NYC Comptroller Calls for Investigation into Wal-Mart’s Spying Tactics

Wal-Mart’s surveillance of employees, shareholders and critics has many up in arms, including New York City Comptroller William C. Thompson, Jr., who is now calling for the US Attorney General and the SEC to investigate Wal-Mart’s potentially illegal actions.

Official Asks for Probe Of Wal-Mart ‘Surveillance’ [Wall Street Journal]

The New York City Comptroller asked the U.S. Attorney General’s office and the Securities and Exchange Commission to investigate Wal-Mart Stores Inc. for what it called “ill-considered and possibly illegal surveillance operations” directed at shareholders who submitted proxy petitions.

In letters to both agencies, Comptroller William C. Thompson Jr., citing a recent article in The Wall Street Journal, said he was “particularly troubled by reports that Wal-Mart engaged in chilling and truly outrageous surveillance activities.”

The April 4 article detailed the company’s extensive surveillance of employees, critics and shareholders. As one example, the article detailed how internal security groups were asked to investigate shareholders who had submitted proposals that could potentially disrupt the company’s annual meeting and that the company was trying to block.

The comptroller’s office submitted a proposal that requested the Wal-Mart board to abide by a corporate code of conduct for companies doing business in Northern Ireland. New York City’s Pension Funds hold approximately eight million Wal-Mart shares, currently valued at nearly $400 million.

The April 4 article noted that in a January internal memo viewed by the Journal, a Wal-Mart official asked its internal security groups to “do some preliminary background work on the potential threat assessment for the Annual Shareholders Meeting,” listing the 14 submitted proposals. The official cautioned that the company’s efforts to thwart some of the petitions “can create a potential for a negative reaction from the shareholder group that submitted the proposal.”

Shortly after the article ran, Wal-Mart contacted some of the shareholders to apologize, particularly for referring to them as potential threats. Mr. Thompson said the phone call didn’t appease his office.

“The response they gave my office was that it was justifiable and that they had no problem with it,” Mr. Thompson said. “We want to know to what level this background investigation went. If they just Googled us, fine. But we can’t get answers.”

Wal-Mart wouldn’t comment, but it provided a letter written by its top legal officer that was faxed this past Thursday to all shareholder proponents, in which the company said the request to do a threat assessment was never carried out.

The letter went on to explain that “in the ordinary course of business and for legitimate business reasons, Wal-Mart will conduct background research on persons or organizations, including proponents of shareholder proposals … Any information gathered about proponents of shareholder proposals would come from internet searches and from other publicly available sources of background information.”

The Comptroller’s office says it received the fax but still wasn’t satisfied.

Other shareholders got on the Wal-Mart threat list with a variety of petitions. Action Fund Management LLC, which operates the Free Enterprise Action Fund, submitted a proposal that would require the company to report on what it has done to promote “the social benefits of business and the virtues of capitalism.” Last week, after the Journal article ran, the group sent a letter to Wal-Mart seeking “any and all information” that Wal-Mart may have collected on the fund and its managers.

Steven J. Milloy, the Potomac, Md., fund’s managing partner, asked that the retailer’s chief executive and general counsel “personally certify” that the company had done no “inappropriate surveillance of shareholders” who submitted petitions for the upcoming annual meeting.