--New York City pension funds: Wal-Mart breached fiduciary duty to company, shareholders
--Complaint directed at current, former board members, executives
--Wal-Mart: reviewing lawsuit, but lawsuit doesn't indicate ultimate merits of case
(Updates with details of complaint in the second, seventh, eighth, and 10th paragraphs, Wal-Mart response in the third and fourth paragraphs and updates share price in the last paragraph.)
By Amy Or
NEW YORK--The New York City Pension Funds said Monday they have filed a shareholder derivative action against Wal-Mart Stores Inc. (WMT) regarding allegations of a "bribery and corruption scandal" at the discount store chain's Mexico unit.
The complaint, filed in the Delaware Chancery Court, listed 27 current and former Wal-Mart board members and executives as defendants, including its president and chief executive Michael Duke. It alleges Wal-Mart's officers and directors breached their fiduciary duty to the company and its shareholders by "failing to properly handle credible claims of the bribery allegations and attempting to cover up details of the scandal."
A Wal-Mart spokesman, David Tovar, said the company will review the lawsuit closely and is thoroughly investigating the issues that have been raised.
"It is also important to remember that the filing of a lawsuit does not indicate the ultimate merits of the case or how the case will be resolved," Tovar said in a statement.
The New York Times reported in April that Wal-Mart de Mexico had paid more than $24 million in bribes to obtain construction permits in order to gain market dominance. While an internal investigation by Wal-Mart back in 2005 found widespread evidence of bribery, executives kept quiet, according to the New York Times.
No enforcement officials were notified, and no staff was disciplined, the newspaper added.
Eduardo Castro-Wright, president and chief executive of the Mexican unit in 2005, was promoted to the company's vice-chairman in 2008, despite being implicated in wrongful conduct in initial investigations, the pension funds said in the complaint.
Wal-Mart said in a regulatory filing in December it launched a voluntary internal review of its policies, procedures and internal controls pertaining to global anti-corruption compliance in late 2011.
Mr. Tovar said the company is committed to a full and independent investigation.
"A thorough investigation will take time and we are in the early stages. It would be inappropriate for us or others to come to conclusions before the investigation is complete," he said.
Monday's complaint came after New York City pension funds spent years pressing for better legal and regulatory controls at the chain. Starting May in 2005, the funds led institutional shareholders in requesting a comprehensive review of Wal-Mart's legal and regulatory controls.
"Wal-Mart's board has repeatedly rebuffed our office and the New York City Pension Funds when we have raised concerns over the company's failure to comply with legal and ethical standards," said New York City Comptroller John Liu in a statement.
The pension funds, which held 5.6 million Wal-Mart shares as of March 31, said they seek to "recover corporate assets lost as the result of its wrongful acts, tighten legal and regulatory compliance structures, and institute improved governance oversight."
The pension funds added separate derivative cases against Wal-Mart are also pending in Delaware Chancery Court and the U.S. District Court in Arkansas.
Wal-Mart shares were down 1% to $67.53 in recent trading.
Write to Amy Or at email@example.com
(END) Dow Jones Newswires
June 11, 2012 16:44 ET (20:44 GMT)
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