Wal-Mart Stores, Inc. (NYSE:WMT) has been accused by a group of community and labor organizations of using its charitable foundation to sway cities it had planned to expand into.
Complaint Alleges Wal-Mart Silenced Opposition
In a 22-page complaint to the Internal Revenue Service (IRS) on Monday, the group charged that Wal-Mart had violated its tax-exempt status and had misused funds from its Walmart Foundation to quash local opposition to its growth efforts in key cities.
Some of the cities on the list include Boston, Los Angeles, and New York. Groups supporting the complaint consist of D.C. Jobs with Justice, New York Communities for Change and South of Market Community Action Network of San Francisco.
The Bentonville, Arkansas-based retail giant’s non-profit organization received an increased amount of donations in certain cities where Wal-Mart attempted to garner local support and build a presence in those markets. It’s alleged that Wal-mart tapped lobbyists, negotiated details of its stores with elected officials and purchased local ads with the cash.
Under the 501(c)3, charitable organizations are banned from using it services to represent a firm or to allocate funds away from the general public to private groups. However, this act does enhance public relations and boost tax advantages.
The complaint cited one example: the charity donated about $200,000 to organizations in Los Angeles in the years 2008 and 2009, and later boosted the donations to $1.4 million in 2011, a year when a store was being constructed. Once the store’s doors opened in 2013, those donations fell back down to around $230,000.
Accusers, Wal-Mart Talk Allegations
I think if this is truly charitable donations, they would be giving this every year. I would characterize it as part of a smoke-and-mirrors campaign that Walmart would run when they’re trying to move into a city.”
Wal-Mart responded to the charges and said that its non-profit hones in on areas to provide relief for the hunger, veterans and victims of natural disasters.
We provide support for these and other important causes in communities across the U.S. and around the world, not just to particular areas or cities, and it’s unfortunate to see criticism of the Foundation’s charitable giving,” said Tricia Moriarty, director of global responsibility communications for Wal-Mart, in a statement. “The Walmart Foundation takes the Internal Revenue Code and regulations very seriously and the allegations made have no merit.”
Some experts do say, however, that there may not be enough proof to show that the Walmart Foundation violated any of the rules outlined by the IRS.
In Dec. 2013, Wal-Mart opened its first two D.C. stores after two years of battles. Two other stores are under construction, and another is scheduled to open. The move made sense given that Wal-Mart is one of the most visited stores in the United States.
Despite the complaint, Wal-Mart shares were up on Tuesday and closed at $72.33 for the day.