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The Business Magazine For In-House Counsel
corpcounsel.com ❘ November 2014
Logo has a .5 stroke
WAL-MART’S WORLD
OF COMPLIANCE
Walmart International’s Daniel Trujillo
PLUS: THE 2014 PATENT LITIGATION SURVEY
MICHIGAN LAW’S TRANSACTIONAL LAB
COVER STORY
Going for the
‘YES’
Wal-Mart’s global compliance
chief wants to get past the
scandals to build a new compliance regime.
BY SUE REISINGER
DANIEL TRUJILLO LIKES TO TELL THE STORY OF VISITING
Walmart stores when he was first hired to learn more about
the retailing business. Trujillo visited one site around Valentines Day that had bought exactly 433 balloons, and seldom returned any product to suppliers. How do you know
how many to buy, he asked. By studying 10 different data
points on balloon sales, they replied. And he knew he and
Walmart International were a match made in heaven.
Trujillo loves data analytics. And so does Walmart, he
discovered, when he began working with 6,100 stores in
26 countries outside the United States. Trujillo, in his second year as international chief compliance officer, was
one of several key hires after Wal-Mart Stores Inc., parent company of Walmart U.S., Walmart International and
Sam’s Club, disclosed in late 2011 that it may have violated
bribery laws in Mexico. The lawyer uses technology and
empirical data for everything from managing allegations
of wrongdoing and their resolutions, to tailoring employee
training to specific risks in the area.
DANIEL TRUJILLO SAYS THAT DOING THE
RIGHT THING “IS NONNEGOTIABLE.”
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MONTH 2014 ❘ CORPORATE COUNSEL
PHOTOGRAPHY BY WESLEY HITT
COVER STORY
COVER STORY
WAL-MART’S LAWYERS FIRST EXPOSED
THE BRIBERY SCANDAL IN MEXICO.
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NOVEMBER 2014 ❘ CORPORATE COUNSEL
keynote address at the Houston compliance symposium:
“How to recruit 2.2 million compliance professionals.”
Friends praise Trujillo’s courage, integrity and intelligence. Diane Ralston, general counsel at Weatherford
International in Houston, worked with Trujillo for 15 years
when they were both in-house lawyers at the oil services
company Schlumberger Ltd. She marvels at his “boundless
energy—and I do mean boundless.”
Ralston also recalls Trujillo telling about a pep talk his
father gave him when he was afraid to ask a girl out on his
first date.
As Ralston retells it: “His father said, ‘You already have
the “no,” you might as well go for the “yes.”’ I think that
perspective has come to typify Daniel. He is not afraid to
challenge the status quo and to ‘go for the yes’ on a new
approach or program.”
THERE IS MORE THAN A LITTLE IRONY UNFOLDING THESE DAYS
in Bentonville, Ark., Wal-Mart’s hometown. While the company is hiring lawyers by the hundreds to help clean up its
act, it was corporate lawyers who exposed the scandal in
the first place, according to The New York Times, which
broke the details last year. An in-house lawyer named Sergio Cicero Zapata, who resigned from Wal-Mart de Mexico
in 2004 after nearly a decade in its real estate department,
laid out the bribery scheme for the Times. It was during the
EDGARD GARRIDO/ REUTERS
His mission is to help Walmart International build a
world-class compliance program that, just maybe, will
help repair some of the damage. He is building while the
company, the U.S. Department of Justice, the Securities and
Exchange Commission and Mexican authorities continue
to investigate the ongoing bribery allegations in that country. Meanwhile the Wal-Mart board’s Audit Committee has
expanded the probe into allegations of more corruption in
Brazil, China and India, according to the company’s quarterly report to the SEC in September.
Trujillo downplays the bribery probe in his job. He says
that he has nothing to do with the investigation, only with
what Walmart International does in the future. He told an
ethics and compliance symposium at the University of
Houston Law Center in June that he wouldn’t be at the
company if it were just because of the investigation. He
is there, he says, because he is convinced that Wal-Mart
wants to do right, and that its executives want him to guide
them. “When we leave the room we have only one voice
and one message,” Trujillo says: “Doing the right thing is
non­negotiable and it is everyone’s responsibility.”
