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The Wall Street Journal reports this morning that New York City Comptroller William C. Thompson Jr. “has formally demanded that Wal-Mart Stores Inc. allow it to inspect all company materials related to alleged surveillance activities dating to 2002 directed at shareholders who submitted proxy petitions.”

Wal-Mart has not yet responded to the demand.

"We have legitimate concerns regarding whether such potentially illegal actions took place; accordingly, we believe it is appropriate to exercise our legal right to obtain access to the corporation's books and records pertaining to this issue," Deputy Comptroller Lewis Finkelman tells the Journal.

The demand by New York City can be traced back to an April article in the Journal reporting on the sophisticated surveillance activities engineered by Wal-Mart to spy on employees, critics, stockholders and even consulting firm McKinsey & Co., which was working on a health care project for the retailer. According to the story, “The company also deployed cutting-edge monitoring systems made by a supplier to the Defense Department that allowed it to capture and record the actions of anyone connected to its global computer network. The systems' high-tech wizardry could detect the degree of flesh-tone on a viewed Internet image, and alerted monitors that a vendor sharing Wal-Mart networks was viewing pornography.”

And, the Journal wrote, “Wal-Mart has always placed tight limits on what its employees can do while at work. For instance, it bars store employees from using personal cellphones on the job. Managers receive a list of email addresses and phone numbers their employees have communicated with, and a list of Web sites visited, according to current and former employees. And the company limits Internet access, blocking social-networking and video sites.

“But Wal-Mart appeared to go beyond most companies in its sleuthing. It didn't just scan emails written on the corporate email system. Technology it was helping develop allowed it to view emails that employees sent to or received from private accounts such as Hotmail or Gmail whenever the employees were hooked into the Wal-Mart computer network…”

And, according to the original story, “Wal-Mart also directed its surveillance operations at critical shareholders. According to a January 2007 memo reviewed by The Wall Street Journal, security units were asked to ‘do some preliminary background work on the potential threat assessment’ of those submitting proposals to its June shareholder meeting, particularly those whose resolutions the company was trying to block. The list included proposals from a Boerne, Texas, religious group; the New York City Controller's office; and Sydney Kay, an 85 year-old, retired science teacher who submitted a resolution requiring that board nominees own at least $5 million in Wal-Mart stock, and his 93-year-old sister Hilda Kaplis.”
KC's View:
This has the feeling of a story that could come back and haunt Wal-Mart, resurrecting concerns that the company’s activities have gone beyond what is legitimate and proper. It just has an ugly feeling about it, no matter what the legalities are.