Elsie Cohen v. Wal-Mart Stores, Inc., et al.
Derivative action for the benefit of nominal defendant Wal-Mart Stores, Inc. against certain current and/or former members of Wal-Mart’s board of directors and certain Wal-Mart’s executives for breaches of their fiduciary duties owed to Wal-Mart and its shareholders.
Defendants breached their fiduciary duties by causing and/or allowing Wal-Mart and its employees to engage in the systematic practice of bribing foreign officials in Mexico to obtain construction permits in violation of the Foreign Corrupt Practices Act (“FCPA”), and by curtailing and covering up an investigation into the bribery practices.
Wal-Mart, which had mainly operated retail stores in the United States, began operations in Mexico in 1991, with the opening of a Sam’s Club. During the two decades since, Walmart de México (“WalMex”) has experienced tremendous growth. As of February 29, 2012, Wal-Mart owned 2,099 stores in Mexico and employed approximately 200,000 people in the country. One in five Wal-Mart stores today is in Mexico, making WalMex a significant success story.
Wal-Mart’s rapid expansion in Mexico, however, was the product of illegal actions. For years,Wal-Mart engaged in a wide-ranging practice of bribing officials in Mexico in order to secure zoning approvals, reductions in environmental impact fees and the allegiance of neighborhood leaders, in order to build so fast that competitors could not keep up.
An earlier investigation unearthed evidence of widespread bribery with a paper trail of more than $24 million in suspect payments, about which WalMex’s top executives had extensive knowledge. When it was recommended that Wal-Mart expand the investigation, the Defendants instead halted the investigation and held no one accountable.
Shockingly, WalMex’s chief executive at the peak of the bribery scheme was promoted to President and CEO of Wal-Mart Stores USA and is now vice chairman of Wal-Mart.
Defendants’ conduct represents a breach of Defendants’ fiduciary duties that caused significant harm to the Company and for which they must be held accountable.