The Wal-Mart Watch Blog

| May 20, 2009

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It looks like Bank of America didn’t learn from Wal-Mart’s mistakes.

Just like Wal-Mart has done in years past, BOA is now taking out life insurance policies on it employees and listing itself as the primary beneficiary in order to fund executive compensation. According to an article in today’s Wall Street Journal:

The insurance policies essentially are informal pension funds for executives: Companies deposit money into the contracts, which are like big, nondeductible IRAs, and allocate the cash among investments that grow tax-free. Over time, employers receive tax-free death benefits when employees, former employees and retirees die.

Known as “dead peasant” insurance, Wal-Mart took out Corporate-Owned Life insurance (COLI) policies on unsuspecting employees until 1995. Even thought Wal-Mart stopped taking out new policies at this time, it continued to cash in on them years later. In Texas and Oklahoma, Wal-Mart paid $15 million to settle claims it did not have an insurable interest while taking out these policies. Michael D. Myers, an attorney who has represented workers on these types of cases, had this say about employers using these policies in a July 2007 Tampa Tribune article:

Creepy’s a good word for it...If you ask the executives that decided to buy these policies and the insurance companies that sold them, they would say this was designed to create tax benefits for the company, which would use the benefits for benevolent purposes such as buying employee medical benefits.

Despite widespread condemnation and lawsuits surrounding the practice, some companies never learn. Bank of America—in perpetual hot water for its roll in the financial crisis—decided it was a good idea to cash in on some of the $400 billion in death benefits consultants believe banks will get over the next few decades.

Many people feel that companies should not profit off the death of its employees. Nevertheless, government intervention and regulation has been slow to occur:

Efforts to rein in the practice largely have been unsuccessful, including the most recent rules Congress enacted in 2006. The rules limit companies to buying life insurance to just the top third of earners, who must provide consent. But the rules don’t apply to life-insurance that employers bought before the August 2006 rules, which cover millions of current and former employees. (WSJ)

With executive compensation out of control, Bank of America should rethink taking out these policies. Not only for the positive press, but to restore a good faith relationship with its employees - who are not doing as well as the executives.

Banks Use Life Insurance to Fund Bonuses [Wall Street Journal]:

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| May 20, 2009

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As the New York Times is reporting, a new study by Cornell University professor Kate Bronfenbrenner has found that employers threatened to close plants in 57 percent of union organizing drives, and threatened to cut wages and benefits in 47 percent.

Unfortunately, it now appears to be that several employers - many of which have had stable relationships with their employees for years - have begun to follow Wal-Mart’s lead and get far more aggressive with employee groups seeking to organize. Bronfenbrenner writes:

What distinguishes the current organizing climate from previous decades of employer opposition to unions? The primary difference is that the most intense and aggressive anti-union campaign strategies, the kind previously found only at employers like Wal-Mart, are no longer reserved for a select coterie of extreme anti-union employers.

The report, titled “No Holds Barred: The Intensification of Employer Opposition to Organizing,” is being released today by the Economic Policy Institute. From the report:

Overall, 12.4% of U.S. workers are represented by unions, a density far below what would be the case if all workers who wanted to belong to a union could freely do so. In fact, studies have shown that if workers’ preferences were realized, as much as 58% of the workforce would have union representation.

Of course, we know that one of the ways to rectify this would be federal legislation - the Employee Free Choice Act, perhaps??

For more information on the report, including the press release, fact sheet, and the report itself - click here.

Find the New York Times article, plus a video on how when it comes to unions Starbucks has made itself into the coffee drinker’s Wal-Mart, after the jump.

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| May 20, 2009

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A consumer fraud lawsuit was filed by Arizona Attorney General Terry Goddard back in 2006 after his office found that from 2001 to 2006, Wal-Mart consistently rang up the wrong prices on items scanned in at the cash registers. It also failed frequently to put prices on items on the shelves, leaving consumers in the dark about overcharges. Now, nearly three years after it was first filed, Wal-Mart’s pricing case in Arizona has concluded.

Wal-Mart Stores has agreed to pay $1 million and hire independent monitors to ensure price accuracy at its Arizona stores under terms of a settlement with the Arizona Attorney General’s Office…

Wal-Mart, which trumpets its low prices, racked up nearly a half-million dollars in fines for problems including discrepancies between posted prices and checkout prices and the lack of posted shelf prices on many products. Attorney General Terry Goddard said Wal-Mart never fixed the underlying problems, instead paying the fines as if they were the cost of doing business.

On top of the money Wal-Mart has already paid out, the $1 million fine will be used to pay for the independent monitoring, and a portion of it will go to the AG’s office to pay for consumer education. Goddard’s Office has maintained that while the pricing irregularities were bad, the biggest problem revolved around the consumer’s inability to tell the true cost of a product at the point of sale.

