Wal-Mart Stores Inc. shouldn’t be forced to give investors internal documents about what directors and executives knew about alleged bribes tied to Mexican real-estate deals, a company lawyer argued.
A ruling that the world’s largest retailer must hand over the files about its internal probe of the bribery claims when the documents weren’t reviewed by board members is flawed, Mark Perry, one of the company’s lawyers, told the Delaware Supreme Court in Wilmington today.
The documents “are indisputably protected by attorney-client privilege,” Perry said.
Wal-Mart wants the court to keep the files out of shareholders’ hands while U.S. and Mexican prosecutors investigate whether the payments amounted to a crime. Those probes were started after the New York Times reported that officials of Wal-Mart’s Mexican unit alerted the retailer in 2005 about bribes paid to get new stores and warehouses built.
At least $24 million in “suspect payments” were made as part of the scheme, the Times said, citing internal files. The newspaper also said Wal-Mart executives in the U.S. and Mexico limited the company’s investigation into the scheme and failed to disclose the payments in securities filings until 2011.
“Wal-Mart counsel makes up a lot of stuff,” Stuart Grant, a lawyer for the investors, told the court today. The pension funds he represents are demanding the files to buttress lawsuits against Wal-Mart directors over the scandal.
“They say the documents aren’t necessary” to show alleged corporate wrongdoing, Grant told the court, “but they didn’t put up any evidence.”
Officials of Bentonville, Arkansas-based Wal-Mart said in March that the chain spent $439 million over the past two years in connection with investigations into allegations employees paid foreign bribes. Besides Mexico, federal prosecutors are looking into possible illegal payments made by Wal-Mart officials in China, India and Brazil.
Internal documents showed Wal-Mart’s Mexican unit used a state governor in Mexico to facilitate $156,000 in bribes, Bloomberg News reported last year. The files were released by Democratic representatives Henry Waxman of California and Elijah Cummings of Maryland, who are also investigating the matter.
Pension funds that invested in Wal-Mart shares, including the California State Teachers’ Retirement System, the New York City Employees’ Retirement System and the Indiana Electrical Workers Pension Trust Fund, contend the retailer is hiding e-mails and other relevant documents about the Mexican bribery allegations to protect directors.
Ex-Delaware Chancery Court Judge Leo Strine last year ordered Wal-Mart to hand over more information about the board’s probe, including some files the company said were covered by attorney-client privilege, which applies to confidential communications between the chain and its lawyers.
Strine, now the Delaware Supreme Court’s chief justice, recused himself from hearing the appeal.
The funds’ demands for the files weren’t made with the “rifled precision” Delaware law requires on the question of what Wal-Mart executives knew about the payments and when they knew it, the company said in court filings.
The investors countered that Strine properly ordered Wal-Mart officials involved in an internal investigation of the claims to do a more extensive search of their files for relevant documents.
Delaware law doesn’t allow companies to “hide responsive documents its counsel already knows to exist simply because the search protocols do not independently locate the responsive documents,” the shareholders said in court filings.
The case is Indiana Electrical Workers Pension Trust Fund IBEW v. Wal-Mart Stores Inc., CA No. 7779-CS, Delaware Chancery Court (Wilmington).