Roll Back? Wal-Mart Dumps Director

Coughlin resigns amid reimbursement scandal; finance committee executive once considered candidate for CEO post.


Wal-Mart Stores, Inc. forced former vice chairman Thomas M. Coughlin to resign from the retailer’s board of directors after management and Coughlin disagreed over the results of an internal probe. According to company officials, the in-house inquiry focused on reimbursements, payment of third-party invoices and the use of company gift cards.

The world’s largest retailer indicated in an SEC filing that the unauthorized payments appear to have been obtained through the reporting of false information on third-party invoices and company expense reports. The amount in question ranges from $100,000 to $500,000, according to the filing.

The company’s management said it promptly reported the results of an internal investigation to the United States Attorney for the Western District of Arkansas and requested that all appropriate action be taken. Wal-Mart also provided the results of its internal investigation to federal officials and said it is cooperating with them in their further review.

The company’s filing also noted that three Wal-Mart associates were terminated, including one officer. The Wall Street Journal identified one of the fired employees as Rob Hey, who was a vice president of store operations, citing people familiar with the matter. The three employees were close to Coughlin, said the paper.

In a brief statement, the 55-year-od Coughlin said: “This is to advise you that I am resigning effective immediately as a member of the Board of Directors of Wal-Mart. I leave with warm feelings for the company and all the people who have made it great. I have appreciated the opportunity to serve.”

Coughlin, who joined Wal-Mart in 1978, worked his way up through the ranks at the company. He served as vice president of loss prevention, as well as vice president of human resources. In 1995, he was promoted to chief operating officer — and many Wal-Mart watchers believed Coughlin would eventually succeed David Glass as the CEO of the mega-retailer. That job, however, when to H. Lee Scott, another long-term Wal-Mart manager. The Journal, citing sources close to the company, says Coughlin was bitter about losing the top job to Scott.

Coughlin later served as president and chief executive of the Wal-Mart Stores Division and Sam’s Club, USA. He retired from management in January, staying on as vice chairman of the board. In that role, he served as a member of the board’s strategic planning and finance committee, executive committee and stock option committee.

On Tuesday Wal-Mart CEO Scott plans to tell employees in an internal telecast that “If you see something or someone asks you to do something that you know is wrong — whether that is a buddy or a supervisor or Lee Scott — you must have the courage to say ‘no.’ We all have to do this, no matter our role or position within the company.”

The Journal also reported that several days after Coughlin announced his retirement in December, Wal-Mart fired three executives and four managers for integrity-related violations. The paper said all of the executives had close ties to Coughlin, citing a person familiar with the matter.

Wal-Mart spokeswoman Mona Williams, however, told the paper there “was no connection” between the December firings and the announcements regarding Coughlin and the other three individuals. She also said that the company’s management is reviewing internal controls on reimbursements and gift cards as a result of the incident.

Wal-Mart’s proxy containing compensation for the January 2005 fiscal year has not yet been filed. According to last year’s proxy, in the prior fiscal year Coughlin earned about $6.4 million, including a salary of $983,894, a bonus of nearly $2.9 million and restricted stock valued at $2 million. In February, the city of Bentonville announced that the town would name its new public library after Coughlin. The Walton Family Foundation and Wal-Mart Sam’s Club Foundation donated $4 million to the project.

Coughlin serves on many boards, including that of embattled data broker ChoicePoint. In March, he was named a director at Alien Technology, a maker of radio frequency identification systems. Wal-Mart has been a big backer of that supply-chain technology.

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