[More on Wal-Mart]
Julie Roehm, the marketing specialist Wal-Mart Stores Inc. fired for alleged conflicts of interest, said the retailer's executives accepted free plane travel and concert tickets, while Chief Executive Officer H. Lee Scott received discounts on yacht purchases and a diamond.
Roehm, 36, said in court papers filed in Detroit May 24 that she never put her own interests first, "although other executive employees of Wal-Mart did on a frequent basis." Wal- Mart fired Roehm in December, less than a year after hiring her.
The filing follows Roehm's lawsuit for breach of contract and fraud in December and a counterclaim by Wal-Mart in March that accused her of taking gifts from DraftFCB, an advertising agency she hired, and having an affair with a subordinate.
"Her document shows how weak her case is," said Bentonville, Arkansas-based Wal-Mart spokesman John Simley. "This lawsuit is about Julie Roehm and her misconduct."
Scott bought yachts and a "large pink diamond" at a "preferential price" from companies run by Irwin Jacobs, the complaint said. Roehm also accused Scott of traveling to Las Vegas and Florida on jets owned by Jacobs.
One of Jacobs' companies, Plymouth, Minnesota-based Jacobs Trading Co., buys and sells returned and leftover merchandise from stores including Wal-Mart, and employs Scott's son as a consultant.
"We will address these issues in court," Simley said. "Certainly we dispute the allegations involving our CEO and Irwin Jacobs."
Wal-Mart shares rose 26 cents to $46.91 in composite trading on the New York Stock Exchange on May 25.
`Outright Lying'
Jacobs denied giving preferential prices on at least two fishing boats and a diamond to Scott, 58, and said Scott has never been in any of his planes. He doesn't sell diamonds, he said.
"Wherever she's getting her information from is either wrong or from someone who is outright lying," Jacobs, 65, said in an interview by mobile phone from Turkey last week. "If they don't retract it, I'm going to sue them personally."
"What bothers me about this whole thing is how hard he tries to make sure the things he does are done just the right way," Jacobs said of Scott. "He made it very clear he did not want preferential treatment. He said that to me in person."
Roehm attorney Sam Morgan said he would depose Jacobs, "and we'll see what he has to say under oath."
Separately, the state of Rhode Island has asked the U.S. Securities and Exchange Commission to look into whether Wal-Mart adequately disclosed a possible conflict of interest concerning Scott's son Eric's employment by Jacobs Trading.
Rhode Island
Rhode Island Treasurer Frank Caprio urged the SEC in a May 21 letter to probe whether Eric "may have had a material interest in the transactions that investors would consider significant." Companies are required to disclose dealings that benefit directors' immediate family members.
Rhode Island has a $21 million stake in Wal-Mart in its pension funds.
The concern is baseless because none of Eric Scott's work or compensation involves Wal-Mart, said Jacobs. Scott rents office space from Jacobs Trading and contacts other companies to arrange purchases of their leftover merchandise, he said, noting the arrangement was approved by Wal-Mart attorneys.
"There are rules for what you should disclose, and we follow all of them," including in this case, Wal-Mart spokeswoman Mona Williams said.
"It woulsd probably be different if Eric Scott were a high- level executive officer with Jacobs Trading, but he is not. He has no interest, much less material interest," in two companies' transactions, she said.
SEC spokesman John Nester declined to comment on what action, if any, the agency will take.
Vodka Case
Wal-Mart didn't initially disclose the reasons why the retailer fired Roehm.
After Roehm filed the lawsuit for breach of contract and fraud, Wal-Mart accused her of taking gifts, including meals and a case of vodka, from DraftFCB, which was competing for the company's $580 million annual advertising budget.
Roehm denied those accusations in her filing last week. She also said other Wal-Mart executives, including her supervisor John Fleming, the company's executive vice president of marketing, accepted from vendors free tickets, backstage passes and souvenirs from an Eagles concert in Spain.
Roehm's lawsuit was initially filed in state court in Michigan in December and transferred to federal court in January. A trial is scheduled for May 2008, Morgan said.
The lawsuit is Roehm v. Wal-Mart Stores Inc., No. 07-CV- 10168, U.S. District Court, Eastern District of Michigan (Port Huron).
source: 27may2007
[More on Wal-Mart]
A fired marketing executive accused by Wal-Mart Stores Inc. of violating company ethics rules mounted a scathing counterattack on Chief Executive H. Lee Scott Jr. and other top brass, claiming they accepted sweetheart deals, travel and concert tickets from suppliers and engaged in improper relationships.
Claiming in a court filing that Wal-Mart applies its conduct rules arbitrarily, Julie Roehm accuses Mr. Scott of, among other things, accepting "preferential prices" on boats and jewelry from financier Irwin Jacobs, whose companies do everything from sell boats to Wal-Mart to buy unsold goods from the retailer. She contends that Mr. Scott's relationship with Mr. Jacobs goes "beyond a business relationship" and violates the corporation's conflicts-of-interest guidelines.
Wal-Mart dismissed the assertions, made in a filing in U.S. District Court in Michigan, as did Mr. Jacobs.
