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Former Wal-Mart Stores Inc. Vice Chairman Thomas Coughlin has agreed to plead guilty later this month to federal wire-fraud and tax-evasion charges, according to people familiar with the proposed plea agreement he has struck with prosecutors.
The deal, if it holds, will bring down the curtain on a bizarre chapter in Wal-Mart's history. Mr. Coughlin, a Wal-Mart legend who was a protégé and former hunting buddy of founder Sam Walton, left the company early last year amid accusations that he misappropriated as much as $500,000 from Wal-Mart through fraudulent reimbursements and improper use of gift cards.
Although Mr. Coughlin took home millions of dollars in compensation, documents reviewed by The Wall Street Journal suggest that he secretly had the retailer pay for a range of his personal expenses, including hunting vacations, a $2,590 dog enclosure at his home and a $1,359 pair of handmade alligator boots.
Under terms of the deal, Mr. Coughlin will plead guilty to five counts of wire fraud and one count of tax evasion, according to the people familiar with matter. A court hearing on the plea deal is set for later this month. A Wal-Mart spokesman declined to comment. Mr. Coughlin couldn't be reached for comment.
Federal sentencing guidelines, which are advisory but still followed by most judges, call for a sentence in excess of two years, according to people familiar with the matter.
The most explosive aspect of the drama may remain unresolved. Mr. Coughlin is expected to claim that, in part, he was reimbursing himself for a secret scheme to fund an antiunion spy operation.
But federal prosecutors for the U.S. Attorney's Office for the Western District of Arkansas have found no evidence that Mr. Coughlin was part of any clandestine intelligence operation directed at unions, according to someone familiar with the investigation. Wal-Mart has said it has also investigated the matter and found Mr. Coughlin's claims to be untrue.
The deal came after several months of negotiations between Mr. Coughlin's lawyers and prosecutors. Mr. Coughlin's lawyers, who include Washington-based William Taylor and Blair Brown, persuaded prosecutors not to pursue money-laundering charges, which would have added to his sentence.
The 6-foot-4 Mr. Coughlin worked at Wal-Mart for 27 years, five of them as the second-most-powerful executive in a company with more than a million employees. He retired last January, then in March abruptly left the company's board after an internal probe turned up evidence of allegedly improper expenses. The notion that he may have betrayed Wal-Mart shocked many at the company's Bentonville, Ark., headquarters.
Last spring, after Wal-Mart turned over its investigation to federal authorities, it rescinded Mr. Coughlin's retirement agreement, worth more than $10 million. That agreement is the subject of a civil suit Wal-Mart filed in Benton County, Ark. The plea agreement won't have a direct effect on that litigation.
According to a chronology provided by Wal-Mart, Mr. Coughlin was caught after asking an underling for $5,100 in company gift cards, supposedly to reward superior performance by employees. Instead, Wal-Mart has claimed, Mr. Coughlin used the gift cards himself at Wal-Mart stores and Sam's Club outlets, spending $1,000 on three 12-gauge shotguns, and buying a Céline Dion compact disc, Stolichnaya vodka, wine, a fishing license, a rifle case and a $3.54 Polish sausage. It also found myriad other suspect transactions.
Mr. Coughlin told subordinates that the money was to reimburse him for sums he secretly spent gathering intelligence on union activities, including paying union staffers for information about pro-union workers in Wal-Mart stores. Wal-Mart has long opposed efforts by unions to organize the retailer's workers, so the claim had a ring of plausibility.
Mr. Coughlin's deal with prosecutors calls for him to admit to five illegal transactions, according to someone familiar with the matter. The parties have agreed that the amount of the loss, including the unpaid taxes, is more than $350,000. All of the transactions occurred before November 2001.
One of Mr. Coughlin's deputies, former Wal-Mart Vice President Robert Hey Jr., pleaded guilty in federal court in November to three charges of wire fraud in the case.
--Kris Hudson contributed to this article.
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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.
source: http://www.washingtonpost.com/wp-dyn/content/article/2006/01/06/AR2006010601907_pf.html 7jan2006
The former vice chairman of Wal-Mart Stores, Thomas M. Coughlin, has agreed to plead guilty to federal charges that he defrauded the company of at least $350,000, people close to the negotiations said yesterday.
