Wal-Mart Stores Inc., the world largest retailer, is negotiating with a U.S. attorney's office in Pennsylvania to settle a 10-month-old investigation into whether it knowingly hired contractors who used illegal immigrants to clean its stores, the company said yesterday.
The discount chain did not reveal details about the talks but, in documents filed with Securities and Exchange Commission, predicted that any settlement would not significantly affect its earnings.
Wal-Mart disclosed in November that it was the target of a federal grand jury investigation into potential immigration law violations, after federal agents arrested more than 250 cleaning-crew workers hired by outside contractors.
Wal-Mart's critics argued that the investigation undercut the chain's claims to be a good corporate citizen and instead suggest its primary focus was keeping down labor costs.
"The Wal-Mart myth is red, white and blue and the undocumented worker issue damages the brand image," said Greg Denier, a spokesman for the United Food and Commercial Workers union, which is trying to organize Wal-Mart's workers. "I believe they are in talks to settle in order to maintain that brand image."
Gus Whitcomb, a Wal-Mart spokeswoman, said the company would not comment on the talks beyond the chain's SEC filings. Wayne Samuelson, an assistant U.S. attorney for the Middle District of Pennsylvania in Williamsport, where the case is being handled, did not return a phone call last night.
The federal inquiry began after a series of pre-dawn raids on Oct. 23, during which agents descended on 61 Wal-Marts in 21 states. The raids included eight stores in Virginia -- in Sterling, Culpeper, Richmond, Winchester, Harrisonburg, Lynchburg, Lexington and Madison Heights -- and two in Maryland, in Catonsville and Mount Airy.
Agents also searched the chain's Bentonville, Ark., headquarters and carried away boxes of paperwork. The company has declined to comment on what was taken during the raids.
If Wal-Mart is found to have known about the workers' illegal status, the chain could be fined up to $10,000 per worker, federal officials have said.
Wal-Mart, which employs 1.3 million people in the United States, faces several lawsuits alleging general discrimination and wage violations, prompting its chief executive, H. Lee Scott Jr., to tell investors at this year's annual shareholder meeting that "we have to do things correctly."
Harley Shaiken, a University of California at Berkeley professor who specializes in labor issues, said the company's decision to negotiate a possible settlement with the government in the illegal immigrant worker case suggests it is engaging in "public relations triage."
"I think we have reached a critical mass of bad publicity for Wal-Mart. Settlements, as expensive as they are, stop the bleeding," Shaiken said.