The California State Teachers' Retirement System has filed a lawsuit against Wal-Mart Stores Inc. (WMT) over allegations of bribery in the retailer's Mexico operations.
CalSTRS, which holds more than 5.3 million Wal-Mart shares, alleged that senior Wal-Mart officials engaged in large opportunistic stock sales before an article in the New York Times reported the charges of corporate corruption last month. The Wal-Mart holdings account for roughly 0.4% of CalSTRS' equities portfolio.
"By utilizing the derivative action, CalSTRS is seeking to remedy the damages sustained by Wal-Mart as a result of alleged gross misconduct by Wal-Mart's executive officers and directors," said CalSTRS Chief Executive Jack Ehnes. "The focus of this action, unprecedented in CalSTRS history, is corporate governance reform to ensure that similar misconduct is not repeated in the future."
Last month, Wal-Mart acknowledged that it is investigating its operations in Mexico for possible violations of the U.S law that prohibits bribery overseas. The company confirmed that the probe involved Mexico, one of its largest markets, after the New York Times published a lengthy investigative article that contended the company learned of allegations of "widespread bribery" by its workers in the country in 2005--and that top executives subsequently covered them up.
The alleged bribery involved hundreds of illicit payments totaling more than $24 million to help obtain permits for new stores in Mexico, where the company's Wal-Mart de Mexico (WALMEX.MX, WMMVY) arm has become the nation's largest retailer and top private-sector employer, the newspaper reported, citing numerous internal emails and records it obtained.
The Times reported that top Wal-Mart officials in the U.S. learned of the bribery allegations in 2005 but didn't then alert U.S. or Mexican authorities.
Wal-Mart shares slid by 18 cents to $58.82 in recent trading. The stock is off 1.6% so far this year.
-By Nathalie Tadena, Dow Jones Newswires; 212-416-3287; email@example.com