Why is Wal-Mart in Hot Water With These Investors?
The second-largest U.S. pension fund has filed suit against former executives and board members of Wal-Mart Stores Inc. (NYSE:WMT) in connection with allegations that the company engaged in bribery and a cover-up during its expansion in Mexico.
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The California State Teachers’ Retirement System, which holds more than 5.3 million shares of Wal-Mart stock, filed a derivative suit in Delaware on Thursday. The lawsuit comes on the heels of a New York Times story last month that accused Wal-Mart de Mexico of participating in bribery in order to gain control of the market. The story also alleged that Wal-Mart executives were aware of the activity and helped to cover it up.
“By utilizing the derivative action, CalSTRS 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 CalSTRS Chief Executive Officer Jack Ehnes. The suit names current Wal-Mart Chief Executive Michael Duke and his predecessor H. Lee Scott Jr., as well as other executives and board members.
CalSTRS’ lawsuit also alleges that company executives were aware of illegal activity as early as 2005 but sought to cover it up until the end of 2011, when The New York Times began asking questions. If allegations are true, Wal-Mart may be guilty of violating both the Sarbanes-Oxley Act and the U.S. Foreign Corrupt Practices Act.
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