While it remains to be seen whether any of Ms. Roehm's accusations will stick, they represent yet another distraction for the world's biggest retailer and its CEO, Mr. Scott. Wal-Mart has seen sales growth at its U.S. stores bog down amid increasing competition from other retailers and growing resistance to locating stores in urban areas. Wal-Mart also has stumbled in its efforts to attract upscale shoppers like those flocking to competitor Target Corp. at a time when Wal-Mart's traditional blue-collar customers are being hurt by high gasoline prices and other economic pressures.
The filing is the latest sally in a nasty battle that began after Wal-Mart fired Ms. Roehm in December. In its own court filing in March, Wal-Mart accused Ms. Roehm of having an improper romantic relationship with a subordinate, accepting gifts from suppliers and misusing her company expense account. Now, Ms. Roehm is turning the tables.
It isn't clear how Wal-Mart's ethics rules might apply to the activities alleged by Ms. Roehm. Its policy says its employees "must avoid conflicts of interest in supplier selection, such as directing business to a supplier owned or managed by a relative or a friend." It also warns executives aren't allowed to "have social or other relationships with suppliers, if such relationship would create the appearance of impropriety or give the perception that business influence is being exerted." The policy also bars employees from soliciting jobs for relatives or friends.
In a telephone interview, Mr. Jacobs called the accusations of preferential treatment "totally outrageous" and without any substance. He acknowledged a long friendship with Mr. Scott. The two are close enough that their families have vacationed together, and Mr. Jacobs attended the wedding of Mr. Scott's daughter. But he said there is no favoritism.
"They pay their way; we pay our way," he said. "I've frequently told Mr. Scott, it's very difficult for me to go with him because he always picks up the check....I'd like at some point to level up. He won't allow that to happen."
A Wal-Mart spokesman said, "This lawsuit is about Julie Roehm and her misconduct. Her [court filing] shows how weak her case is." He also said: "The allegations of impropriety involving our CEO Lee Scott are untrue."
Ms. Roehm and former Wal-Mart Vice President Sean Womack were fired in December after the company accused them of violating its policies against fraternization and later claimed they had carried on an affair. She sued Wal-Mart, arguing there was no valid reason for her dismissal and asking the court to award her unspecified damages, lost pay, stock options, severance and bonus.
In March, the Bentonville, Ark., company countersued and released details of what it said were a "series of messages" obtained by Mr. Womack's wife and reports from unnamed co-workers who described a torrid affair between him and Ms. Roehm.
Ms. Roehm's salvo includes a fierce defense of her short tenure as senior vice president of marketing communications and challenges the company's portrayals of her in its counter-suit. She denied accepting gifts, insisted suppliers were told to bill the company for any meals and, while insisting she acted appropriately, neither admitted nor denied some of the most salacious descriptions of her relationship with Mr. Womack.
In addition, Ms. Roehm cited an excerpt from an affidavit by Mr. Womack's wife, Shelley, attesting that she had provided just one email to Wal-Mart and that another ostensibly damning email didn't name Ms. Roehm.
Ms. Roehm's filing alleges that Mr. Scott personally benefited from his relationship with Mr. Jacobs, the chairman of boat supplier Genmar Holdings Inc. and owner of Jacobs Trading and FLW Tour, two private companies with Wal-Mart business relationships. The two men's relationship began years before Mr. Scott became CEO.
Without identifying any specific instances, Ms. Roehm alleged the CEO obtained travel, "a number of yachts" and "a large pink diamond" at preferential prices due to the relationship. The Wal-Mart spokesman declined to comment on specifics of the allegations.
Mr. Jacobs said he has never sold Mr. Scott a diamond or provided air travel. He said he has suggested boat dealers to Mr. Scott but was never involved in any sales.
Ms. Roehm also alleged that Wal-Mart looked the other way when senior executives conducted affairs with subordinates and allowed executives who owned retail stores to negotiate with subordinates on leases for those properties.
"Many Wal-Mart executives do not abide by Wal-Mart's alleged 'firm' policy forbidding conflicts of interest," she said in the filing. Despite policies prohibiting conflicts of interest and the misuse of company assets, "actions apparently speak louder than words at Wal-Mart," her court filing says.
She cited the role of Mr. Scott's son Eric at Jacobs Trading, the Wal-Mart salvage supplier. Eric Scott has worked for various companies owned by Mr. Jacobs for several years. Several years ago, he worked full-time for a boat-manufacturing unit of Genmar and now works part-time for a salvage company owned by Mr. Jacobs. He shares an office with Jacobs Trading near Wal-Mart's headquarters. Wal-Mart's attorneys reviewed and approved the son's business dealings with Jacobs Trading, Mr. Jacobs said. A Wal-Mart spokesman said he was unfamiliar with the decision.
In an interview earlier this year, Mr. Jacobs insisted there never were any discussions between him and Mr. Scott about hiring Eric Scott at Genmar's Wellcraft unit. "I swear to God Lee never called me about it," he said in that interview. Mr. Jacobs said he saw an opportunity for "putting Eric to work," noting his past experience as a Wal-Mart employee buying merchandise from overseas manufacturers.
Eric Scott said in an earlier interview that he inquired about a job with Mr. Jacobs, who in turn put him in touch with a manager at Genmar. He also said he doesn't recall discussing the matter with his father. "I don't remember there ever being a conversation or an issue," Eric Scott said of his initial hire at Wellcraft. He said that his jobs with Mr. Jacobs didn't involve any dealings with Wal-Mart.
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