He means it. Trujillo says compliance starts with the
tone at the top, spreads through the store managers where
he says “the rubber meets the road,” and thrives when the
2.2 million employees—or “associates” in Walmart parlance—own it. He emphasized the point with the title of his
Times’ reporting that the company disclosed the allegations
to the government.
Most payments allegedly went to speed up licenses and
permits, Cicero told the Times. He said he had first taken
evidence of the wrongdoing to Maritza Munich, then general counsel of Walmart International, in September 2005.
Munich pursued the investigation until it implicated WalMart de Mexico’s top officers—the then-chief executive
officer and its general counsel—in possible violations of the
U.S. Foreign Corrupt Practices Act. Both men have since
left the company.
But their departure was not Munich’s work. Her probe
was thwarted by executives in Bentonville, and her investigative files turned over to the Mexican executives implicated in the wrongdoing. “The wisdom of assigning any
investigative role to management of the business unit being
investigated escapes me,” Munich wrote at the time in an
email to top Wal-Mart executives, according to the Times.
She resigned in February 2006 and is now chief legal
officer and general counsel for Medical Card System Inc.,
a leading health insurer in her home, Puerto Rico. In an
interview published recently in the alumni newsletter from
Sandra Day O’Connor College of Law at Arizona State University, she said of her principles in general, “At the end of
the day, my goal is very simple—I like to sleep at night. I
want my daughter to be proud of me. I want my 91-year-old
father always to be proud of me. These are simple goals.”
She has declined specific comment about Wal-Mart, citing
attorney-client privilege.
But the truth will out, as Wal-Mart has painfully found.
Now Cicero’s allegations—and how they were handled by
top executives in Mexico and Bentonville—are the focus of
internal as well as U.S. and Mexican government investigations. Such probes often take years to complete, can cost
companies millions of dollars and executives their jobs, and
usually end in expensive settlements that include massive
compliance reforms.
The fallout from the scandal so far has been staggering.
At least eight senior executives in Mexico, India and Bentonville who touched the probe have left the company. The
list includes Thomas Mars, corporate general counsel in
2005 and 2006 when Munich’s investigation was stymied.
The Wal-Mart announcement of his leaving after 11 years
with the company did not offer a reason why. Mars, who
earlier this year joined the law firm Taylor English Duma,
declined comment about Wal-Mart and his role in the
investigation.
Mars was followed by Jeffrey Gearhart, who has since
been elevated to executive vice president for global governance. He is over both compliance and legal. And now the
general counsel is a veteran in-house Wal-Mart lawyer, Karen
Roberts. She has worked at the company nearly 20 years and
has held various positions, including general counsel for real
estate and construction, and chief compliance officer. The
compliance officers no longer report to the GC’s office.
And there’s even more fallout in the courts. The company, along with some current and former executives, is
fighting both shareholder and derivative suits over how the
allegations were managed. In July it lost a landmark ruling
REFORM SLATE
Wal-Mart has spent more than $109 million in creating a five-year plan to enhance its global compliance
program. Changes include:
hanged corporate structure to split compliance
C
and legal in each market; but the global compliance, ethics, investigations and legal functions
still all report to one executive vice president
for global governance—former general counsel
Jeffrey Gearhart—who reports to the board of
directors.
ired 30 percent more compliance staff, increasH
ing its number to nearly 2,500 employees,
including a senior vice president and global chief
compliance officer, a senior VP and CCO for
Walmart International (Daniel Trujillo), a senior
VP and CCO for Walmart U.S., a global anticorruption compliance officer, three regional CCOs,
plus CCOs and anticorruption directors in at least
10 markets.
Identified 14 subject areas, such as antimoney
laundering and anticorruption, and hired 14 leaders plus other experts to enhance compliance
and establish best practices in these subject
areas.
ired a new executive to lead compliance in
H
global e-commerce.
ppointed teams of compliance monitors in all
A
international retail markets to regularly review
the operations and to assist in complying with
local laws and policies.
dopted a multiyear training compliance proA
gram, and increased the frequency of training.
Improved global communications to help better
identify and resolve risks, and to escalate review
of certain high-priority allegations.
egan deploying a set of core technologies
B
across all markets, complemented with local specialized solutions where needed, to assess risk
and to evaluate and track compliance measures;
the company is expected to spend another $100
million on compliance technologies.