The Yuma Sun has more details on the settlement:

The deal requires Wal-Mart to hire and pay for an independent monitor to conduct random checks of compliance with state pricing laws at each of the company’s 93 stores in the state during the next three years. Any time compliance at any store dips below 98 percent - meaning more than two items out of 100 checked are not priced or improperly priced - the company will pay a $2,500 fine. Repeat failures each would result in $5,000 penalties.

Back in 2006, Wal-Mart entered into a $1.5 million settlement with the Michigan Attorney General for similar pricing errors.

Arizona AG reaches pricing lawsuit settlement with Wal-Mart [Yuma Sun]

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| May 20, 2009

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FINAL RULING: NORTH CAROLINA COURT SAYS NO $33 MILLION TAX REFUND FOR WAL-MART

• NC appeals court upholds tax bill for Wal-Mart [Associated Press]
  The state Court of Appeals ruled Tuesday against Wal-Mart Stores Inc. and its efforts to get a $33 million tax refund, upholding a trial judge's ruling that found a complex corporate structure was used primarily to avoid corporate income taxes.
  

• Wal-Mart loses appeal to get $30M in North Carolina tax refunds [Triangle Business Journal (N.C.)]
  The North Carolina Court of Appeals has denied Wal-Mart’s attempt to win $30 million in tax refunds from the state of North Carolina.
  

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| May 19, 2009

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Here’s making a careful prediction: Mike Duke will cave, and Wal-Mart won’t build a store at the Wilderness Battlefield.

Just like the Debbie Shank case, the drumbeat of negative press this controversy is earning the company is only getting louder. After the Civil War Preservation Trust alerted everyone to the danger of losing the Wilderness, there have been an increasing number of organizations standing up to fight the the project. Leading historians and celebrities have written op-eds and held press conferences, politicians from both parties have come together, and an outpouring of letters published in local newspapers—all wanting Wal-Mart to simply find a spot a few miles down the road to build.

Today, the formidable list of opponents to the Wal-Mart’s proposed store at the Wilderness grew even stronger. Preservation Virginia—the oldest statewide conservation group in the country—just joined up to fight Wal-Mart’s plan. The group is no lightweight - it has over 3,000 members and has “saved Jamestown and dozens of other historic sites from ruin.”

Said Preservation Virginia’s Executive Director Elizabeth Kostelny:

“The proposed Wal-Mart would degrade the rural character of the battlefield, promote commercial sprawl, and drastically increase traffic through the heart of the park...Protection of the battlefield and the setting of the national park is a critical concern for Virginians...Annually, the battlefield draws 170,000 visitors to Orange County, generating sustainable economic activity through heritage tourism.

“The intrusion of a new Wal-Mart store, in an area already served by other branches of the same chain, would irrevocably harm a historic site of national significance.”

Just this weekend, yours truly was on the way out to a lovely (if a bit rainy) camping trip in Central Virginia and intentionally drove right past the Wilderness Battlefield. I stopped for a minute at the intersection at Route 3 where Wal-Mart so desperately wants a supercenter, and I can assure you a supercenter anywhere in the close vicinity will absolutely change the nature of the battlefield.

So what will it be, Mike Duke? How long can you hold out on this one? 

| May 19, 2009

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To sum up: Wal-Mart cheated on its taxes, got caught, appealed its fines, lost the appeal, appealed THAT loss, and now has been told to go home again. Wal-Mart’s tax avoidance case in North Carolina, the breakthrough case that spawned a huge Wall Street Journal series, caused several state governments to re-examine their tax laws, and made REIT a household name, has taken another turn against the retail giant as the North Carolina Court of Appeals has ruled against them again:

“The Secretary acted within his lawful authority when he assessed additional taxes against plaintiff as a result of the combination of plaintiff with two related entities,” wrote NC Court of Appeals Judge Donna Stroud in her opinion.

Earlier this year, at the trial court level, Judge Clarence Horton ruled against Wal-Mart in its case filed back in 2006. Wal-Mart was seeking a refund of the over $30 million it was assessed by the North Carolina Department of Revenue for its use of a “captive REIT” tax strategy. In denying Wal-Mart’s claims then, Horton wrote:

“[Wal-Mart does] not deny the facts demonstrating the circular journey taken by the ‘rents’ paid by these plaintiffs, but contend[s] that on each leg of the journey [Wal-Mart was] only taking advantage of a lawful deduction afforded them by then-existing tax law. Such a piecemeal approach exalts form over substance, however …”

That’s twice now - at the trial court level and in the appeals court - that Wal-Mart’s attempt to recoup its tax money has been denied. You can find more background on the REIT strategy on our blog here, or in our tax report here (which also lays out several other tax avoidance schemes used by the company).

Wal-Mart loses appeal to get $30M in North Carolina tax refunds [Triangle Business Journal]

| May 19, 2009

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CALIFORNIA WAL-MART FINED FOR NOT PROTECTING WORKERS FROM HEPATITIS B

• NorCal Wal-Mart workers to be tested for Hepatitis [San Jose Mercury News (Calif.)]
  About 20 employees of Wal-Mart's Yuba City store will be tested for Hepatitis B after one worker was diagnosed with the bloodborne disease in December.

