Shareholders Sue Walmart Directors over Bribery Scandal
Posted on June 6, 2012 by jway
In the wake of the New York Times’ exposure of systemic bribery in Mexico to the tune of $24 million, Walmart is under investigation by both the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). Now, in addition to these investigations, shareholders have filed a class action lawsuit and a number of derivative complaints.
According to a New York Times article, a number of top executives not only knew about or were involved in the bribery of public officials, but later tried to cover up the scandal. Allegedly, these executives then failed to report these facts to the DOJ. This means that the potential liability for the company, if found guilty, could reach hundreds of millions of dollars. The investigations and related litigation will likely take years to complete.
Unsurprisingly, shareholders are not happy. The Wall Street Journal reports that in an SEC document filed last Friday, Walmart disclosed information about shareholder lawsuits filed against the company and its directors since the scandal broke. The suits include one securities class action lawsuit, filed in Nashville by the City of Pontiac General Employees Retirement System, and 11 derivative complaints. The Wall Street Journal states that the securities class action “seeks to represent shareholders who bought shares between Dec. 8, 2011, and April 20, the day before the Times story went live. Walmart made its first disclosure of a foreign-bribery probe on Dec. 8, but the Times story said the Justice Department was informed of the matter only after Walmart learned of the paper’s reporting.”
The 11 derivative complaints, filed by a variety of individual and institutional shareholders, were filed on behalf of the company and individually name multiple board members as defendants. Predictably, three current board members are implicated in the scandal – current CEO Mike Duke, who was CEO of Walmart International when the alleged bribery took place, Chairman of the Board S. Robson Walton (currently the 18th richest person in the world), and former CEO H. Lee Scott. According to the filing, the derivative lawsuits accuse “the defendants who are or were directors or officers of the Company [of breaching] their fiduciary duties in connection with oversight of (Foreign Corrupt Practices Act) compliance.” One filer of a derivative complaint is the California State Retirement Systems (CalSTRS), which announced plans in May to vote against re-election of all existing board members at the company’s June 1 shareholder meeting.
The filing also states that “the Company is cooperating with the investigations by the DOJ and the SEC.” However, Walmart may be less than helpful when it comes to federal investigations of the bribery allegations. Representatives Elijah Cummings and Henry Waxman opened a legislative inquiry about the situation shortly after the story broke. The Chicago Tribune reported last month that U.S. lawmakers are “frustrated by the lack of cooperation they have received from the company,” according to a committee staffer with inside knowledge.
This post was written by Rebecca Cassler.