Retailers have been reviewing their international operations in light of a bribery scandal at Wal-Mart Stores Inc's (>> Wal-Mart Stores, Inc.) operations in Mexico that is the subject of investigations by the Justice Department and the Securities and Exchange Commission.
The conduct was thrown into the public spotlight in April, when a New York Times report said that management at Wal-Mart de Mexico (>> Wal-mart de Mexico S A B de C V) orchestrated bribes of $24 million to help it grow quickly in the last decade and that Wal-Mart's top brass tried to cover it up.
Other retail companies have also since reported to U.S. agencies suspicions of their own potential violations, which in turn has the Justice Department and SEC considering a sweep of the entire industry, said the sources, who are working with companies who have unearthed potential issues but declined to be identified.
The people would not reveal which retail companies have reported problems, but the development could signal that the retail industry faces an expensive legal headache that could last for years.
An SEC spokesman, a DOJ spokeswoman and Wal-Mart declined to comment.
It is not clear which firms would be included in an industry sweep by authorities. A number of U.S. retailers, selling everything from apparel to electronics and office products, have extensive operations abroad.
The government teams that enforce the U.S. anti-foreign bribery law, the Foreign Corrupt Practices Act, have often turned to industry-wide reviews when they find misconduct at a few companies that could be indicative of more widespread problems.
The SEC as a regulatory agency usually conducts the sweeps, though the DOJ does on occasion participate as well.
Both agencies, for example, sent letters to a handful of pharmaceutical companies in 2010 asking for information about their businesses in countries around the world.
Earlier this year, the SEC sent letters of inquiry to major U.S. movie studios asking for information about their dealings in China.
"It wouldn't surprise me," said Daniel Nardello, a former federal prosecutor, about the prospect of an industry-wide review of retailers.
"They have taken an industry-based enforcement approach, and I'm sure this has piqued their interest and gotten their prosecutorial juices flowing," said Nardello, who now runs Nardello & Co, which helps companies investigate potential FCPA violations and other issues.
It is also not unusual for companies to go to the authorities to disclose their own problems after another industry player's problems come to light, though the defense bar has debated for years whether self-reporting an issue to the government provides a tangible benefit.
In several recent cases, the Justice Department has attempted to make clear that benefit, lawyers said.
A former Morgan Stanley (>> Morgan Stanley) executive pleaded guilty in April to charges related to a bribery scheme in China, for example, but the Justice Department said it would not charge the Wall Street firm for the conduct and cited Morgan Stanley's internal controls and cooperation as contributing factors.
Even without charges, foreign bribery investigations can tie up company resources and management attention.
"Sometimes they are fairly focused, but even if they are focused they still require companies to do a significant amount of work," said Lucinda Low, a partner at the law firm Steptoe & Johnson who heads the firm's FCPA practice.
Requests from previous sweeps have asked for documents that range from dealings with a specific government agency, to detailed inquiries about a compliance program, to costs related to certain activities, lawyers familiar with such requests said.
(Reporting By Aruna Viswanatha in Washington, Jessica Wohl in Chicago and Dhanya Skariachan in New York; Editing by Tim Dobbyn)
By Aruna Viswanatha