Wal-Mart's Indian joint venture said Friday it has suspended several employees as part of an internal corruption investigation, another blow to the U.S. company's plans for aggressive expansion in a giant market that is largely untapped by foreign retailers.
Bharti Walmart, Wal-Mart's joint venture with India's Bharti Enterprises, said it had suspended "a few associates" and was "committed to conducting a complete and thorough investigation." India's Economic Times newspaper reported that the company's chief financial officer was among the five employees suspended, a claim the company declined to verify.
The news comes at a sensitive time for foreign retailers in India, where corruption scandals in everything from telecommunications to coal mining have badly damaged the ruling Congress Party. Eager to rekindle foreign investment, the Congress Party eased foreign investment rules in September, paving the way for Wal-Mart and others — which had been limited to wholesaling — to run retail shops with a local partner.
When parliament reconvened this week, opposition politicians quickly shut down proceedings to protest the move, which has already cost the Congress Party a key coalition partner.
In a Nov. 15 filing to the U.S. Securities and Exchange Commission, Wal-Mart said it was investigating potential violations of the U.S. Foreign Corrupt Practices Act in Brazil, China and India, among other markets. Wal-Mart's Mexico subsidiary is already embroiled in a public scandal over alleged payments to middlemen to speed up the store-opening process, possibly through payments to local officials.
Wal-Mart told the SEC it had spent $99 million in the nine months to October on corruption investigations and related lawsuits and said that it is cooperating with ongoing Department of Justice and SEC investigations.
Indian authorities are also reportedly investigating Wal-Mart for possible violations of foreign investment rules, relating to a $100 million investment in a company owned by its wholesale joint-venture partner, Bharti Enterprises.
Bharti Walmart said Friday that it was in compliance with all Indian foreign investment laws.
"All procedures and processes have been duly followed and details filed with relevant Indian government authorities, including the Reserve Bank of India. The central government has sought certain information and clarification which has been provided by us," the company said in a statement.
Wal-Mart operates 18 wholesale shops in India through its joint venture, according to its website. Wal-Mart said in September that it planned to open retail stores in India over the next 18 months, but the corruption investigation may slow its aggressive expansion strategy.
Spokeswoman Arti Singh said Wal-Mart remains "committed to the Indian market."
"We remain excited about the opportunity to grow our business in one of the world's most vibrant economies, expand opportunities for farmers and help lower the cost of living for families in India," she said by email.