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Harry Cassin
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Andy Spalding
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Jessica Tillipman
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Richard L. Cassin
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Julie DiMauro
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Thomas Fox
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Bill Waite
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Russell A. Stamets
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Delaware supremes unanimously affirm Walmart discovery order

The Delaware Supreme Court Wednesday affirmed a lower court order for Walmart to turn over files and documents from an internal FCPA investigation to plaintiffs in a civil shareholder suit.

Walmart had appealed an order last year by Delaware’s Chancery Court, arguing the materials requested by the plaintiffs were protected by attorney-client privilege.

The plaintiffs said they needed the documents to discover evidence that Walmart’s board may have breached its fiduciary duty to pursue an investigation into bribery allegations.

Among the files under review were some from directors, the audit committee, and Maritza Munich, the Walmart attorney and compliance officer who resigned when an early investigation into alleged bribery in Mexico was abruptly terminated.

The plaintiffs in the case said Walmart was withholding some documents from discovery to protect directors and others.

Among the plaintiffs in Wal-Mart Stores, Inc. v Indiana Electrical Workers are pension funds that bought Walmart stock, including the California State Teachers Retirement System, the New York City Employees€™ Retirement System, and the Indiana Electrical Workers Pension Trust Fund.

The Supreme Court decision is likely to increase pressure on Walmart to settle the civil litigation in Delaware.

In April 2012, the New York Times reported in a Pulitzer Prize-winning story that Walmart’s Mexico unit paid $24 million in bribes to speed up licensing and permitting for new stores. The story said top managers in the United States covered up the bribery after learning about it.

Walmart said it self reported its internal investigation of the Mexico allegations in late 2011 and has cooperated since then with the DOJ and SEC, and with investigative agencies in other countries.

A Walmart lawyer told the Delaware Supreme Court earlier this month that the documents sought by the plaintiffs relate to ongoing FCPA investigations and therefore “are indisputably protected by attorney-client privilege.”

But the Supreme Court, in a unanimous decision Wednesday, said the attorney-client privilege doesn’t shield files and documents essential to proving a breach of fiduciary duties.

The court also said certain lower-ranking Walmart officials had a “reporting relationship” to members of the board, making their communications relevant.

Walmart said in its fiscal 2014 Global Compliance Program Report published in April that it has spent $439 million in legal fees and other costs associated with investigations of alleged FCPA violations, and to revamp its global compliance program.

The company said it is still dealing with inquiries and investigations about “allegations of potential FCPA violations” in Mexico, Brazil, China, and India, among other places.

A copy of the Delaware Supreme Court’s July 23, 2014 opinion is here.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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