BOSTON — The reported decision of former Wal-Mart vice chairman Thomas Coughlin to plead guilty to five counts of federal wire fraud and one count of tax evasion is a stunning conclusion to the downfall of an executive once in the running to be the company’s chief executive officer.
The Wall Street Journal, citing unnamed sources, said Friday that Coughlin had reached the agreement with U.S. prosecutors in the Western District of Arkansas.
Coughlin, who rose to second-in-command at the world’s largest retailer, based in Bentonville, Ark., was personally close to the Walton family during his 27-year career. He resigned from Wal-Mart’s board last March amid charges he embezzled as much as $500,000 by directing a subordinate to prepare phony expense reports and illegally obtain store gift cards.
Neither federal prosecutors, Coughlin’s attorney nor Wal-Mart would comment.
The company and Coughlin are involved in civil litigation over Coughlin’s estimated $10 million retirement package, which Wal-Mart rescinded in March.
The Coughlin scandal rocked Wal-Mart, which has stringent internal expense controls and an ethics policy prohibiting Wal-Mart executives from accepting so much as a free cup of coffee from a vendor.
He is said to have asserted in his defense that he used company funds to reimburse himself for a secret effort to pay union members for information about their organizing activities, which would violate federal law. Wal-Mart has opposed all attempts to unionize workers.
Coughlin joined Wal-Mart in 1978 as a vice president of store security, and often spoke about the importance of loss prevention. The burly executive was a popular figure within Wal-Mart, generating some of the largest cheers at the annual shareholders meeting with his folksy demeanor, humor and ready supply of stories about founder Sam Walton, with whom he often went hunting. When Coughlin retired in December 2004, Wal-Mart chairman Rob Walton donated funds to rename the Bentonville public library after Coughlin and his wife, Cindy.
Coughlin’s reported plea follows that of Wal-Mart former operations vice president Robert Hey Jr., one of Coughlin’s direct reports, who pleaded guilty to three counts of wire fraud in November.
The criminal complaint filed against Hey details the scheme in which both executives allegedly participated, although it names Coughlin as senior executive “John Doe.” The lawsuit alleged that Hey prepared fraudulent invoices for items such as a $2,442 Beretta 28-gauge shotgun and a $6,500 hunting lease in South Texas — to cover Coughlin’s personal expenses.
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Hey also was accused of providing Coughlin with gift cards in $100 and $200 denominations totaling thousands of dollars. Coughlin reportedly purchased guns, vodka, a Polish sausage and a Celine Dion disc during one shopping trip using stolen gift cards. Hey had a Sam’s Club provide Coughlin with a $2,021 laptop and printer as a gift for his son’s graduation.