Shareholders speak out on Walmart scandal

by The City Wire staff ([email protected]) 263 views 

Controversy is certainly nothing new for Wal-Mart — a simple Google search found a dozen or so active petitions started this year against the Bentonville behemoth.

The most recent and active petition doesn’t oppose a new store or some product offering, but instead calls to End the Corruption and Cover-Up recently alleged by the retail giant’s Mexican subsidiary.

Wal-Mart is alleged to have paid out $24 million in bribes to Mexican officials to boost the rate at which new stores were opened, which violates the Foreign Corruption Practices Act.

Venanzi Luna, a Walmart employee in southern California, is behind the latest petition.

Luna says she’s worked for Walmart for seven years and is a company shareholder.

“I am angry that top Walmart executives are reported to have bribed public officials in Mexico and then tried to cover up the scandal. For years my coworkers and I have been saying that this company has lost its way. We didn't know it had gotten this bad,” Luna noted in an email interview.

The petition calls for a thorough and independent investigation by a highly respected external organization and the resignations of Board Chairman Rob Walton and CEO Mike Duke.

“No one, no matter how rich and powerful, should get away with these kinds of acts,” Luna said.

This petition seeks to get 10,000 signatures. In the first six hours the petition was available online it was signed by more than 2,900 shareholders and employees.

This is part of a bigger campaign known as Making a Change at Walmart, which seeks to help rebuild the economy and strengthen working families. This group is supported by the United Food & Commercial Workers union.

Joe Hansen, president of UFCW said in a release, “The corruption scandal and reported cover-up exposed an unacceptable failure of leadership within Walmart. Walmart Chairman Rob Walton and CEO Mike Duke must resign immediately in an effort to restore integrity and accountability for Walmart associates, shareholders, customers, and communities.”

Hansen said Wal-Mart has pursued a growth-at-any-cost strategy in cities and towns across the United States and globally. If laws were ignored there should be dire consequences, she says.

Wal-Mart did not respond when asked about Luna’s petition. But the company has spoken out since the bribery story was first reported by the NY Times on Saturday.

Wal-Mart spokesman David Tovar said publicly, “We will not tolerate noncompliance with Foreign Corrupt Practices Act anywhere or at any level of the company. We are confident we are conducting a comprehensive investigation and if violations of our policies occurred, we will take appropriate action.”

Wal-Mart says it launched a comprehensive internal investigation into the allegations of bribery six months ago at the urging of Duke.

Wednesday (April 25) Walmart announced it had named Tom Gean as the company’s new global compliance officer a position created to help oversee compliance with the Foreign Corruption Practices Act in every market around the world.

Also on Wednesday, Reuters first reported a shareholder lawsuit was filed with the Chancery Court in Delaware. The derivative lawsuit seeks to recover money on behalf of the company rather than shareholders.

The complaint filed by shareholder Henrietta Klein says the illegal payments have and will continue to irreparably damage Wal-Mart's corporate image and jeopardize its ability to do business in foreign countries.

Wal-Mart confirmed receipt of the lawsuit.

Analysts who follow Walmart’s stock performance said the company must continue to focus on business as usual while the investigation looms in the background.

Ian Gordon, equity analyst with S&P Capital IQ, said Walmart must continue their community service efforts and low price focus because that’s what brings shoppers back.

Shares of Wal-Mart stock (NYSE: WMT) did rebound Thursday to close at $58.95, up nearly 3% on the day. The shares slid 8% in value in the first two trading days following the scandal news.

Walmex shares closed at $38 Thursday, recovering slightly from the 16.5% drop in price earlier this week.