Wal-Mart Must Provide More Bribery Files, Judge Concludes

Wal-Mart Stores Inc. officials must turn over more internal files on what directors knew about claims that executives handed out bribes to facilitate Mexican real-estate deals, a judge ruled.

The world’s largest retailer must provide documents about how officials set up the investigation of the Mexican bribery allegations and some files the company argued were covered by the attorney-client privilege, Delaware Chancery Court Judge Leo Strine ruled today in Wilmington. Investors are seeking the files as part of suits over claims that Wal-Mart directors didn’t properly oversee company operations.

The company “can’t sanitize its response” to shareholders’ requests for documents about the board’s handling of the bribery claims, Strine said at a hearing.

U.S. and Mexican prosecutors said last year they are investigating the bribery allegations, first reported by the New York Times. The newspaper said an executive of Wal-Mart’s Mexican unit alerted company officials in 2005 about bribes paid to facilitate construction of new stores and warehouses.

At least $24 million in “suspect payments” were made as part of 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 bribery scheme.

Internal documents showed Wal-Mart’s Mexican unit used a state governor in Mexico to facilitate $156,000 in bribes, Bloomberg News reported this year. The files were released by Democratic representatives Henry Waxman of California and Elijah Cummings of Maryland, who are investigating the allegations.

Shareholders’ Lawyer

Wal-Mart officials lost a bid last week to bar Stuart Grant, a lawyer for shareholders, from using the publicly disclosed documents as part of his bid to force the retailer to produce more bribe-related documents.

The suing funds include the California State Teachers’ Retirement System, the New York City Employees’ Retirement System and the Indiana Electrical Workers Pension Trust Fund.

Investors contend Wal-Mart, based in Bentonville, Arkansas, is hiding e-mails and other relevant documents about the Mexican bribery allegations to protect directors, Grant told Strine today.

“They are hiding the ball,” Grant said. Investors want the documents to probe whether directors “engaged in a cover up” of the bribes, the lawyer said.

Lawyers for Wal-Mart’s board countered that the retailer turned over all relevant documents about directors’ knowledge of the bribes and shouldn’t have to search for more.

No Cover-Up

“There’s no evidence whatsoever to support a claim of a cover-up,” said Stephen Norman, one of the company’s lawyers.

Wal-Mart has reviewed more than 160,000 documents in their quest for board documents related to the bribery scandal and searched computer servers and executives’ personal files, the retailer’s lawyers said in a March 6 court filing.

“The company has provided plaintiff with all of the documents to which it is entitled under Delaware law,” Wal-Mart’s lawyers said in the filing.

Grant and the pension funds’ other lawyers counter Wal-Mart’s hand over of bribery related files “was patently deficient” and the company has done only “perfunctory” searches for board material about the scandal.

Investors focused their document requests to answer questions about whether directors authorized a probe of the bribery claims with an eye “toward holding people responsible,” Strine said.

‘Bizarre’ Refusal

“It’s bizarre to me” that Wal-Mart officials refused to turn over files outlining how they prepared to conduct the investigation, the judge said.

The pension funds that sued contend Wal-Mart officials may have violated the U.S. Foreign Corrupt Practices Act of 1977 and other anti-bribery statutes in connection with the alleged payments to Mexican officials.

The Indiana fund sued to force Wal-Mart to hand over records about internal probes of the bribery allegations and contends that the company had been “woefully deficient” in producing documents.

Wal-Mart said in March it had spent $157 million on probes of bribery allegations in its international operations and expects to rack up more costs as the investigations continue. The company has said it’s investigating possible FCPA violations in Brazil, India and China along with Mexico.

The case is Indiana Electrical Workers Pension Trust Fund IBEW v. Wal-Mart Stores Inc., CA No. 7779-CS, Delaware Chancery Court (Wilmington).

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