Candid Camera: Trove of Videos Vexes Wal-Mart

LENEXA, Kan. -- For nearly 30 years, Wal-Mart Stores Inc. employed a video-production company here to capture footage of its top executives, sometimes in unguarded moments. Two years ago, the retailing giant stopped using the tiny company.

At first, the decision threw Flagler Productions Inc. into a panic. Now it's Wal-Mart that's squirming.

In recent months, Flagler has opened its trove of some 15,000 Wal-Mart tapes to the outside world, with an eye toward selling clips. The material is proving irresistible to everyone from business historians and documentary filmmakers to plaintiffs lawyers and union organizers.

Since the '70s, Wal-Mart employed a Kansas video-production company to capture its corporate meetings and culture. But since that relationship has ended, things have changed. Paul Lin reports.

Among the revealing moments: A former executive vice president and board member challenges store managers in 2004 to continue his work opposing unionization. Male managers in drag lead thousands of co-workers in the company's corporate cheer. In another meeting, managers mock foolish or dangerous use of a product sold in its stores. In 1991, founder Sam Walton describes Hillary Clinton, then a Wal-Mart director, as "one of us."

The best part, maintains plaintiffs lawyer Gene P. Graham Jr., is that "Wal-Mart has no control over this stuff."

Wal-Mart isn't pleased. "It's difficult to understand how the company could now sell to third parties the material we paid it to produce on our behalf," says a Wal-Mart spokeswoman. "Needless to say, we did not pay Flagler Productions to tape internal meetings with this aftermarket in mind." She adds that the company is "reviewing our legal options."

The production company's founder and former owner, Mike Flagler, says he was hired on a handshake in the 1970s to help produce the events Wal-Mart holds each year for managers and shareholders, including entertainment portions of its annual meeting and important sales meetings. He filmed them as well.

He says he rebuffed Wal-Mart's suggestions that he reuse the tapes to save money. Instead, he held onto recordings of commercials, executive speeches and manager hijinks.

Corporate records typically are closely controlled through legal contracts that restrict access and use. Mr. Flagler says he never signed a contract with Wal-Mart for the production or video work. Flagler Productions says that that arrangement left ownership and control of the films with it.

In a Jan. 14 letter to Flagler, Marshall S. Ney, a lawyer for Wal-Mart, said the retailer has "claims to rights in the video library" and the film transcripts. Mr. Ney didn't return calls for comment, and Wal-Mart's spokeswoman declined to elaborate.

Unvarnished Look

Unlike the polished presentations delivered at business forums, the videos provide an unvarnished look at Wal-Mart leaders as the corporation grew into one of the world's largest, says Nelson Lichtenstein, a labor historian at the University of California at Santa Barbara who has viewed some of the tapes.

The video library might have remained under wraps if a new Wal-Mart executive hadn't decided to hire another company to stage a musical production for its 2006 stockholders' meeting. The decision sharply curbed Flagler's role. Wal-Mart dumped Flagler altogether as a producer in late 2006, nine days after Mr. Flagler sold the company for an undisclosed sum to two employees, Mary Lyn Villanueva and Gregory A. Pierce.

The current owners say Wal-Mart accounted for more than 90% of Flagler's revenue. The company's bank called in a loan, and the pair dismissed their 16-person work force, Ms. Villanueva says.

Flagler offered to sell the whole video archive to Wal-Mart for several million dollars, Ms. Villanueva says, although she won't disclose the exact price. Wal-Mart countered with an offer of $500,000, arguing the footage wouldn't be of interest elsewhere, the two owners say.

They sold their 20,000-square-foot production facility and moved into an 800-square-foot rented office. They now hope to sustain the company by selling access to the Wal-Mart videos. They charge $250 an hour for video research, and additional fees for a DVD copy of film clips.

Plaintiffs attorney Diane M. Breneman stumbled across the videos while working on a lawsuit she filed in 2005, on behalf of a 12-year-old boy, against Wal-Mart and the manufacturer of a plastic gasoline can sold in its stores. Her client was injured when he poured gasoline from the container onto a pile of wet wood he had been trying to light, and the can exploded. The lawsuit alleges that the containers are unsafe because they don't contain a device that prevents flames from jumping up the spout and exploding.

