>> 2012 was a good year for wal-mart, but it was a bad year for bangladesh. it experienced the deadliest factory fire in its history. wal-mart shorts were among the charred remains, but the company escaped accountability, and for many western retailers who's clothes a clothes are made in bangladesh,

fault lines travels there. >> the fire at the factory last november started on the ground floor, and quickly spread. at least 112 people died, hundreds of others were injured. many workers were trapped inside because the doors were locked, and the building had no fire exits. the remains of the fire are still everywhere here. this is where workers jumped out of the burning building on to the roof of this dormitory. there are bars on the windows so workers had to kick out the exhaust fans and jump out of the building.

>> you haven't received any compensation for your daughter's death? many of the women who escaped the fire still live in the shadow of the factory. this is one of them. she says she was sowing the wal-mart shorts when the fire broke out. >> so how did you escape?

>> can you describe what you were working on? these were the kind you were working on? when word got out that we were visiting other survivors came to share their stories. so you did the helping along the zipper and belt. how about you? none of the women received any compensation from wal-mart, and they all vowed to never work at a garment factory again. do you know who these pair of shorts wr for? >> wal-mart? >> five months after the fire, yet another disaster captured the world's attention.

an eight-story building housing several garment factories collapsed. more than a thousand people died. even those the scale of the collapse eclipsed the fire, the fundamental questions were the same: how could tragedies like this happen? and who ultimately should be held responsible? before we arrived in bangladesh, we received internal documents related to the wal-mart shorts order. the paper trail gives us an inside look into the complicated way that wal-mart produces its clothing. >> wal-mart is a pioneer, and also the most ruthless practitioner of a sourcing model. >> it's a system that can shield a company from blame when disaster strikes. >> wal-mart's supply chain is

defined by two critical features, the tremendous pressure it puts on its factories overseas to slash prices, and all the layer of contractors so it can distance itself from the practices. >> this is a mid-sized garment factory in a neighborhood crowded with them. at its height it had 1500 workers. today there are 600. this is where the shorts were supposed to have been made. wal-mart placed the order with a new york-based supplier. so this is from success apparel? >> yes, this is the contract, and you can see the price and

the quantity, 20,000, which is like 337,000 pieces. no mention that this is a wal-mart product, but except if you see the [ inaudible ] faded glory. >> faded glory is wal-mart's main in-house clothing line, and it was that brand of shorts that was found in the ashes of the fire. it says it wouldn't handle the order after dozens of workers who left town during the muslim holiday didn't return on time. >> already we were over our capacity, and suddenly we don't have the workers to fulfill the orders on time. the ceo of success apparels, he visited us and was going through our facility, the production -- used the four-letter word, et cetera, and we told him like, we're having trouble like meeting the

deadline. we need some extensions, and help. >> he was very upset. he said find a subcontractor. >> so the direct supplier to wal-mart came here and told you to subcontract? >> yes. yes. yes. >> subcontracting means paying another factory to take on some of the work. simco was already stretched thin dealing with the shorts. >> then we have got this other document from public clothing company, and that's another wal-mart supplier? >> yes. >> and dave sent a purchase order for almost 300,000 shorts. >> yes. >> another set of shorts. >> august 17th. >> august 17th. three days later. >> yes. >> simco can make around 300,000

garments a month. the two orders were more than double its capacity. >> i guess the logic was you place the order and some other factory will fulfill it. >> what is that code for? >> yes, you do subcontracting and give it to other production lines to fulfill the order. wal-mart does third-party audits sew they know exactly what you can produce. >> factories in places like bangladesh are engaged in cut-throat competition with competitors, so it's practically impossible to turn down a major order from wal-mart, because that's the factory's livelihood. >> so to meet the deadline they subcontracted to a manufacturer

called tuba. tuba then sent the shorts too its factory. a few weeks later, the factory caught fire. >> oh, my god. couldn't believe. couldn't believe. you know, i couldn't believe. how -- how can that happen? i don't know. so i called kevin, you know, i said look, kevin that factory, you know, caught fire. he got mad, he said what happened? he said why didn't you send somebody to get our things out? >> success appearel occurred simco of subcontracting the order without their knowledge. and wal-mart blamed their supplier, success. but wal-mart would have known because its own database retail link requires suppliers to identify where orders are being filled. >> they are supposed to have a record of every factory engaged

in the production of wal-mart goods. >> in may wal-mart named over 240 factories it would no longer work with, saying it had a zero-tolerance policy for unauthorized subcontracting. >> it's like everybody knows what is going on. it's an open secret, but getting caught on camera is -- or i think in the fact then you have to disown anything, and say i didn't know anything about it. >> it is the practice of wal-mart to hide -- so here is the supplier, who is the vendor? and every factory you see

>> after the fire, wal-mart announced it has dropped success apparel as a supplier. we tried to speak to success's venntive in bangladesh, but he found the company has closed

down its office here. we tried to interview the company's ceo in new york, but she refused to speak with us. kevin who was success's president at the time of the fire also refused to speak to us on camera. he now heads up another supplier called amerco group, one of its clients is wal-mart. >> one assumes wal-mart would not be keen to continue doing business with a leading exsec sieve from success apparel. >> on the phone, kevin told us that neither success nor true colors new about the subcontract. but we managed to track down true color's last remaining employee. if there is any subcontracting would you be aware of that? >> yeah. >> and what do you do with that information? do you pass it up? >> yeah, i pass it up to our

importer. >> can you read this email for me. >> it's saying i heard the shocking news about the fire last evening. >> and what is the subject line of the email? >> fire at subcon. >> sub con is industry speak for subcontractor. that email was sent by manager of true colors, shortly after the fire. so despite success's denials, their own agent may have been aware of the subcontract to tazrine.

