Pension fund files derivative suit against Walmart leaders
/ Getty Images/David McNew(AP) NEW YORK — The California State Teachers' Retirement System, which holds more than 5.3 million shares of Walmart ( WMT), 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 Walmart as a result of alleged gross misconduct by Walmart'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."
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 Walmart'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 Walmart.
Greg Rossiter, a spokesman for Walmart 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 Walmart 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.
The paper reported that Walmart executives failed to notify law enforcement even after its own investigators found evidence of millions of dollars in bribes funneled through its Mexican unit.
Walmart 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 Walmart'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 Walmart, which has more than 3.4 billion shares outstanding.
Walmart's share slipped 18 cents to $58.81 in midday trading. Its shares are down about 6 percent since news of the alleged bribery scheme surfaced.
Popular on MoneyWatch
- Reverse cell phone lookup service is free and simple
- Chrysler expected to make Jeep recall refusal official
- 6 ways to pay off your student loans
- Why geniuses don't have jobs
- Chrysler agrees to recall of Jeeps at risk of fire
- The Internship: 6 real-life lessons from the movie
- Top 10 professional life coaching myths
- Chrysler continues its refusal to issue a Jeep recall