Wal-Mart's lawyers have argued in court filings that the retailer couldn't have known that the product "presented any reasonable foreseeable risk...in the normal and expected use."

Ms. Breneman says that when she first laid eyes on the racks of tapes, "I thought, 'How could anyone in the world allow this to exist?'" The videos, she says, deal with "everything anyone would want on Wal-Mart....They've got 30 years of people winging it."

Parody Testimonials

Ms. Breneman says Flagler Productions located videos of product presentations to Wal-Mart managers in which executives gave parody testimonials about the same brand of gasoline can. In an apparent coincidence, one manager joked about setting fire to wet wood: "I torched it. Boom! Fired right up." In a separate skit, an employee is seen driving a riding lawn mower into a display of empty gasoline cans. A Wal-Mart executive vice president observing the collision jokes: "A great gas can. It didn't explode." The tapes were made before the lawsuit was filed.

Ms. Breneman argues the footage provides evidence that the retailer could have foreseen the risk that customers would use the gas cans when starting fires. She says she plans to ask the Kansas City, Mo., federal court handling the case to allow the footage to be used as evidence. Wal-Mart's lawyer on the case didn't return calls seeking comment.

Flagler began getting calls from people all over the country -- many of them lawyers -- requesting videos on a variety of topics. "Once I know what it is they're looking for, I can find it," Ms. Villanueva says.

Washington lawyer Joseph M. Sellers is pursuing a gender-discrimination lawsuit seeking billions of dollars on behalf of past and present female Wal-Mart employees. Wal-Mart has denied discrimination and has appealed the class-action status of the case in San Francisco federal appellate court.

In reviewing the videos, Mr. Sellers's colleague found clips of Mr. Walton, the founder, lamenting the lack of women executives, and of Wal-Mart Chief Executive Officer H. Lee Scott Jr. at a 1999 meeting discussing cases of sexual harassment. Mr. Sellers contends the videos bolster his argument that senior Wal-Mart executives knew about the lack of women managers and about incidents of sexual harassment, and failed to address the problems in a timely way.

Mr. Graham, the plaintiffs lawyer, learned of the archive last fall through Ms. Breneman and alerted other lawyers. One attorney says he spent $15,000 to secure copies of video clips on the chance they might be useful in future cases.

Flagler now is becoming a must stop for a variety of parties interested in Wal-Mart. Critics of the company have been looking there for clips that support their views. The United Food and Commercial Workers International Union and Service Employees International Union, for example, sent employees to research footage in connection with their campaigns to force Wal-Mart to change its business practices.

On March 31, the UFCW posted a video on YouTube that included clips from Flagler of Mr. Walton and other Wal-Mart executives telling employees they must always "do the right thing" and put integrity above convenience. The union was campaigning for Wal-Mart to drop its legal efforts to recoup monies paid for medical treatment of former employee Deborah Shank, who was seriously injured in an accident and had separately collected money for her injuries. Last week, Wal-Mart said it would drop its demand for repayment.

Sen. Clinton served on Wal-Mart's board of directors from 1986 to 1992, when she was first lady of Arkansas. During her presidential campaign, she has faced some criticism over Wal-Mart's labor record and the lack of women in upper management.

There is footage in the archive of Mrs. Clinton joining Mr. Walton, Wal-Mart's founder, on a stage at the 1991 opening of a store in Rogers, Ark. "I'm so proud of this company and everything it represents," Mrs. Clinton said. "It makes me feel real good about what we've been able to do."

Mr. Walton responded: "You're a great associate, Hillary." Turning to the crowd, he added: "She's one of us."

'Mixed Blessing'

Asked about the Flagler clip, a spokesman for her campaign cited remarks she made about Wal-Mart in a debate last year. When Sen. Clinton was asked whether Wal-Mart is "a good thing or a bad thing" for the nation, she described the retailer as "a mixed blessing."

Mr. Lichtenstein, the labor historian, says the Flagler archives provide a unique window into the company. "When they are talking to themselves, and there aren't shareholders present, you get a level of things being revealed," he says.

Write to Gary McWilliams at gary.mcwilliams@wsj.com

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