AMERICA'S OLDEST STATE PRESERVATION GROUP JOINS FIGHT TO SAVE WILDERNESS BATTLEFIELD

• Preservation group: Civil War battlefield at risk [Associated Press via Forbes]
  Preservation Virginia has joined a growing opposition that says a proposed Wal-Mart Supercenter near the Wilderness Battlefield threatens the Civil War site where nearly 29,000 troops were killed or injured 145 years ago.
  

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| May 18, 2009

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Two outlets - Congressional Quarterly and AllGov.com - have picked up on our FEC story from last week - all of which stems from Wal-Mart’s activities last summer, when meetings were held warning store managers and department supervisors around the country that if Democrats won power in last year’s elections, they would likely change federal law to make it easier for workers to unionize companies—including Wal-Mart.

Basically, Wal-Mart was telling its employees that if they voted Democratic, unionizing would lead to store closings, lost jobs and more bad things:

“The meeting leader said, ‘I am not telling you how to vote, but if the Democrats win, this bill will pass and you won’t have a vote on whether you want a union,’” said a Wal-Mart customer-service supervisor from Missouri. “I am not a stupid person. They were telling me how to vote,” she said.

Following a Wall Street Journal piece that relied heavily on sources provided by Wal-Mart Watch, several groups (WMW included) filed complaints with the FEC, asking the commission to look into Wal-Mart’s election activities.

As we reported last week, that complaint ended badly with a deadlocked FEC and an eventual dismissal. Now, however, we can at least begin to piece together how the ruling unfolded (or the lack there of, unless you consider a “stalemate” as indicative of a ruling).

Six commissioners participated in the ruling, with three voting in favor of further investigation, and three against. Could they have voted down party lines, you ask? Surely not? Well, you’d be wrong - three Democrats favored investigating further while the three appointed Republicans said, “Screw it, it’s getting late, we’re heading for happy hour - let’s close the book on this horse.” A 3-3 vote ensued, and just like in baseball the tie went to the runner, with Wal-Mart running away from any official wrongdoing - although we will point out that the Republicans that Wal-Mart was nudging its employees towards didn’t actually win.

An excerpt from the FEC statement against Wal-Mart:

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| May 18, 2009

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When is a loss really a win? In Colorado, it’s when a piece of legislation fails and the result is a victory for the little guys.

The Colorado General Assembly has been debating HB 1192, a bill that would have allowed large grocery chains and drug stores to sell liquor, wine and full strength beer (grocery stores can already sell beer with an alcohol content at or below 3.2% - Bud, Miller Lt., Coors Light, etc). The reasons for the bill being introduced are many, but basically for a long time in Colorado, grocery stores were the only place that you could purchase beer on Sundays. When laws were changed in mid-2008 and liquor stores were allowed to remain open 7 days a week, grocery stores saw their revenue dip ever so slightly, and they were not happy. So the grocery industry began pushing HB 1192.

The consequence of allowing grocery chains to move into the wine and premium beer market, of course, is that perhaps you risk putting local liquor stores out of business. One can argue all they want that the increased competition will be a good thing, but it really won’t. Why? First, as Colorado resident Denise Washington explains, the liquor store industry in Colorado really is a local industry:

Many liquor stores and wine shops in Colorado are family owned. They build relationships with their customers and learn their tastes. There is added value of a knowledgeable staff who wants to work with you to make your experience with a new wine or beer memorable. Who enjoy teaching you about how to choose a good Pinot Noir for your dinner party or a hearty stout for your big BBQ.

Beyond that, however, is the fact that local liquor stores and wine shops support other Colorado businesses - vineyards and microbreweries from across the state that Coloradoans wouldn’t be able to find in large grocery aisles regardless of whether HB 1192 passed.

With the bill failing, grocery stores (many owned by companies outside the state) aren’t really going to see much change - they aren’t going to close up or raise prices simply because they can’t sell craft beers or wine. For them, life will go on. But had the bill passed, 1,650 locally-owned liquor stores would have been devastated to the tune of 50% of its full-strength beer sales in the first year. It doesn’t take much to determine that a loss of business like that would eventually threaten not only the local liquor store industry, but the breweries and wineries they support.

You can get more information on the legislation, including a great video piece from BeerTap TV, after the jump.

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| May 18, 2009

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REPUBLICAN APPOINTEES BLOCKED FEC CHARGES AGAINST WAL-MART

• Republicans Block Election Complaint against Wal-Mart [AllGov]
  Republican appointees to the Federal Election Commission found nothing illegal in the actions by Wal-Mart during last year’s election when the giant retailer was accused of pushing its employees to vote against Barack Obama and other Democrats.

• FEC Dismisses Wal-Mart Complaints [CQpolitics]
  The Federal Election Commission deadlocked on whether Wal-Mart violated campaign finance laws during the 2008 campaign. Because of the tie vote, complaints against the retailer were dismissed, documents released Thursday show.
  

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