—S.R.
CORPORATE COUNSEL ❘ NOVEMBER 2014
81
COVER STORY
Trujillo has
worked in 60
countries and
speaks five
languages.
in the Delaware Supreme Court, in the state where Wal-Mart
and many other companies are registered. The Delaware
court found an exception to the attorney-client privilege
when a stockholder needs the information to sue a director
for breach of fiduciary duty. The court ordered Wal-Mart to
produce confidential legal documents related to the scandal,
which might well include Munich’s investigative files.
Fixing the problem has not come cheap. Besides the lawsuits, the company says the bribery probe has cost $439 million over the past two years according to filings this spring
with the SEC. And it estimates another $200 million to $240
million in expenses in the coming year. The cost includes
increasing its compliance staff more than 30 percent, to
about 2,500 people globally.
FOR ONE OF THOSE HIRES WAL-MART NEEDED A TRULY INTER-
national compliance chief who could move easily throughout its rapidly growing global market. The company sought
out Argentine-born Trujillo, who speaks five languages and
has worked in 60 countries on five continents. He went to
law school in Argentina, while he worked as a clerk in a city
court and planned to become a diplomat. But after talking
with several diplomats who showed him the downside of
the lifestyle, Trujillo decided against that route.
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NOVEMBER 2014 ❘ CORPORATE COUNSEL
He joined a law firm briefly and tried to be a litigator.
Highly competitive, Trujillo still works out nearly every day
so that he can race in triathlons across the country. But he was
still more diplomat than adversary, and litigating wasn’t a
good fit. So he added a business degree, and then started to
provide legal and compliance services to companies.
He worked for several large corporations in Europe and
South America before joining Schlumberger as a compliance officer. The company based him in Milan, and he covered 25 countries in Europe and Africa. Then came a serendipitous meeting while he was attending a conference in
China where he met his future wife, a California native also
at the conference. She worked for Schlumberger as well,
handling human resources across Latin America. Both their
jobs required a lot of travel on different continents. It was
sort of a bicoastal romance times 10. He laughs, “We would
try to meet on weekends, somewhere in the world.”
Eventually they married and Schlumberger moved
them both to Brazil, where their daughter was born. Now
5 years old, she loves soccer and is an avid fan—of Brazil’s
team—while Trujillo roots for his native Argentina. It made
for interesting World Cup watching in their house, he notes.
After Schlumberger moved them to Houston, their son
was born. And the Trujillo family settled into their dream
house for what they thought would be a long time. Then
one day Wal-Mart called. Trujillo at first declined an interview, but the company pushed for one meeting, just one. At
his wife’s urging, Trujillo took the meeting. Then-Wal-Mart
CEO Mike Duke spoke with him for over an hour, selling
Trujillo on the company’s mission and convincing him of
the need to build a world-class compliance program.
But from Europe and Latin America to Bentonville? Trujillo says he and his family love the small, friendly town.
It’s a great place to raise their children, he says. Jay Martin,
deputy GC and chief compliance officer at Baker Hughes
Inc. in Houston, has known Trujillo for about four years
and likes to tease his friend about the town. But Martin confirms that Trujillo loves the intensity of the work environment followed by a relaxing family lifestyle in Bentonville.
“Senior lawyers describe it as like Wall Street by day and
Mayberry by night,” Martin says.
WALMART INTERNATIONAL IS THE FOURTH LARGE COMPANY
Trujillo has worked for. While each is different, he says they
share one trait—compliance is about understanding your
business whether it’s on an oil drilling rig or in a retail store.
Martin, of Baker Hughes, says to have an effective compliance program, the CCO has to fully understand the business and its risks. “Daniel not only gets that, he preaches
it,” Martin says. “He is very innovative, very efficiency
oriented, and is always looking for the latest technology,
evolving his program to another level.”
Trujillo describes his approach as “taking care of people, the processes and the technology.” Under the people
part, he says, comes hiring the right ones. And Trujillo has
reached into his international travels to do that. With him at
the ethics symposium in Houston were two Walmart International hires, Sonia Rye from Bulgaria, director of compliance; and Luis Kolster from Venezuela, vice president
COVER STORY
and compliance officer. Some lawyers say that Wal-Mart’s
international reach is single-handedly changing the complexion of Bentonville.
