicians and local nonprofit organizations, and arguments that it helps economic growth and provides healthy groceries.

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Steven Restivo, a Walmart Stores Inc. spokesman, said the bribery investigation would not affect expansion plans. “We remain committed to opening stores all across the United States, including large cities,’’ he said.

In New York, City Councilman Erik Dilan said a committee he heads will investigate a land-use transfer at a Brooklyn site Walmart has been considering. The state comptroller was already reviewing a contract for the state-owned site.

In Los Angeles, opponents of a Walmart site were using the bribery scandal to supplement an appeal they have filed that would rescind the project’s building permit.

In Massachusetts, Walmart is eyeing possible stores in Somerville, Watertown, and Roxbury. Leaders of an anti-Walmart coalition are demanding the company identify its financial contributions.

For Walmart, the new obstacles come after a long and concerted battle to win over its critics. For years, labor unions said it did not pay fair wages. Environmentalists said it was a polluter. And female employees, claiming discrimination, were locked in a lawsuit against the company.

And city after city denied Walmart entry.

About seven years ago, as Wall Street analysts began to refer to the negative media coverage, the stock price fell and Walmart decided to burnish its image.

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With the help of Leslie Dach, a former adviser to President Bill Clinton hired in 2006, Walmart executives met with activists to improve its labor and health care records, outline an aggressive conservation plan, position Walmart as a company bringing fresh, affordable food to underserved areas, and develop initiatives to help promote women.

The company’s fiercest critics said they were public-relations moves with little substance, but at least in some circles, Walmart was seen as a better corporate citizen. That helped smooth over opposition to new stores in some cities.