business news in context, analysis with attitude

Justice may be blind…but the media is not, especially when it comes to Wal-Mart’s various adventures in the legal system of various countries.

Herewith, a synopsis:

  • Wal-Mart has filed a new lawsuit against its former vice chairman, Thomas Coughlin. The Northwest Arkansas Daily News reports that Wal-Mart alleges that Coughlin threatened to fire anyone who worked for him if they talked about fake expense reports and fraudulent gift cards, that employees would put envelopes full of cash from fraudulent transactions in his desk drawers, and stole more than a quarter of a million dollars through fake travel vouchers and gift cards.

    The lawsuit is just the latest in a series of legal battles between Wal-Mart and Coughlin, who was a longtime associate and intimate of company founder Sam Walton.

    Coughlin retired from his position as vice chairman of the retailer last January, and then was forced to resign from the board of directors several months later amid charges of financial misconduct. Coughlin has denied the charges, saying that he used the money appropriated from Wal-Mart to pay off informers who kept him apprised about union activities.

    The company already has lost one suit in the Coughlin controversy, its attempt to void Coughlin’s multi-million dollar retirement package. The courts said that Wal-Mart couldn’t avoid paying Coughlin because the two parties had signed an agreement not to bring such claims against each other.

    Wal-Mart is now suing Coughlin for a different kind of fraud – lying to the company about his activities, which then resulted in the company filing incorrect statements with the US Securities and Exchange Commission (SEC).

    According to the new suit, Coughlin created a network of employees who helped him commit his fraudulent acts. The Morning News reports it this way:

      “The lawsuit contains lengthy sections that the company claims detail how Coughlin falsified travel and expense reports and got gift cards to pay for items ranging from ‘the petty to the extravagant.’

      “The petty items include bottled water, candy bars, fiber supplements, shaving cream, toothpaste, a toilet seat, underwear and cheese.

      “The extravagant items include a $10,000 custom-built hunting vehicle; $4,168 for care for his hunting dogs; a $2,750 trip to New York City, including hotel, meals and theater tickets, for Coughlin and his wife; and exotic custom cowboy boots, including $605.47 for a pair of snakeskin boots, $907.50 for elephant boots and $1,359.50 for alligator boots.

      “Wal-Mart says in a footnote to the lawsuit it is using the fake names John and Jane Doe to refer to some of Coughlin's former subordinates because of a ‘pending government investigation’ regarding Coughlin's alleged activities. The company says those subordinates cooperated in its internal investigation.

      “The suit claims that Coughlin on April 17, 2003, allegedly asked a ‘John Doe’ to submit to Wal-Mart a request for a handwritten check for $3,575 and payable to the Alabama Conservation and Natural Resources Foundation. The money was to be for a ‘donation to the governor's task force on hunting and fishing.’

      “Wal-Mart says in the lawsuit that Coughlin actually spent the money at a silent auction in a 2003 ‘Alabama Governor's One-Shot Turkey Hunt.’ The suit says Coughlin bought artwork, a Mossberg commemorative gun and a ‘Dick Kirby Commemorative Call.’”

    In a touch of irony, the paper notes that from 1986 through 1992, Coughlin was responsible for the Sam's Club loss prevention department, investigating theft, fraud and abuse by company employees, suppliers and others.

  • Published reports say that Robert Hey, Jr., a former Wal-Mart vice president, pleaded guilty yesterday to three counts of wire fraud – specifically using his position to “illegally manipulate employee travel reimbursement and [the] vendor invoice accounting system at Wal-Mart to embezzle monies, gift cards and products which were provided to a senior Wal-Mart executive for the executive’s personal benefit and use.”

    Hey at one reported to former company vice chairman Thomas Coughlin, who also is the subject of a federal investigation into similar allegations. However, Coughlin is not mentioned by name in the court papers.

    Hey faces a maximum prison sentence of 30 years and a maximum fine of $1 million on each count.

  • The Wall Street Journal reports that documents unsealed in federal District Court in Arkansas allege that at least three Wal-Mart executives know that its cleaning contractors hired illegal immigrants and paid them less than minimum wage in order to keep costs down. In addition, the papers charge that one of the executives told one contractor to set up multiple shell companies, so that if one were shut down for hiring illegal immigrants, another company could cleaning stores.

    The documents are part of a federal investigation, but were unsealed as part of a civil suit against Wal-Mart filed by several of the workers who are seeking back pay and damages.

    Wal-Mart has maintained that none of its executives knew about the use of illegal immigrants on the cleaning crews hired by outside contractors to work in its stores, but agreed last March to pay $11 million in fines to settle the federal case – though it did not admit any guilt, and the government agreed not to pursue any criminal charges against the company or its executives.

    The unsealed documents, however, suggest that the government could have filed charges against the company’s executives, and they will certainly be used in the civil case.

  • Wal-Mart won a court case in Canada last week, beating a class action lawsuit filed by one of its former employees there. The employee charged that he lost his livelihood when Wal-Mart decided to close its store in Saguenay rather than engage in collective bargaining with the union after workers there voted to organize.

    The judge in the case ruled that he didn’t have jurisdiction in the case, and that the case should be brought to the Quebec Labor Relations Board.

    The lawyer for the former Wal-Mart employee said an appeal is possible.

KC's View:
Want job security? Become a lawyer for Wal-Mart.