New York City's pension system on Monday sued Wal-Mart Stores Inc., charging the company's officers and directors breached their fiduciary duty “by failing to properly handle credible claims of the bribery allegations (in Mexico) and attempting to cover up details of the scandal,” according to a news release from the New York City comptroller and city's law department.
Comptroller John Liu is the investment adviser to, custodian and trustee of the five city pension funds, which have aggregate assets of $121.9 billion.
The pension funds own about 5.6 million shares combined, Matthew Sweeney, a spokesman for Mr. Liu said in an interview.
At Wal-Mart's current stock price, the shares are worth about $378 million, or less than 1% of market capitalization.
The shareholder derivative lawsuit was filed in the Delaware Chancery Court in Wilmington on Monday.
“The defendants breached their fiduciary duties consciously and purposefully by acting to subvert and/or failing to take any action to investigate and/or stop the improper and illegal conduct at (the Wal-Mart Mexico subsidiary) involving bribery,” the lawsuit said.
“There was a systematic failure of the board to exercise oversight,” the lawsuit said. “Defendants failed to implement any reporting or information system or controls, or, having implemented such a system or controls, consciously failed to monitor its operations.”
In his news release, Mr. Liu said: “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.”
He added: “Rooting out the directors and executives responsible for the current crisis would be a first step, but Wal-Mart also needs corporate governance reforms and an independent board that will protect outside shareholders and safeguard against another breakdown of internal controls.”
The five city pension funds are the New York City Employees' Retirement System, New York City Teachers' Retirement System, New York City Police Pension Fund, New York City Fire Department Pension Fund and New York City Board of Education Retirement System.
Last month, the $153.7 billion California State Teachers' Retirement System filed a similar suit against Wal-Mart, alleging that company officials knew about and sought to cover up an alleged bribery campaign by its Mexican subsidiary to gain market power. CalSTRS, West Sacramento, owns more than 5 million shares of Wal-Mart stock.
A call to Wal-Mart's communications office was not returned by press time.