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Plaintiffs lawyers in a federal class-action suit in Newark, N.J., challenging the labor practices of the world’s biggest corporation, Wal-Mart, think they’ve got a fighting chance, now that they hold the fruits of a federal criminal probe. Affidavit testimony from an immigration investigation of Wal-Mart, they say, shows that two senior executives knew the company’s cleaning contractors employed illegal aliens across the country — the very scienter the plaintiffs need to prove their case. “This document demonstrates very clearly that Wal-Mart executives knew of the operations of these subcontractors and were very, very much in agreement with the situation,” says Gilberto Garcia, of Garcia & Kricko in Englewood Cliffs, N.J., one of the plaintiffs’ lawyers in Zavala v. Wal-Mart, 03-5309. The suit charges that the contractors routinely hired illegal immigrants from Mexico and Eastern Europe to work seven days a week, housed them in squalid quarters, paid them less than minimum wage and even locked them in Wal-Mart stores at night. One class representative says he suffered a deep cut on his hand but could not get treatment until the next day. Last month, U.S. District Judge Joseph Greenaway Jr. dismissed without prejudice two counts lodged under the Racketeer Influenced Corrupt Organizations Act, saying the plaintiffs had not demonstrated a factual basis. However, he granted them the opportunity to amend their pleadings by Nov. 21. In the interim, on Nov. 4, Garcia and co-counsel James Linsey, of Cohen, Weiss & Simon in New York, prevailed upon a federal judge in Arkansas — Wal-Mart’s home state — to unseal a 114-page affidavit from the earlier criminal probe. That affidavit had been used to obtain search warrants of the company’s headquarters. “Essentially, we’re riding the coattails of a very detailed criminal investigation that in the end was not pursued by the government,” Garcia says. Federal immigration officials had been investigating Wal-Mart’s use of undocumented workers for cleaning crews in its St. Louis-area stores since 1997, but in October 2003, immigration officials raided 61 of the company’s stores nationwide and arrested 245 illegal aliens. The government dubbed the raid “Operation Rollback,” an apparent stab at Wal-Mart’s commercials, where a yellow smiley face is seen rolling back prices. But last March 15, federal prosecutors agreed not to bring criminal charges against Wal-Mart after the company agreed to pay a fine of $11 million, which set a new record in a civil immigration case. Then came Greenaway’s Oct. 7 dismissal of the RICO and RICO-conspiracy counts and a civil rights count under 42 U.S.C. 1985 — the latter with prejudice, since the plaintiffs are not members of a protected class. (The suit also alleges violations of the Fair Labor Standards Act and common-law false imprisonment.) So Linsey and Garcia have pinned their hopes on the unsealed affidavit, which they say bolsters the factual basis for the conspiracy charges. WHO’S SPEAKING, PLEASE? The affidavit may help make out a prima facie case, but it reads like third- or fourth-hand hearsay. The affiant is Patricia Mullin, the agent in charge of the Philadelphia office of U.S. Immigration and Customs Enforcement. Mullin signs and swears to the affidavit but says that she got the information from Julio Santana, a special agent who works for her. Moreover, after about a page, the affidavit lapses without explanation into Santana’s voice as narrator, referring to Mullin in the third person. Santana recites that Christopher Walters, a cleaning contractor who became a cooperating witness, reported to Santana the contents of a conversation with Wal-Mart vice president Leroy Schuetz in the wake of Operation Rollback. Walters said Schuetz told him to create a series of shell corporations to employ workers, which would — in the event that one was found to be employing illegals — allow the others to continue doing business with Wal-Mart, according to Santana. The affidavit also cites a meeting between Walters and another Wal-Mart vice president, Steve Bertschy. Santana says Mullin attended that meeting “undercover,” that the meeting was recorded on audio tape by federal investigators and that Walters said at the meeting that he knew of “at least 400 stores that have illegal aliens in them.” Bertschy responded, “Don’t repeat that,” according to the affidavit. COMPANY HOLDS FAST Wal-Mart is sticking to its guns that its executives committed no knowing violations of federal law, and they say that the affidavit does not change its mind. “As we have maintained all along, no company senior official had any direct knowledge that undocumented workers were working in our stores,” the company said in a written statement in response to a reporter’s questions. “The government conducted a thorough investigation into these matters and concluded that federal criminal charges against our company or any of its associates would not be appropriate.” Wal-Mart’s lead defense lawyer, David Murray at Willkie, Farr & Gallagher in Washington, D.C., declines to comment, but Wal-Mart spokesman Marty Heires says the company’s lawyers do not consider Walters, the cooperating witness, a credible source. And the lawyers, who have heard the tape recording of the Bertschy meeting, have concluded that the affidavit presents only “bits and pieces” of what was said, according to Heires. Still, Wal-Mart’s troubles over its labor practices are not confined to the Newark case. A gender discrimination suit on behalf of women managers in the Northern District of California has been certified as a class action, which could bring the number of claimants to 1.6 million. Wal-Mart is appealing that ruling, in Dukes v. Wal-Mart, 01-2252. Additional litigation may arise over the contents of internal memos from Wal-Mart managers, reported in the media in recent weeks, saying the company should hire healthy people to keep medical costs down. EARLY WARNINGS The plaintiffs in Zavala say Wal-Mart has had ample notice of their contractors’ use of illegal aliens. They cite a 1999 letter from Greta McCaughrin, a Washington & Lee University Russian-language professor to Wal-Mart CEO David Glass. She had served as a translator for Lexington, Va., police, when janitors at the local Wal-Mart were accused of stealing merchandise, and became aware of a Wal-Mart pattern of hiring illegal aliens. McCaughrin complained that all five of the store’s Russian-speaking janitors were fired, even though only two were implicated in the thefts. McCaughrin’s letter, obtained by Linsey, described how the Russian men had overstayed tourist visas and obtained their jobs through a broker in New York. After the first five men were fired, the broker sent five more Russians and Georgians on a bus from New York, and since the first group had paid their rent in advance, all 10 were then housed in the same apartment, furnished only with mattresses, she wrote. The Operation Rollback raids of 61 stores in 2003 gained plenty of attention in the news media. Yolanda Vazquez, a reporter for the local Telemundo affiliate, WNJU-TV, interviewed tearful Mexican cleaners at Wal-Marts in Piscataway and Old Bridge who faced deportation and put them in touch with Garcia. Garcia filed suit in Monmouth County Superior Court, charging Wal-Mart and several cleaning contractors with violating labor, tax and discrimination laws. Garcia then heard from Linsey, who has a history of representing workers, and the two formed a team. Linsey redrafted the complaint and filed it as a class action in federal court in Newark in late 2003. The class is believed to number about 1,000 people, says Garcia. He says he and Linsey have stayed in touch with some of those arrested in “Operation Rollback” but the putative class members are hard to reach. Many have returned to their home countries, and those remaining in the U.S. are reluctant to join the suit for fear it will cause them to be deported, Garcia says. The lawyers have attempted to reach would-be class members with a Web site they created, www.walmartjanitors.com, but Garcia concedes most do not have computers or Internet access. “Reaching people who are in the U.S. who are in fear of retaliation by Wal-Mart or are in fear of giving their names to the lawsuit — that has been one of my most frustrating tasks, without a doubt,” Garcia says.

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