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March 18, 2005
Wal-Mart Settles Illegal Immigration Case for $11 Mln
from Bloogberg.com:
March 18 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, agreed to pay a record $11 million to settle a federal investigation that found it hired contractors who used illegal immigrants to clean stores.
A four-year Department of Justice probe concluded that Wal- Mart's contractors knowingly hired undocumented workers at more than 1,000 stores from 1998 to 2003, according to the civil settlement agreement issued today. Twelve companies that provided cleaning services will forfeit $4 million and have agreed to plead guilty to criminal immigration charges.
``This is a milestone for corporate responsibility, and it sets a strong precedent for other companies to follow,'' said Michael J. Garcia, assistant secretary for immigration and customs enforcement at the Department of Homeland Security. The accord requires Wal-Mart ``to create an internal program to ensure future compliance with immigration laws,'' he said.
Today's agreement arose out of a nationwide investigation into cleaning companies that provided services to Wal-Mart, according to a statement from Homeland Security and Thomas Marino, the U.S. Attorney in Harrisburg, Pennsylvania. Both conducted the investigation of Wal-Mart.
Stores Raided
In October 2003, federal agents raided about 61 Wal-Mart stores in 21 states and arrested approximately 245 illegal aliens employed by contractors. The states included Pennsylvania, Alabama, Connecticut, Michigan and Texas. Following the raids, Wal-Mart contacted federal authorities to cooperate in the investigation.
The companies that agreed to forfeit profits included Comet Floor Care Associates in Belleville, Illinois; IMC Associates Inc. in Ferguson, Illinois; and World Clean Associates in St. Louis. An attorney for the 12 cleaning contractors, Jeffrey Demerath, declined to comment through an assistant.
Wal-Mart failed to have proper procedures to identify whether contractors complied with immigration law in hiring cleaners, Bentonville, Arkansas-based Wal-Mart said in a statement. ``We acknowledge we should have had better safeguards in place,'' said company spokeswoman Mona Williams.
The company's own workers will now clean stores, Williams said. Wal-Mart didn't admit wrongdoing and wasn't aware contractors were hiring illegal workers, according to the settlement.
`Image' Factor
``When something like that comes up, you're concerned about the public relations image and the financial impact,'' said John Waterman, who helps manage about $9.5 billion at Rittenhouse Asset Management in Radnor, Pennsylvania, including Wal-Mart shares. The $11 million ``doesn't move the needle'' for Wal-Mart, he said.
The $11 million is ``a substantial amount of money,'' Wal- Mart's Williams said during a press conference. The amount is equal to about 0.4 percent of the company's 2004 net income.
Over the next 18 months, Wal-Mart must verify that outside contractors are taking steps to comply with immigration laws and train store managers to prevent the hiring of illegal immigrants by contractors, according to the settlement.
The settlement money will be used by the government for training and detection of companies that ``prey on undocumented individuals,'' Tom Mars, Wal-Mart's general counsel, said in a statement.
More Lawsuits
Wal-Mart is defending itself against several nationwide worker discrimination lawsuits. It's facing claims it forced as many as 200,000 California employees to work without meal or rest breaks. That suit is scheduled for trial in June.
The company was sued in a class action in Newark, New Jersey in 2003 by undocumented contract workers seeking unpaid minimum wages and overtime. Their lawyer, James L. Linsey, has said that the class includes as many as tens of thousands of undocumented workers from countries including Mexico, Mongolia and the Czech Republic.
Wal-Mart has also been sued by six women claiming they were paid less and offered fewer promotions than male employees. In June, a federal court in San Francisco allowed 1.6 million other workers who may have similar claims to join the case, making it the largest class action ever approved in a private discrimination suit.
`Smart Move'
The company has appealed that ruling to the 9th U.S. Circuit Court of Appeals.
``Wal-Mart would be facing large penalties if it had not settled,'' said Stephen Yale-Loehr, who teaches immigration law at Cornell Law School. ``If they knew that the contractors' employees were not legal, they are as culpable as if they employed the illegal immigrants directly. It sounds like the settlement was a smart move.''
Shares of Wal-Mart fell 43 cents to $51.90 at 2:23 p.m. in New York Stock Exchange composite trading. The shares have fallen 1 percent this year.
In January 2004, Wal-Mart hired Tom Gean, who had been U.S. attorney for the western district of Arkansas, as a legal compliance officer to ensure stores are obeying laws and regulations.
Posted by Chris at March 18, 2005 05:46 PM