Impropriety allegations take down Wal-Mart director; U.S. Attorney to weigh in

DSN Retailing Today, April 11, 2005 by Mike Troy

BENTONVILLE, ARK. -- The next major development concerning allegations of financial impropriety against former Wal-Mart vice chairman and board member Tom Coughlin appears set to take place in early May when a grand jury is scheduled to meet and review cases under investigation by the U.S. Attorney for the Western District of Arkansas.

The U.S. Attorney's investigation follows the revelation last month that Coughlin was asked to resign his seat on the Wal-Mart board and the retailer had forwarded to the U.S. Attorney results of an internal investigation that led to Coughlin being asked to resign.

"The company's request for Mr. Coughlin's resignation arose from a disagreement between Mr. Coughlin and the company concerning the results of a recent internal investigation into the alleged unauthorized use of corporate-owned gift cards and personal reimbursements that appear to have been obtained from the company through the report of false information on third-party invoices and company expense reports," Wal-Mart disclosed in a filing with the Securities and Exchange Commission.

The amount in controversy is estimate to be in the range of $100,000 to $500,000.

Wal-Mart referred the matter to the U.S. Attorney and requested all appropriate action be taken.

Whatever that action is will likely be determined by a grand jury that review facts in the case and decide whether there is sufficient cause to proceed further with the case. The grand jury for the Western District of Arkansas meets about every six weeks for two days and its next meeting is scheduled for May 3-4, According to William Cromwell, criminal chief with the office of the U.S. Attorney for the Western District of Arkansas, the grand jury.

Cromwell said the Coughlin matter has received, "a lot of national interest," but declined to comment on the case.

"I cannot confirm or deny that Wal-Mart has turned anything over to us," Cromwell said.

If the matter is heard by the grand jury during its next session Coughlin will be represented by William Taylor with the Washington D.C.-based law firm of Zuckerman Spaeder. Although Taylor was unavailable for comment, his office confirmed he is representing Coughlin. The Arkansas Democrat Gazette on March 31 quoted Taylor as saying "he's not guilty of any wrongdoing," in reference to Coughlin.

However the matter plays out the revelation that Coughlin was asked to step down from a seat on the Wal-Mart board he was due to relinquish in June stunned many in Northwest Arkansas where Coughlin lived during a 27-year career with Wal-Mart.

Because Coughlin's departure was so unexpected, Wal-Mart president and ceo Lee Scott communicated to Wal-Mart associates via email and with a videotaped message.

"I know that many of you will have a strong reaction to this news and that is understandable. As you work through you own feelings, let's all keep in mind that an incident like this once again underscores the strength of the Wal-Mart culture," Scott said. He added that Wal-Mart, "is doing just fine. Our sales and profit performance remain strong and our future growth prospects have never been better."

Nevertheless, the recent developments are the culmination of a career that seemed to wind down rapidly following a heart attack Coughlin suffered in October 2003. By mid-2004, Coughlin told Wal-Mart chairman Rob Walton that he planned to retire, according to an interview published in the February 2005 issue of Celebrate magazine.

Coughlin's intention to retire was announced publicly on Dec. 6 and just a few days later it was revealed Wal-Mart had fired seven executives over unspecified integrity issues. The seven, including Jim Haworth, coo of the Wal-Mart Stores division and Terry Pharr, a senior vp of operations, reported to Mike Duke as president and ceo of the Store's division. However, the timing of their dismissal and Coughlin's retirement created the impression the events were related.

"There's absolutely no relation to my retirement and the recent shakeup," Coughlin was quoted as saying in the Celebrate article.

Coughlin's last day with Wal-Mart was January 24, but he was scheduled to serve out his term on the board of directors until it expired at the company's annual meeting scheduled for June 3.