Mr. Coughlin, once the retailer's No. 2 executive, was ousted last year amid accusations that he used fake invoices and misappropriated gift cards to pay for items like contact lenses and a custom-made dog kennel.
He has agreed to plead guilty to five counts of wire fraud and one count of tax evasion, people close to the inquiry said, and is scheduled to enter the pleas this month in federal court in Fort Smith, Ark.
Defense lawyers and prosecutors expect Mr. Coughlin to be sentenced to slightly more than two years in prison, said people close to the case, who spoke on condition of anonymity because the investigation into the matter is still open. The court is also expected to order Mr. Coughlin to make restitution to Wal-Mart for benefits he received and money he misappropriated.
The guilty plea casts considerable doubt on Mr. Coughlin's assertion that he used company money to reimburse himself for a secret campaign, approved by senior executives, to pay union members for information about their organization drives, a potential violation of federal law.
Mr. Coughlin is still expected to advance that argument before a judge during sentencing. A person close to the matter said that the plea agreement explicitly mentions a plan to use Wal-Mart's money to buy information that would disrupt efforts to unionize Wal-Mart Stores.
Neither the United States attorney for the Western District of Arkansas nor Wal-Mart, after sifting through thousands of pages of documents, found evidence that such a proposal existed, people close to the investigation said.
A representative for Wal-Mart declined to comment last night.
The plea agreement, which has been in the works since October, represents a staggering outcome for Mr. Coughlin, who was once considered a strong candidate to become chief executive of Wal-Mart.
Mr. Coughlin came to Wal-Mart in 1978 as a chief of security, rose quickly and two decades later, oversaw Wal-Mart, Sam's Club and Walmart.com. Mr. Coughlin, a hunting buddy of Wal-Mart's founder, Sam Walton, was a celebrated figure within the company, viewed as the final link to the retail chain's humble roots.
But according to legal documents that Wal-Mart made public last year, Mr. Coughlin had for years relied on an intricate web of underlings to routinely approve purchases of gifts for himself ($900 worth of duck hunting gear) and even his son (a $1,700 computer).
Mr. Coughlin retired from Wal-Mart in January 2005 but remained on the board until March, when he was forced out.
A former aide to Mr. Coughlin, Robert Hey Jr., pleaded guilty in November to charges of wire fraud.
In one instance, according to a Wal-Mart report, Mr. Coughlin directed a subordinate to buy $2,000 worth of gift cards, which he said would be given to low-level employees to improve morale. Instead, Mr. Coughlin used the cards to buy wine and hunting gear, the report said.
In another case, Mr. Coughlin bought an all-terrain vehicle from a potential Wal-Mart supplier, using $8,500 in company money and permitting the supplier to cover the remaining $2,200, according to records. The arrangement violated Wal-Mart's ban on gifts from vendors that it has done or may do business with.
In the end, Mr. Coughlin's use of company money was discovered by a cashier, according to Wal-Mart. The employee tipped off executives when Mr. Coughlin tried to use a gift card, intended for rank-and-file workers, to buy a pair of contact lenses.
In July, Wal-Mart sued Mr. Coughlin, seeking to prevent him from collecting about $12 million in retirement benefits and to recover money the company said he had fraudulently siphoned from the company
In November, a state judge in Arkansas tossed out part of the lawsuit, citing an agreement that barred the former executive and the company from suing each other. Wal-Mart had asserted that Mr. Coughlin's conduct invalidated his retirement pact.
But a local judge ruled that Arkansas law did not require an executive to disclose misconduct before signing a release from liability. Wal-Mart, the court said, could pursue only claims of misconduct said to have been committed after Mr. Coughlin signed the agreement.
One question that remains is whether Mr. Coughlin's plea would lead the town of Bentonville, Ark., to reconsider the name of its new public library. The building, constructed with the help of $4 million from the Wal-Mart/Sam's Club Foundation and the Walton Family Foundation, was recently christened the Coughlin Library.
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source: http://www.washingtonpost.com/wp-dyn/content/article/2006/01/06/AR2006010601907_pf.html 7jan2006
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