May 9 Wal-Mart Stores Inc should face a U.S. shareholder lawsuit accusing it of concealing suspected corruption at its Mexico operations, even after learning that a damaging media report was being prepared for publication, a federal judge said.
U.S. Magistrate Judge Erin Setser in Fayetteville, Arkansas on Thursday recommended denying Wal-Mart's request to dismiss the lawsuit, led by a Michigan-based pension fund against the world's largest retailer and former Chief Executive Mike Duke.
Setser said the plaintiffs had sufficiently alleged that Wal-Mart materially misled investors by not disclosing that the company had learned of suspected bribery involving its Walmart de Mexico unit as early as 2005, and had conducted an investigation into the matter in 2005 and 2006.
The judge also said the plaintiffs should be allowed to press claims that Wal-Mart should have "come clean" in a late 2011 regulatory filing, soon after it had learned that The New York Times was investigating the alleged corruption.
A Wal-Mart spokesman did not immediately respond to a request for comment. The company is based in Bentonville, Arkansas.
Wal-Mart's share price, which is not known for being particularly volatile, fell 8.2 percent in the three days after the Times reported on its investigation on April 22, 2012, wiping out roughly $17 billion of market value.
Setser's recommendation is subject to review by U.S. District Judge Susan Hickey. District judges are not bound by magistrate judges' recommendations but often follow them. (Reporting by Jonathan Stempel in New York; Editing by Nick Zieminski)