>> we are on the trail investigating how wal-mart supply chain works here in bangladesh. does the company know when its orders are being subcontracted? is the way they source their clothing, the system itself flawed? the garment industry is notoriously secretive, so we needed an insider. we're on our way to meet an auditor who was hired by wal-mart to assess standards at some of the factories. he doesn't want to speak to us on camera. so we recorded the camera secretly. some companies hire auditors to inspect the factories. >> how so?

>> what do you think about their system? why is it bad? like what is the danger? >> from what you are saying it sounds like wal-mart supply chain is so out of control -- >> well if wal-mart doesn't know

where its goods are being produced, it's because they choose not to know. this is a company who's success built on the extrordanaire level of control they exert over production in their global supply chain. >> wal-mart refused to give us any information about his supply chain, but a spokesperson said wal-mart relies on its suppliers to implement the company's standards. ♪ >> there's a reason bangladesh is so popular with companies, especially those that produce inexpensive clothes that need to be made quickly. >> it's cheap because it has the lowest minimum wage for apparel workers at $0.18 an hour. >> that's about $38 a month. but it goes both ways. garments are just as important to bangladesh, accounting for

80% of its exports and giving jobs to 4 million people, mostly poor women. that gives the industry enormous leverage inside the country. >> >> so what they do, the buyers come here to look for the cheapest suppliers. everybody shares. everybody takes a share of the pick. so formally we have five to six layers, but there are many hands with these layers who are taking all of this money. >> it's not just the multi-nationals. in bangladesh, everyone wants a shot at making it in the garment industry. i'm headed to a small factory that does finishing of garments. they are supposed to be finishing garments for wal-mart.

i'm posing as a buyer to get in there. for those who can't open large factories, there's always business in subcontracting, even if it means putting the finishing touches on garments before they are shipped out. >> do you make anything that ends up in wal-mart? you have made products that go to wal-mart? were you an authorized wal-mart subcontractor? so is this very common that a lot of factories subcontract for big labels like wal-mart without authorization?

you are 14. so you started working when you were 13 years old? so what is the average age of your workers? but we just spoke to a girl who said she is 14. wal-mart told us they don't tolerate child labor in their supply chain, and they are investigating whether this finishing center did any work on wal-mart products. once we found one finishing house, it wasn't hard to find others. >> what are you making? how many buttons do you put on every day? how old are you? how long have you been working here? how old are you? do you go to school?

how much money do you make? 2,500 taka is $32 a month. >> so you are putting the elastic band into old navy pants? it says old navy. old navy is owned by gap, inc., one of the largest clothing companies in the world. this is where a lot of america's clothes come from, and it's a reality many companies don't want us to see. this is one of many many subcontracting factories at the bottom of the supply chain in bangladesh. it seems completely unregulated. it's just a shack in someone's

backyard. this morning we went to a finishing house, and they had about 20 workers there, more than half of them were under 14. there were girls as young as 12 making clothes for gap. >> really? in a finishing section? oh, my gosh. oh, my gosh. i mean for me -- it just -- i just can't believe. so this is the time that gap should step forward to make this correct. oh, my gosh. so see how critical is the supply chain is? how critical it is. ♪ >> gap declined to give us an oncamera interview. they did give us a statement saying the products we found were quote either counterfeit or improperly acquired, but through the bar codes we found, as well

as shipping records, we were able to match the garments to ones at old navy stores in the u.s. gaap added that it, quote, strictly prohibits any company from employing underage workers. >> there is a fairytale that they tell the public. gap and wal-mart are socially responsible and deeply committed to protecting the rights of workers, and making every effort to inspect their factories and making sure everything is on the up and up, and that has very little to do with the reality of the supply chain. for wal-mart and gap, worker right's are an issue of reputational risk. they understand their image in the eyes of the public has a very large impact on the degree to which they can get people to come to their stores and buy

their goods. so if their image will be damaged if they don't do the right thing for workers, then they will make change. >> months after the fire, the memories of that disaster and the ones that followed are still fresh in people's minds. a worker's rights activist rushed to the scene not long after the fire began. >> for my experience i think it was crying, and, you know, my -- still you can feel the heat inside, and my skin was like burning. yeah. yeah. >> it took wal-mart two days to acknowledge its connection to the company after photographs emerged showing its labels in the wreckage. >> the wal-mart clothes weren't burnt to ash. some others, but not them. >> some who survived the fire like this woman, is still haunted by what she saw this

day. >> you can feel how these workers fought to remove the window bars, and the jump. my feeling is nothing can be worse than this. seeing this burnt to ash and the family crying in front of you, and they cannot identify these bodies whether it's their beloved or not. nobody think about this -- these human facing who are making these clothes and dying in these factories every day. nobody is talking about their compensation or wages they are getting. even they don't consider they are human, but they are really human. they have names. they have a voice. they want to speak out. they have right to have a safe working place.