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Wal-Mart Directors Sued by Pension Fund Over Mexico Bribe Probe

Wal-Mart Stores Inc.’s board was sued by a California pension fund over its mishandling of allegations that the world’s largest retailer bribed Mexican officials to help fuel the company’s growth in the country.

Wal-Mart directors and executives responsible for overseeing the company’s Mexican unit should reimburse the Bentonville, Arkansas-based retailer for damages the chain suffered as a result of the bribery scheme, lawyers for the California State Teachers Retirement System said in a lawsuit filed yesterday in Delaware Chancery Court in Wilmington.

“The board’s prolonged failure to address detailed and credible allegations of criminal activity” has caused the retailer “substantial harm,” the pension fund said in the complaint.

Both U.S. and Mexican prosecutors said last month they started probes of the bribery allegations, first reported by the New York Times. The retailer’s growth in Mexico has turned the company into the country’s largest private employer with more than 209,000 employees.

The newspaper reported that officials of Wal-Mart’s Mexican unit paid the bribes to win government building permits for stores. Once the bribery allegations came to light, company officials failed to act on the results of an internal probe or inform authorities about the allegations, the California pension fund said in the suit.

‘Reviewing Closely’

“We are reviewing the lawsuit closely and thoroughly investigating the issues that have been raised,” David Tovar, a Wal-Mart spokesman, said yesterday in a telephone interview.

It’s the second so-called derivative suit filed in state court in Delaware by a Wal-Mart investor over the Mexican bribe allegations in the past two weeks. Another investor filed a Chancery Court suit on May 2 seeking records about the board’s handling of the allegations.

Under derivative suits, any recovery would be returned to Wal-Mart’s coffers rather than awarded to individual shareholders.

The California pension fund contended in yesterday’s filing that Wal-Mart officials may have violated the U.S. Foreign Corrupt Practices Act of 1977 and other anti-bribery statutes in connection with the payments to Mexican officials.

Twenty percent of the company’s more than 10,000 stores worldwide are in Mexico, following Wal-Mart de Mexico SAB’s rapid growth in the past 10 years.


Once the bribery allegations were flagged to company officials by a whistle-blower in late 2005, executives within the Mexican unit sought to cover up the payments, the pension fund said in the suit.

Wal-Mart officials never disclosed the bribery allegations publicly or alerted law-enforcement officials until the New York Times reported the claims last month, according to the complaint.

The case is California State Teachers’ Retirement System v. Wal-Mart Stores Inc., CA No. 7490, Delaware Chancery Court (Wilmington).

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