(Adds Wal-Mart comment, stock activity)
By Jessica Wohl
June 11 New York City's pension funds on Monday
became the latest group to file a derivative lawsuit against
Wal-Mart Stores Inc based on reported allegations of
bribery in Mexico and a possible cover-up by Wal-Mart officials.
The suit, filed in Delaware Chancery Court, alleges that
Wal-Mart's officers and board of directors breached their
fiduciary duty to both the company and shareholders by failing
to properly handle claims of alleged bribery and apparently
attempting to cover up details of the issue.
The issue was brought to light in an April 21 New York Times
report which said that management at Wal-Mart de Mexico
, or Walmex, allegedly orchestrated bribes of $24
million to help it grow quickly in the last decade and that
Wal-Mart's top brass tried to cover it up.
"Rooting out the directors and executives responsible for
the current crisis would be a first step, but Wal-Mart also
needs corporate governance reforms and an independent board that
will protect outside shareholders and safeguard against another
breakdown of internal controls," New York City Comptroller John
C. Liu said in a statement.
The lawsuit comes after the California State Teachers'
Retirement System, or CALSTRS, filed a derivative lawsuit in
Delaware Chancery Court in early May. In total, 11 derivative
complaints were filed in April and May in Delaware and Arkansas
tracking the allegations in the New York Times story, Wal-Mart
previously said. A securities lawsuit was also filed by the City
of Pontiac General Employees Retirement System in Tennessee.
In a derivative lawsuit, plaintiffs seek a recovery for the
company, not shareholders. The pension funds are seeking to
essentially stand in the shoes of Wal-Mart and sue the company's
executives and directors for damage they have done to the
retailer. Such lawsuits often result in changes in corporate
"We take our responsibility to our shareholders very
seriously. We will review the lawsuit closely and are thoroughly
investigating the issues that have been raised," said Wal-Mart
spokesman David Tovar. "It is also important to remember that
the filing of a lawsuit does not indicate the ultimate merits of
the case or how the case will be resolved."
Wal-Mart is in the early stages of a full and independent
investigation, which will take time, and the company believes it
would be inappropriate to come to conclusions before the
investigation is complete, he added.
The bribery issue is also being investigated by the U.S.
Department of Justice, the U.S. Securities and Exchange
Commission and a number of government agencies in Mexico.
On June 1, Wal-Mart said that while it could not predict the
outcome of the various suits, it did not believe that the
outcome would have a material effect on its financial conditions
or results of operations.
The New York City Comptroller's Office was among a group of
shareholders that voted against certain board members in
Wal-Mart's recent election. It previously said that it voted its
shares against Chairman Robson Walton, Chief Executive Michael
Duke, former CEO Lee Scott, current audit committee chairman
Christopher Williams and audit committee director Arne Sorenson.
While several directors received many more votes against
them than usual, they were still elected with a majority of
votes cast in their favor.
The New York City funds held 5.6 million Wal-Mart shares as
of March 31 and collectively have more than $121 billion in
assets, according to the lawsuit.
Wal-Mart shares fell 1 percent to close at $67.53 on Monday,
declining slightly less than the broader market.
LONG LIST OF DEFENDANTS
Fifteen of Wal-Mart's 16 current board members are named as
defendants in the lawsuit. Marissa Mayer, who just joined the
board this month, is not listed as a defendant.
Others listed as defendants include former Wal-Mart CEO
David Glass and former directors Roland Hernandez, John Opie, J.
Paul Reason and Jose Villarreal.
Among the executives listed as defendants are Eduardo
Castro-Wright, who served as president and CEO of Walmex in the
early 2000s; Thomas Mars, current chief administrative officer
and past general counsel; José Luis Rodríguezmacedo Rivera, who
was Walmex's general counsel and now a senior vice president at
Walmex; and Eduardo Solórzano Morales, president and CEO of
Wal-Mart Latin America, chairman of Walmex, and a past president
and CEO of Walmex.
Former executives listed as defendants include Thomas Hyde,
John Menzer and Lee Stuckey.
Along with Comptroller Liu, the trustees of the New York
City pension funds include the New York City Employees'
Retirement System, the Teachers' Retirement System, the New York
City Police Pension Fund, the New York City Fire Department
Pension Fund and the Board of Education Retirement System.
(Reporting by Jessica Wohl in Chicago; Editing by Richard