California State Teachers' Retirement System Suing Walmart Execs In Wake Of Bribery Scandal

NEW YORK — One of the nation's largest public pension funds has filed a lawsuit against current and former Wal-Mart executives and board members, saying they had breached their responsibility in handling an alleged bribery scheme.

The California State Teachers' Retirement System which holds more than 5.3 million shares of Wal-Mart Stores Inc., filed what's called a derivative suit late Thursday in state court in Delaware seeking changes in corporate governance and improvements in its internal procedures at the world's biggest retailer.

The pension fund is asking that any damages sustained as a result of the violations should be awarded to the company, which is based in Bentonville, Ark.

The action marks the pension fund's first derivative lawsuit. This type of suit is brought by a shareholder on behalf of a corporation against a third party. The goal of the plaintiffs is not to reap big financial rewards but to change corporate governance.

"By utilizing the derivative action, (the pension fund) is seeking to remedy the damages sustained by Wal-Mart as a result of alleged gross misconduct by Wal-Mart's executive officers and directors," said Jack Ehnes, the pension fund's chief executive officer in a statement. "The focus of this action....is corporate governance reform to ensure that similar misconduct is not repeated in the future. We need truly independent directors who will set the right tone from the top."

During a conference call with reporters on Friday, Ehnes said the alleged scandal could well be the "Fortune 100 version of Watergate."

The suit names several current executives including CEO Mike Duke and Vice Chairman Eduardo Castro-Wright as well as former executives including John Menzer. Menzer was vice chairman at the time of the alleged bribery scheme while Castro-Wright headed the Mexico operation. It also names all of Wal-Mart's board members including Lee Scott, who was CEO at the time of the alleged bribery scheme, and Jim C. Walton and Robson Walton, members of the founding family of Wal-Mart.

Greg Rossiter, a spokesman for Wal-Mart said in a statement, "We take our responsibility to our shareholders very seriously. We are reviewing the lawsuit closely and are thoroughly investigating the issues that have been raised."

The suit comes two weeks after The New York Times reported that Wal-Mart allegedly covered up results of an internal probe that showed its Mexican subsidiary bribed officials there in 2005 and 2006 in exchange for speedier building permits and other favors. It's unclear whether board members knew about the alleged bribery scheme.

The paper reported that Wal-Mart executives failed to notify law enforcement even after its own investigators found evidence of millions of dollars in bribes funneled through its Mexican unit. Such alleged practices would be a violation of the 1977 Foreign Corrupt Practices Act, which prohibits U.S. companies from bribing foreign officials.

Wal-Mart said that it's doing its own investigation and has met with officials from the Securities and Exchange Commission and the Justice Department to discuss the ongoing probe.

The Mexican government announced that it's doing its own probe..

Earlier this week, the New York City Pension Funds urged shareholders to vote against the re-election of Wal-Mart's Duke and four other board members due to concerns about the bribery allegations in Mexico. The pension group owns 5.6 million shares of Wal-Mart, which has more than 3.4 billion shares outstanding.

Wal-Mart's share slipped 17 cents to $58.82 in afternoon trading. Its shares are down about 6 percent since news of the alleged bribery scheme surfaced.

Earlier on HuffPost:

Comments

[StopMakingSense2]

12:17 PM on 05/07/2012

Those good ol' derivatives in the news again. As if a jury will understand what the CEO's that created them don't either. What a fantastic shell game they are! Plausible denyability for all!

[authorized-user]

08:23 AM on 05/07/2012

Do I recall this pension fund getting into trouble with other investments?

[Joe Bigg]

07:40 AM on 05/07/2012

Never fear Wal-Mart will just use a few hundred lobbyists to pay-off a few of our corrupt politicians and bing-o business as usual.

[Andrew Cole]

08:29 PM on 05/06/2012

Soooo.... basically shareholders get to scapegoat the execs in order to protect Walmart from harm because they might lose value in their shares. That's nice, good thing corporations are never held accountable for their actions. There will always be somebody to throw under the bus.

[ta8ersalid]

06:29 PM on 05/06/2012

After all the money that was lost by the pension funds through BOGUS trades in the derivatives market and Mortgage backed securities. how do any of these execs sill have a job?

[raphaelbonee]

05:21 PM on 05/06/2012

Pension funds are 28% of the financial intermediary market. Currently 92% of the S and P 500 companies have unfunded pensions. The median is 72%. Some owe as much as their market cap.

So what happens to a company when it owes as much as its worth ... bankruptcy. Even worse for investors the unfunded pension liabilties have to come from somewhere. Best guess is out of earnings. That's right the unfunded liabilties mean that stock prices of those companies that have them are too much.

