Wal-Mart's Coughlin
to Plead Guilty
To Wire-Fraud,
Tax-Evasion Charges
By JAMES BANDLER, THE
WALL STREET JOURNAL, From the Web, January 6, 2006
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.
Mr. Coughlin, formerly the giant
retailer's No. 2 executive, 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.
Federal sentencing guidelines, which are advisory, but which are still adhered
to by most judges, call for a sentence of in excess of two years, according to
people familiar with the matter.
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 in January.
The most explosive aspect of the drama may remain unresolved. Mr. Coughlin
is expected claim that, in part, he was reimbursing himself for a secret scheme
to fund an anti-union spy operation
But Federal prosecutors for the U.S. Attorney's Office for the Western District
of Arkansas have found no significant 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 ends several months of negotiations between Mr. Coughlin's lawyers and
prosecutors. Mr. Coughlin's lawyers, who include William Taylor and Blair
Brown, persuaded prosecutors not to pursue money laundering charges, which could
have added substantially to his sentence.
Mr. Coughlin, regarded once by some employees as the living embodiment of
Wal-Mart founder Sam Walton, is likely to be the senior most Wal-Mart executive
charged for his involvement in the episode. Several other lower level
employees could also face charges. Mr. Coughlin was widely regarded as
helping preside over one of the most successful periods of growth in Wal-Mart
history, and the scandal has shocked thousands of employees who admired him.
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.
According to a chronology provided by Wal-Mart in a civil suit filed last year,
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 toward three 12-gauge
shotguns, and buying a Celine Dion compact disc, Stolichnaya vodka, wine, a $319
fishing license, a rifle case and a $3.54 Polish sausage.
Documents reviewed by The Wall Street Journal also suggest that Mr. Coughlin had
Wal-Mart pay for a range of his personal expenses, including a $2,590 kennel at
his ranch, a $1,359 pair of handmade alligator boots, and thousands of dollars
in hunting leases.
Mr. Coughlin told subordinates that the money was to reimburse him for sums he
secretly spent gathering intelligence on union activities, including paying 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 wire-fraud
counts based upon multiple transactions. The parties have agreed that the
amount of the loss including the unpaid taxes is slightly over $350,000.
All of the transactions occurred before November 2001.
Wall Street Journal staff reporter Kris Hudson in Dallas
contributed to this article.
Write to James Bandler at james.bandler@wsj.com.
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