Wal-Mart Stores Inc., which has been on a mission to rehabilitate its public image, confirmed yesterday that it is the subject of a federal grand jury investigation in Arkansas.
The probe involves accusations that the former vice chairman at the world's biggest retailer misspent up to $500,000 - some of it allegedly for widely criticized anti-union activity.
The company denied that any of the alleged improper spending was related to anti-union activities.
"We're aware that there's an investigation," Wal-Mart spokesman Marty Heires confirmed yesterday. "We're cooperating." He wouldn't say whether any Wal-Mart workers or documents had been subpoenaed.
Wal-Mart stock yesterday fell 2 percent, or 97 cents, to $46.81, nearly its lowest close in two years.
On March 25, former Vice Chairman Thomas M. Coughlin retired from Wal-Mart's board amid an internal investigation over personal reimbursements, payment of third-party invoices, and the use of company gift cards.
Wal-Mart referred the matter to the U.S. attorney in Arkansas. The resulting investigation by a federal grand jury is the latest blemish to show up on the $285 billion discount chain.
Wal-Mart faces slower sales growth and a stock price that has been under pressure. Besides being taken to task for being anti-union, Wal-Mart has been criticized for everything from putting small mom-and-pop shops out of business to providing meager health benefits to employees to receiving government subsidies for infrastructure improvements around its stores.
In January, the company bought full-page color advertisements in more than 100 U.S. newspapers, including the Chicago Tribune, to address criticisms about its wages and benefits and to cast itself as a career option for the upwardly mobile. Yet the criticism is taking its toll.
Starting in early 2005, investment firm Prudential Equity Group has surveyed consumers who have shopped at Wal-Mart during the past year, and found that 8 percent of respondents expressed negative sentiments regarding Wal-Mart's reputation as a corporate citizen, including its treatment of workers.
"While we expected some negative feedback regarding corporate policy, this figure was a little higher than we anticipated," Prudential Equity analyst Wayne Hood wrote in an April 12 report.
Wal-Mart assured investors last month that the Coughlin matter will have "no adverse financial impact" on the company.
Still, the United Food and Commercial Workers Union, which has been waging a long, costly battle against Wal-Mart, said in a statement yesterday that it's pleased that the "legal process" against the company is "going forward." It also urged the company to release all related documents.
"Clearly, the American people deserve to know how deep Wal-Mart's anti-union rabbit hole goes," the union said.
Prompted by news accounts this month detailing Coughlin's alleged payoffs to union members to tattle on pro-union Wal-Mart workers, UFCW officials said they want to see Wal-Mart's documents to further their own investigation.
The union has led organized labor's effort to sign up members at the global giant, but so far, it has not organized any U.S. store.
The company said this year that it would close a store in Quebec after workers there voted in favor of the UFCW. The company said the store was unprofitable.
The Chicago Tribune is a Tribune Publishing newspaper.