With baby boomers retiring at a rate of 10000 a month since 2011 and there being 77 million of them look for politics to swing away from covering investors right to keep pension money they've baked into stock prices and more towards paying baby boomers the money they are entitled to.

[blueken60]

02:13 PM on 05/07/2012

The first back stop to go will be the pension fund insurance companies. I believe most pension funds are insured.

[jeliz]

04:07 PM on 05/06/2012

Residual problems due to our financial system. Stocks and bonds, once again, are not immune to scandal and loss.

[suburbanmom]

02:41 PM on 05/06/2012

I stopped shopping at Walmart when I heard how they treat their employees. No savings is worth that behavior. As much as I can, I try to shop at local mom and pop stores or local union shops. It's not easy, and yes, it's more expensive. But it's worth it to me to make sure that my neighbors make a living wage.

[Tquin]

03:59 PM on 05/06/2012

All of that sounds good. I am sure that Walmart is suffering because of your sacrifice. They probably sit up at night and worry.

[BBinMT]

05:02 PM on 05/06/2012

I'm with suburbanmom. I don't shop there, either. Your choice if you want to wallow in cheap, plastic stuff, keep buying.

[MaxHeadroom]

08:01 PM on 05/06/2012

That's only one person who you know about that posts such sentiment here. There are more than that who feel this way, and yes, they do stay up at night and worry. You obviously have never attended a stock holder meeting to hear just what is discussed there. But then again, you probably do not have a savings account cause you are to young and broke.

[robert9671]

06:28 PM on 05/06/2012

It takes the power of each individual to affect positive change. I commend you and am doing the same. WalMart is the epitome of what went wrong in America.

[VPerry24]

01:07 PM on 05/06/2012

Anyone has to know that before Lehman Bros. went belly up they had paid their top CEOs $ 700 million dollars in bonuses. Some of you will tell me, they deserved it.

[VolsFans]

10:39 PM on 05/06/2012

What bothers me the most was our President saying there wasn't anything illegal about the finical melt down.
Lets hope karma really does happen and Walmarts treatment of their employees and this bribery scandal opens the flood gates.

[madcityy]

12:24 PM on 05/06/2012

WALMRT DID WHAT U GOTTA DO TO EXIST IN MEX..................THE TEACHERS R SUCH
HIPPOCRITES...............

I AM GUESSING THE PESNIONS R IN BAD SHAPE,,DUE TO ???????????

BUT IT IS NOT DUE TO WALMRT MAKING MILLIONS IN MEX............

[VolsFans]

10:39 PM on 05/06/2012

caps r cruz control

[blndgenie]

11:15 AM on 05/06/2012

So a UNION teacher retirement system has invested large sums in the biggest retailer in the world, who is notoriously NON-UNION. And now they are ADVERTISING that fact with this absurd lawsuit? LMAO~ What hypocrisy and silliness! Do love the fact they're exposing their actions to everyone though........

[SimianNation]

11:51 AM on 05/06/2012

"hypocrisy and silliness!", for what? For participating in capitalism? It's as if you believe that the sole purpose of unions, is to create a socialist world. Hahahahah

[blndgenie]

12:44 PM on 05/06/2012

I guess that would for INVESTING IN and ENABLING the poster child for 'employment abuses' according to UNIONS. If you don't comprehend the blatant hypocrisy, you should probably just run along back to the O- bag ger refugee 'camp'.

[Tquin]

04:00 PM on 05/06/2012

No, they just like to preach socialism.

[raphaelbonee]

05:23 PM on 05/06/2012

You want to influence a corporation own a majority of their stock. Not as dumb an idea as you might think.

[kdraper]

09:46 AM on 05/06/2012

I for one am glad that CalSTRS has taken a stand. It is the right decision for them. I'm sure they thought long and hard about it first. They did the same thing when they divested from tobacco stocks years ago. Everyone said it was a bad move financially, but they did it anyway.My hat goes off to them. I hope they are victorious in their effort. California teachers did not get a chance to vote on this issue, but if given the chance, I believe they would have backed the decision. It's nice to have a big hammer on your side for once.

[fortressfountain]

09:31 AM on 05/06/2012

I like the way anything they do is o.k but everything the citizen does is suspect and the are told to use due diligence.

[janmB]

07:30 AM on 05/06/2012

Legal bribes are what the USA does,,,, when it gives countries free-American dollars in the pretense it is to help the foreign Govt in order to open the doors for our corporations to get in.

[KeyopsBack]

07:18 AM on 05/06/2012

I avoid Wal mart ast all cost. Plus I avoid all those scary people I see in their stores. Lots of obese people scurrying around in their Jazzys.

[MaxHeadroom]

08:03 PM on 05/06/2012

Tea Bag/Republicans shopping for their slop.