(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.

A worker walks through the "Action Alley" at a new Wal-Mart store in Chicago, January 24, 2012. REUTERS/John Gress

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 de Mexico, describing how the subsidiary had paid bribes to obtain permits to build stores in the country.

Wal-Mart sent investigators to Mexico 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 the U.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 since Walmart 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.

STEPS TO CONCEAL PAYMENTS

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.

Wal-Mart found documents showing that Walmex’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Arkansas, the Times reported.

Wal-Mart hired Willkie Farr & Gallagher, a law firm with extensive experience in FCPA cases, to look into the matter, but when the firm suggested a thorough investigation, it was rejected for a more “limited preliminary inquiry,” the paper said. Willkie Farr could not be reached for comment.

The Times said Wal-Mart’s own lead investigator, a former F.B.I. special agent, said there was reasonable suspicion to believe Mexican and U.S. laws had been violated and had recommended an expanded investigation.

The Times said that in a meeting where the investigation was discussed, then Chief Executive Lee Scott rebuked internal investigators for being too aggressive.

Days later, the paper said its records showed Wal-Mart’s top lawyer arranged to ship the internal investigators’ files on the case to Mexico City.

Primary responsibility for the investigation was then given to the general counsel of Walmex, who was alleged to have authorized bribes, the Times said. The general counsel then exonerated his fellow Walmex executives, the report said.

The Justice Department and the U.S. Securities and Exchange Commission have in the past few years aggressively stepped up enforcement of the FCPA, a 1970s law that bars bribes to officials of foreign governments.

In 2010, for example, the agencies collected a record $1.8 billion in sanctions in bringing such cases against major companies including BAE Systems, Daimler and Alcatel-Lucent.

But the government units that enforce the law are only staffed with a few dozen prosecutors and agents who traditionally rely upon the companies to hire outside lawyers to conduct the bulk of the investigation themselves, since such probes usually involve collecting millions of documents and interviewing hundreds of witnesses outside the United States.

The companies then generally turn over to the agencies the results of the investigation, which can cost tens or even hundreds of millions of dollars in legal fees and take several years to complete.

There was little reaction in Wal-Mart’s shares on Saturday. The stock has gained about 17 percent in the past 12 months, outperforming the S&P 500 index’s 3 percent rise.