“Most companies sooner or later will have to become
global if they want to survive,” Trujillo says. “And that
includes having people from different places with global
backgrounds.”
From the beginning Trujillo wanted to try new
approaches at Walmart. He uses the newest technology
to assess the risks, allocate the resources and then to track
and evaluate the program. His goal is to build not a legal
process but an international compliance system that can be
embedded in the company.
Trujillo’s first step was to travel from store to store learning the business. He says all the stores, all the meetings,
seemed to include wall signs stressing integrity. “Integrity
has been one of their core values for many years,” Trujillo
says. “Once you understand what they believe in, you can
work with that.”
Trujillo interviewed more than 150 employees, collecting and distilling their ideas for a compliance plan. He says
employees suggested leveraging the company’s data collection and analysis areas, for example, and many linked
their pride in the company’s values to “how compliance
should operate and be articulated.” Then he presented the
basics to Walmart leaders. “We worked on the plan for over
four hours,” he says. “At the end of the day, it was our
plan, not my plan. Because if they don’t own it, it doesn’t
happen.”
LIKE EVERYTHING AT THE WORLD’S LARGEST RETAILER, THE
compliance regime is complicated. Trujillo reports to Jay
Jorgenson, the senior vice president and global chief compliance officer. Jorgenson, hired in December 2012, reports
to Gearhart, the executive vice president for global governance and corporate secretary, and directly to the board of
director’s Audit Committee. And Wal-Mart split its compliance and legal into separate departments.
Previously each country, like Mexico, had its own chief
compliance officer, who was usually the general counsel.
Clearly that didn’t work well. Now each of 12 major markets has its own CCO who is not the general counsel; then
each CCO reports to one of three regional chief compliance
officers in Latin America, Asia and Europe/Middle East.
These three regional CCOs report to Trujillo. “The chief
compliance officer can’t be buried in the organization,” Jorgenson explained to Compliance Week magazine earlier
this year about splitting the legal and compliance functions.
“She can’t be wearing half a hat. [The CCOs] need to be
independent, senior executives, who all report back into
Bentonville.”
The five-year compliance plan, though, goes beyond
geographic assignments. The plan, revealed in July, also
assigns experts to specific topic-related teams that work on
common problems across borders. “Most companies identify four or five topic areas to concentrate on,” Trujillo says,
“but at Walmart we have 14 subject-matter areas.”
Anticorruption tops the list. The other topic areas are
anti-money laundering, antitrust, consumer protection,
84
NOVEMBER 2014 ❘ CORPORATE COUNSEL
DIANE RALSTON MARVELS AT DANIEL
TRUJILLO’S “BOUNDLESS ENERGY.”
environment, food safety, health and safety, health and
wellness, labor and employment, licenses and permits,
privacy, product safety, responsible sourcing and trade.
And there’s more. Wal-Mart appointed teams of compliance monitors in all retail markets. “Their mission is to
regularly review the company’s retail operations and assist
the business in maintaining compliance with local laws
and policies,” according to the July report. The company
increased training, along with new technology to measure
its effectiveness.
In fact, many improvements include new technology.
The company is electronically capturing monitoring data,
for example, and tracking remediation of compliance
issues. A Global Compliance Systems Roadmap “focuses
on deploying a set of core technologies across all markets,
complemented with local specialized solutions where necessary,” the report states.
And Wal-Mart is putting its money where its mouth is. A
portion of compensation for senior executives is contingent
on achieving satisfactory progress on compliance objectives
each year.
Wal-Mart’s biggest obstacle may also be its biggest asset:
its size. With an organization this massive, Trujillo says it’s
difficult to get everybody on the same page. “But the company takes the size we have with great responsibility,” he
says. “So when it realizes something can be done better, we
go all the way.”
And that includes technology. The company expects
to spend $100 million in the coming year on compliance
technology alone. Yet Trujillo concedes it is still a work in
progress. “It’s not just put it together and it’s the way you
want it,” he says. “Compliance is a journey.” ■