PETR3 Petroleo Brasileiro S.A. Petrobras

A U.S. investigation into potential foreign bribery by Wal-Mart Stores Inc. has unearthed evidence of possible misconduct by the retailer in Brazil, after investigators found little to support the sweeping allegations involving Mexico that initially prompted the probe, according to documents and people familiar with the matter.

Federal prosecutors are examining $500,000 in payments that they believe ultimately went to an individual hired to obtain government permits the company needed to build two stores in Brasí lia, Brazil's capital, between 2009 and 2012, an investigative document shows.

Lawyers from the Justice Department and the Securities and Exchange Commission, along with agents from the Federal Bureau of Investigation and the Internal Revenue Service, traveled to Brazil earlier this month to interview witnesses with the help of Brazilian prosecutors, the people said.

Prosecutors are examining whether senior employees at Wal-Mart in Brazil at the time knew of and approved of the suspected payments, the people said. The investigation into the Brazil allegations is at an early stage and it isn't clear if anyone will be charged.

"As we've said from the beginning, we are cooperating fully with the government in this matter and can't comment further on that process," said Wal-Mart spokesman Greg Hitt. "For Wal-Mart, compliance with the U.S. Foreign Corrupt Practices Act and other anticorruption laws is a key priority."

A Justice Department spokesman declined to comment.

The payments add a new line of inquiry to a long-running investigation looking into Wal-Mart operations in Mexico. The Wall Street Journal reported last month that the investigation had found little in the way of major offenses in Mexico, but had found evidence of widespread but small-payment bribery in India.

If prosecutors are also able to prove bribery by Wal-Mart in Brazil, it could turn the case against the company into a multinational action and prompt a larger penalty. Still, the offenses would fall short of the broader pattern of bribery in Mexico that was initially suspected.

Prosecutors are also trying to determine if they have enough evidence to prove senior employees at Wal-Mart Brazil committed any crimes, the people said.

The government has evidence of employees at Wal-Mart discussing the hiring of the individual—a woman believed to have previously held a government position—to obtain the permits, according to a written request for assistance that Justice Department officials sent their Brazilian counterparts. Prosecutors also have evidence that Wal-Mart made the payments indirectly through other contractors, the document says.

The request, dated Jan. 6 of this year, also suggests Wal-Mart was concerned about delays in getting the store permits. The woman they hired had a reputation of being able to speedily obtain the permits "as if by magic," the document says, and she charged roughly 10 times what other intermediaries received.

Still, it isn't clear prosecutors have proof the money was used specifically as a bribe.

Wal-Mart first said in securities filings in 2011 that it is investigating allegations of potential foreign bribery violations, adding in 2012 that the investigation had spread to foreign markets including Brazil. Since then, the retailer has spent more than $700 million on an internal probe of the allegations and related compliance improvements.

Wal-Mart entered Brazil in 1995, initially failing to gain ground with U.S.-style superstores. The retailer's market share increased after acquiring two established local chains in the mid-2000s, but it has struggled to become the country's dominant retailer.

After the acquisitions, Wal-Mart expanded quickly in Brazil, nearly doubling its stores there from 299 to 558 between 2006 and 2012, according to financial filings. In 2013, store growth stalled. Many Brazilian shoppers have remained unmoved by Wal-Mart's "Every Day Low Price" message and the company has strained to leverage its size to squeeze profit out of its supply chain. Brazil accounts for about 3% of the company's total revenue, according to an estimate from Morgan Stanley.

Overall, Wal-Mart's international sales have been flat or fallen in recent years, hit by the strong dollar and weak sales in the U.K., China and Brazil. Business in Mexico and Canada has strengthened recently. Sales in U.S. stores that have been open for at least 12 months inched up 1.5% in the most recent quarter, the fifth straight quarterly gain after a long stretch of declines.

Justice Department officials have said recently that improved cooperation with foreign prosecutors is enhancing their access to witnesses and information overseas, particularly in bribery cases. The Wal-Mart Brazil investigation appears to highlight that shift.

Brazil has recently undertaken its own anticorruption push. State-run oil giant Petró leo Brasileiro is confronting fallout from a far-reaching corruption scandal, and the company wrote off some $17 billion in losses from graft and overvalued assets earlier this year.

Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com and Sarah Nassauer at sarah.nassauer@wsj.com

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(END) Dow Jones Newswires

November 24, 2015 20:15 ET (01:15 GMT)

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