Former Wal-Mart Executive to Admit Fraud

By Amy Joyce and Carrie Johnson
Washington Post Staff Writers
Saturday, January 7, 2006

Former Wal-Mart Stores Inc. vice chairman Thomas M. Coughlin has agreed to plead guilty to five counts of wire fraud and one count of tax evasion later this month, according to a source familiar with the case.

Government and defense lawyers have agreed that Coughlin would serve 27 months in prison, according to the source, who spoke on the condition of anonymity because the plea is still pending. The judge could give him a different sentence. The plea, which came after several months of discussions, will be handled in Fort Smith, Ark. It is unclear whether the plea deal requires Coughlin to cooperate with investigators who might be probing other conduct within Wal-Mart.

Coughlin, who was the No. 2 executive at the company until January 2005, was ousted from the board last March over allegations of financial improprieties estimated to have cost up to $500,000. A six-week investigation prompted the company to fire three other employees. Jared Bowen, a former vice president who was fired, is suing the company, claiming he was fired illegally in retaliation for blowing the whistle on Coughlin. The company responded that Bowen participated in the same acts he challenged.

Wal-Mart's investigation focused on the alleged unauthorized use of corporate gift cards and suspect expense reports. The company said it reported the matter to the U.S. attorney for the Western District of Arkansas based on the findings of the investigation.

Robert Hey, a former Wal-Mart vice president who had reported to Coughlin, pleaded guilty to three counts of wire fraud in November, admitting that he manipulated invoices to embezzle money that was funneled "to a senior Wal-Mart executive."

According to a company report released in July, Coughlin, whose compensation topped $4 million in 2004, used company money to pay for CDs; beer; an all-terrain vehicle; a customized dog kennel; and a computer, a graduation gift for his son, explaining that they were routine business expenses.

Until this point, Coughlin maintained that the money was spent on anti-union activities, such as paying people to identify stores where union leaders planned to organize. Wal-Mart executives had said there was no evidence to support that claim. The company opposes union organization of its workers, arguing that unions would create inefficient labor rules and create more costs for the workers in the form of union dues. The company maintains that it has an "open-door policy" that encourages employees to come forward with concerns.

The plea agreement was reported by the Wall Street Journal yesterday afternoon on its Web site.

"We are not commenting on this at all," a Wal-Mart spokeswoman said in an e-mail.

An assistant to William W. Taylor III, Coughlin's attorney, said he would not comment on the matter.

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