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Wal-Mart Says Inquiry Names Ousted Official

By Michael Barbaro
Washington Post Staff Writer
Saturday, April 23, 2005; Page E01

A federal grand jury in Arkansas is investigating allegations that the former head of U.S. operations at Wal-Mart Stores Inc. misused up to $500,000 in corporate funds, the giant retailer said yesterday.

Wal-Mart is "aware of the grand jury investigation" and "cooperating fully," said company spokesman Marty Heires, who declined to discuss the scope of the grand jury's probe.

Thomas Coughlin and Wal-Mart tell differing stories. (April L. Brown - AP)

Wal-Mart ousted former vice chairman Thomas M. Coughlin, 55, from its board March 25 after uncovering the alleged financial misconduct. Coughlin maintains that the money was used on anti-union activity, but Wal-Mart executives said there is no evidence to support that claim.

Wal-Mart, the nation's largest retailer, has fired three other employees over the matter, which it discovered during an internal probe. The retailer has turned the case over to the U.S. attorney for the Western Division of Arkansas, who declined comment yesterday.

Wal-Mart said its internal probe focused on the alleged unauthorized use of corporate gift cards and suspect expense reports. But Coughlin's attorneys, Blair G. Brown and William W. Taylor III, have said their client "did not seek nor obtain any improper reimbursements from Wal-Mart."

Rather, Coughlin argues that the money was used to pay people to keep tabs on union activity in Wal-Mart's stores -- a claim that prompted the United Food and Commercial Workers to file an unfair-labor-practice complaint against Wal-Mart last week.

Wal-Mart openly opposes the unionization of its workers, arguing that third-party representation will bog the company down with inefficient labor rules. This year, the company announced it would close a Canadian store that had recently voted to organize, saying the Quebec outlet was not profitable. Since 1995, the UFCW has filed 370 unfair-labor complaints against the chain.

It is unclear when the grand jury began looking into the Coughlin case. But so far, Coughlin has not been asked to testify, according to a source familiar with the matter who spoke on condition of anonymity because of the sensitivity of the probe.

Coughlin's attorneys declined to comment Friday. Both the attorneys and the officials at the UFCW have repeatedly called on Wal-Mart to release all documents in the case. Coughlin's lawyers say they need the documents to defend their client; the union wants them to determine who, if anyone, at Wal-Mart was aware of Coughlin's alleged anti-union activity.

The Coughlin case has drawn unwelcome attention to Wal-Mart just as the Bentonville, Ark., company launches a campaign to repair its image. Wal-Mart has taken out full-page advertisements rebutting its critics, put its chief executive on television to defend its employee pay and benefits, and invited members of the press to its headquarters for tours.

But the company's troubles continue to mount. In the past year, it has been hit with a class-action lawsuit, filed on behalf of 1.6 million current and former female employees, alleging sex discrimination. It also agreed to an $11 million settlement of a case involving a Wal-Mart contractor's use of illegal immigrants.

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