Arkansas Judge: Investors Can Sue Wal-Mart as Group Over Mexico Bribe Claim

September 22, 2016

An Arkansas judge has ruled Wal-Mart Stores Inc. investors may bring fraud claims against the retailer as a group, clearing a hurdle in a lawsuit over bribes it allegedly paid to help open new stores in Mexico.

The ruling will make it harder for Bentonville, Arkansas-based Wal-Mart to brush aside a Michigan pension fund’s claims that the chain artificially inflated the value of its shares by mishandling the alleged Mexican payoffs.

The suit, filed in 2012, accused Wal-Mart of bribing Mexican officials to speed up approval for the opening of new stores. The chain was accused of hiding the bribery scheme for about seven years beginning in 2005. The payoffs were made public in a 2012 New York Times article. The paper reported at the time that Wal-Mart made at least $24 million in “suspect payments” to facilitate construction of Mexican stores.

“This was a procedural ruling that has nothing to do with the merits of the case,” Randy Hargrove, a Wal-Mart spokesman, said in an e-mail. “We continue to believe the claims here are not appropriate for class treatment.”

In May, the company persuaded a Delaware judge to throw out claims filed by another set of shareholders accusing directors of botching the handling of the Mexican bribery scandal.

Multiple Probes

The world’s largest retailer has said in regulatory filings that it spent $439 million since 2012 in connection with investigations into allegations that employees paid bribes in Mexico, China, India and Brazil. Both U.S. and Mexican prosecutors have open investigations into Wal-Mart de Mexico SAB, one of the country’s largest private employers with more than 200,000 workers.

Lawyers for the Michigan pension fund contend former Wal-Mart Chief Executive Officer Michael Duke and other board members failed to thoroughly investigate the claims even though they were put on notice in 2005. The retailer began a comprehensive probe only after the Times reported on the allegations in 2012, investors said.

Wal-Mart officials are accused of filing misleading disclosures with U.S. regulators about when they learned about the bribery claims and the thoroughness of the retailer’s internal review of its Mexican operations.

In her ruling on Sept. 22, U.S. District Judge Susan Hickey in Fayetteville, Arkansas, said “judicial economy and the best interests of” shareholders favor allowing the case to proceed as a class action.

The case is City of Pontiac General Employees Retirement System v. Wal-Mart Stores Inc., 12-cv-05162, U.S. District Court, Western District of Arkansas (Fayetteville).

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