(Reuters) - Wal-Mart Stores Inc, the world's largest retailer, squelched an internal investigation into allegations of bribery at its Mexican subsidiary instead of broadening the probe, the New York Times reported on Saturday.

The Times said that in September 2005, a senior Wal-Mart lawyer received an e-mail from Sergio Cicero Zapata, a former executive at the company's largest foreign unit, Wal-Mart deMexico, describing how the subsidiary had paid bribes to obtain permits to build stores in the country.

Wal-Mart sent investigators toMexico City and found a paper trail of hundreds of suspect payments totaling more than $24 million, but the company's leaders then shut down the investigation and notified neither U.S. nor Mexican law enforcement officials, the Times reported.

According to the Times, current Wal-Mart Chief Executive Mike Duke and former CEO Lee Scott, who now sits on the company's board, were among senior executives allegedly aware of the situation.

Wal-Mart said in a statement on Saturday it was "deeply concerned" about the allegations in the Times report and began an investigation into its compliance with the U.S. Foreign Corrupt Practices Act (FCPA) last fall. The company also said it had disclosed the probe to theU.S. Department of Justice and the Securities and Exchange Commission.

"Many of the alleged activities in The New York Times article are more than six years old. If these allegations are true, it is not a reflection of who we are or what we stand for," said David Tovar, vice president of corporate communications at Wal-Mart.

The company said it had taken steps in Mexico to boost internal controls for stronger FCPA compliance. It declined to make any executives available for comment, and said the investigation was continuing.

Richard Cassin, a U.S. FCPA lawyer, said Wal-Mart faces an uphill battle to convince the Justice Department and SEC that its problems are confined to Mexico.

"A corporate attitude toward the corruption there that allowed a cover-up to happen could signal wider compliance problems," said Cassin, who writes an industry blog, FCPA Blog.

"Before any resolution with U.S. authorities is possible, the company has to look under every stone for possible corruption. Are there any similar issues in China or other countries? That's what U.S. authorities will want to know. Wal-Mart's shareholders will be asking the same question," he said.

A spokesman at the SEC said it did not have any comment on the New York Times article. A Justice Department spokeswoman declined to comment.

Wal-Mart de Mexico, or Walmex, as the company is known locally, has expanded rapidly sinceWalmart opened its first store outside the United States in Mexico City in 1991, then part of a joint venture.

In 2011, the Mexican unit reported total sales of 379 billion pesos ($29 billion). Walmart's fiscal 2012 sales, for the year ended January 31, were $443.85 billion.


Middlemen or "gestores" are used in Mexico to help companies perform a variety of tasks, from obtaining residency permits and resolving tax issues to obtaining planning authorization.

They are often legitimate actors in Mexico's bureaucracy, but a lack of transparency in the system can make it impossible to know whether bribery is involved in their dealings, several foreign businessmen working in Mexico told Reuters.

The Times reported that Cicero, the former Walmex executive, gave names, dates and bribe amounts, adding that he knew so much because for years he had been the lawyer in charge of obtaining construction permits for Walmex.

Cicero identified Eduardo Castro-Wright as the driving force behind years of bribery, according to the Times, adding that no Walmex leaders were disciplined.

Castro-Wright became CEO of Walmex in 2003 and was named CEO of Walmart US in 2005. He became a vice chairman in 2008 and led e-commerce from 2010 until January of this year, and is set to retire July 1. He could not be reached for comment.