NY seeks probe of Wal-Mart for surveillance: report

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NEW YORK (Reuters) - New York City is seeking a probe of Wal-Mart Stores Inc. (WMT.N: Quote, Profile , Research) over the retailer's surveillance of shareholders who submitted proxy petitions, the Wall Street Journal reported on Wednesday.

The New York City Comptroller asked the U.S. Attorney General's office and the Securities and Exchange Commission to investigate Wal-Mart for what it called "ill-considered and possibly illegal surveillance operations" directed at shareholders who submitted proposals that could potentially disrupt the company's annual meeting, the paper said.

Comptroller William Thompson Jr.'s office and Wal-Mart officials could not immediately be reached for comment.

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GL on getting that granted

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NYC Comptroller Wants Wal-Mart Spy Probe
By DAVID B. CARUSO
AP
NEW YORK (April 11) - New York City's comptroller has asked the Securities and Exchange Commission and the Justice Department to investigate whether Wal-Mart Stores Inc. illegally spied on some of its shareholders.

The request by New York City Comptroller William C. Thompson follows a string of allegations by a fired Wal-Mart security operative that the giant retailer had wide-ranging surveillance operations against employees, critics, suppliers, consultants and shareholders expected to challenge some of the company's policies at an annual meeting.

Wal-Mart's spokesman John Simley declined to comment Wednesday on Thompson's action.

In a letter faxed to shareholders last week, Wal-Mart acknowledged that a January memo proposed a security review of activist shareholders but said no action was taken and there was no surveillance of investors.

At least three investor groups including the Interfaith Center on Corporate Responsibility, a leader in shareholder activism, have said that the assurance was not enough and have demanded a formal apology and copies of any material collected on the groups' members.

"We certainly welcome this initiative (by the comptroller) and we'd like to get to the bottom of this situation," said Peter Flaherty, president of the National Legal and Policy Center, a free market think-tank that has a resolution pending for the June 1 shareholder meeting to require more details from Wal-Mart on its charitable giving.

The dispute is likely to harm Wal-Mart's shareholder relations, said Russell Reynolds, chief executive officer of The Directorship Search Group Inc., a Greenwich, Conn.-based consultant for corporate governance, executive search and succession planning

"I would think this would be very bad for shareholder relations," Reynolds said. "The idea of any kind of corporate, clandestine surveillance is repugnant, countercultural and destructive."

Wal-Mart's union-backed critics also called for an investigation.

"Since Wal-Mart is unwilling to say, it's time for a serious government investigation into who Wal-Mart spied on, when, where, and why," said Chris Kofinis, spokesman for WakeUpWalMart.com.

In letters to government officials, Thompson said his office, which controls $400 million worth of Wal-Mart stock through government pension funds, was among those targeted by the surveillance effort.

Thompson called Wal-Mart's surveillance activities "ill-considered and possibly illegal" in the April 9 letters to SEC Chairman Christopher Cox and Deputy Attorney General Paul McNulty.

"This conduct reflects breathtakingly flawed judgment and raises significant questions regarding Wal-Mart's commitment to its shareholders and the public markets," he wrote in his letter to Cox.

An SEC spokesman said he could not comment on whether the agency is investigating the matter.

The comptroller's office reportedly drew Wal-Mart's attention after submitting a proposal asking the retailer to abide by a code of conduct that would govern its operations in Northern Ireland.

Thompson also wrote Wal-Mart CEO Lee Scott , calling the company's defense of its activities, "mystifying and outrageous."

Wal-Mart confirmed last Thursday that there was a January memo by an unnamed Wal-Mart official asking an internal security team for a "potential threat assessment" of certain shareholders in advance of the company's annual meeting on June 1.

A spokeswoman told The Associated Press last week it was routine for the company to review "potential areas of concern" before shareholders' meeting but added that any review was "mainly using the Internet and other public sources to obtain background information."

However, Wal-Mart's letter to shareholders on the same issue stated flatly that there had been no effort to collect information on them.

"In spite of a January 2007 memo referenced in the (Wall Street Journal) article, there were no inquiries made with respect to the proponents of shareholder proposals. Given the nature of the matters proposed and our familiarity with the individual proponents, the request contained in the memo was not acted upon," Wal-Mart wrote.

The letter, provided Wednesday to The Associated Press by Wal-Mart, said that Wal-Mart does at times conduct background research on persons or organizations, including proponents of shareholder proposals.

"Any information gathered about proponents of shareholder proposals would come from Internet searches and from other publicly available sources of background information," Wal-Mart wrote.

"You can be assured that Wal-Mart does not and will not obtain information regarding you or organizations with which you are associated improperly or through intrusive means, and that there are no 'surveillance operations' directed at shareholder proponents as stated in the Wall Street Journal," the letter said.

Additional reporting by AP Business Writer Marcus Kabel in Springfield, MO.