Wal-Mart Shareholders Shocked, Spooked By "Threat" Memo

Thursday, April 5th 2007, 6:10 pm
By: News On 6

BENTONVILLE, Ark. (AP) _ Activist shareholders were disappointed and ``a little spooked'' Thursday after Wal-Mart asked its internal security operatives to check whether some of them posed a threat.

Wal-Mart Stores Inc. lawyers telephoned several investor groups to apologize for the phrase ``potential threat'' used in a memo, those groups said.

The Wall Street Journal reported Wednesday on an internal Wal-Mart memo asking the retailer's security team to research shareholders submitting resolutions for the annual meeting June 1.

Wal-Mart spokeswoman Sarah Clark confirmed the memo existed but said it is routine for the company to review ``potential areas of concern'' before shareholders' meeting.

``This is mainly using the Internet and other public sources to obtain background information,'' Clark said. ``We did not authorize any surveillance for any of the 14 shareholder groups this year.''

Wal-Mart lawyers told at least one investor group that there was background research done on it but no surveillance. Two other investors said Wal-Mart lawyers had told them nothing had been done, not even background Internet research, but apologized anyway for the memo.

``Now I'm confused because if nothing took place, why should they apologize?'' said Peter Flaherty, president of the National Legal and Policy Center, a free market think-tank that considers itself an ally of Wal-Mart against what Flaherty called attacks by liberal critics.

Flaherty said groups like his cannot know whether or not they are being watched by Wal-Mart, whose security division is run by veteran CIA and FBI agents.

``Personally I'm a little spooked,'' Flaherty said. ``All we have is their word for it.''

Sister Susan Mika from the Benedictine Sisters of Boerne, Texas, an order that has been active for years as a shareholder trying to improve Wal-Mart corporate citizenship, said she was told by a lawyer that the memo was written by a ``low-level manager''.

``What I expressed to (the lawyer) was that we were appalled and shocked that Wal-Mart would have this type of surveillance of shareholders. We are the owners of the company,'' Mika said.

Mika said the Benedictine Sisters were not satisfied with the phone call and would write to Chief Executive Lee Scott asking for an explanation of what, if anything, had happened.

Flaherty said Jeff Gearhart, a vice president and general counsel in Wal-Mart's corporate division, called him late Wednesday to apologize for the memo using the term ``potential threat assessment'' but that Gearhart was vague about whether there had been any research done by Wal-Mart security on his group.

Another shareholder with a resolution before the upcoming annual meeting, Steven Milloy of Action Fund Management, said a Wal-Mart attorney who called him said there had been research done on his activist mutual fund.

Milloy said attorney Susan Clooz told him ``I just want you to know we were not doing surveillance, we were just doing background research.''

Milloy responded by faxing a letter to Wal-Mart asking for copies of everything collected on his group and a certified statement from the CEO that there was noting else on file.