Wal-Mart Sues Former Vice Chairman Coughlin
By George Anderson
Wal-Mart contends that the former vice chairman of the company, Tom Coughlin, stole millions from the company to pay for hunting trips and other personal expenses.
Mr. Coughlin, according to earlier reports, has claimed that the actual money was used to finance illegal anti-union activities.
Yesterday, Wal-Mart filed suit against Mr. Coughlin seeking to have him repay money the company claims he stole. It also wants him to give back bonuses he received from the company during the years he was allegedly stealing from his employer and, finally, it wants Mr. Coughlin to return any money paid to him as part of his retirement compensation package.
Mr. Coughlin’s attorneys, Blair Brown and William Taylor, would not offer a response to the suit filed by Wal-Mart but did characterize the action as part of a “relentless campaign to discredit a man who dedicated his life to the company and its employees for 27 years.”
The attorneys added, “Mr. Coughlin did not seek or obtain any improper reimbursements. He will not try his case in the press and looks forward to presenting his defense at the appropriate time in the appropriate forum.”
According to a report in the Arkansas Democrat-Gazette, Mr. Coughlin and his attorneys are limited in what they can say because the case is currently under investigation by the U.S. attorney in the Western District of Arkansas.
Moderator’s Comment: What is this case doing for the public perception of Wal-Mart? Has the company been able to
improve its image as it has attempted to do over the past year?
– George Anderson – Moderator
At some point, this case is going to be settled out of court. It’s all a matter of perception.
The longer it goes on, the more people will perceive of Wal-Mart not as a victim, but as incapable of keeping its own executive house in order. As such, how can it be trusted when it comes to other matters? Whether Mr. Coughlin is guilty of any wrongdoing remains to be seen. But all his lawyers have to do is present their case that his use of funds were for anti-union activities. True or not people will think where there’s smoke…etc etc etc.
This is a case where it’s in everyone’s interest to make it go away. And I guarantee the state’s Attorney General’s office and local prosecutors will be getting pressure from the State house which is trying desperately to promote Arkansas as a business friendly state. Look at the TV ads featuring Arkansas governor Mike Huckabee. “We’ll do anything for business,” he says. Right now, I’m sure he would like this scandal to disappear.
WM has several “publics”:
a. Shoppers who love it and probably don’t care about the alleged corruption if they can get what they need at the price they want
b. Shareholders and potential shareholders who are probably appalled. Whether the man is a thief and/or he was engaging in illegal anti-union activities, shareholders and potential shareholders are unlikely to be positively impressed. Of course, some people might believe that he is honest and that the company did not want any illegal anti-union activities, both.
Stock prices are important, and investors generally don’t ignore possible corruption.
c. Suppliers, who probably don’t care about this particular case, but who are always concerned when a major customer has troubles.
d. Employees who might take sides one way or the other, but whose morale is probably not boosted by this type of case.
e. The rest of the public, whose opinion may have influence on zoning boards for new WM locations, and who influence “a” through “d”.
WM’s continuing image problems make it the needy poster child for a new first-class, sustained PR positioning that would be thoroughly communicated on a sustained basis. It’s not just this case; it is all the issues piling on top of each other.
My very first job with a major CPG manufacturer came with the proviso from my first boss…”Companies don’t go to jail, people do.” This was after he laid out the rules on what was an expense and what wasn’t. I’ve always remembered that, even after I progressed well up into this company and then, in later life, with owning several companies.
This type of thing is ugly and no winners at all. Big companies have deep pockets and the one bright spot is that WM has the guts to change out of something that is not working. I can’t see this producing anything positive for anyone.
Someone is going to have to take responsibility. When you do, there are consequences and, in this case, they are going to be bad.
I don’t believe the public at large is following the Coughlin case at all. He wasn’t the top guy at the company, as was the case in other, more public scandals. And Wal-Mart acted decisively when they discovered improper goings-on. Of course, if Coughlin turns out to be right with his accusations, that’s something else entirely, and the public will pay attention to illegal anti-union activities at the nation’s largest retailer.
W-M has been working hard to improve its image, but it will take awhile to right their P.R. ship. And, as the world’s largest retailer (and company by some definitions), they are a natural target so they will have to have make a serious ongoing effort.
The allegations of illegal anti-union activities accompanying this story come at a time when unions are reorganizing to focus more on service sector employees, clerks, etc. Don’t be surprised to see lawsuits filed by unions to spotlight WM’s alleged anti-union efforts while demanding unheard-of levels of governmental oversight in this area. They’ll be involved in this before it’s over.
This case is probably being followed mostly by people who don’t cross the threshold of a Wal-Mart store often; folks who are among Wal-Mart’s sharpest critics. Wal-Mart’s customers probably don’t know of this case, or even care, and these are the people that Wal-Mart mainly relies upon for its reputation.
What Wal-Mart’s regular customers say behind Wal-Mart’s back determines its image and standing in the community. The cash registers in Wal-Mart stores would seem to indicate this case and other publicized events have had no penetration yet.
I don’t think Coughlin did anything that isn’t more or less accepted as normal perks for high level execs these days. We don’t have a day go by but when there isn’t at least one mid to major news story about some form of corporate malfeasance and breach of corporate governance. The airline industry is a case in point.
It took something else to bring on what I see as a vendetta on Wal-Mart’s part. I don’t buy Coughlin’s story either but I seriously question the idea that he was able to “steal” millions from the richest retail company in America, apparently over a long period of time, if we’re to believe the amounts being claimed by Wal-Mart. And somebody didn’t catch on to what was happening. Don’t these people have audits just like everyone else?
I think this makes Wal-Mart look like they have some cavalier vigilantes working for them. Sure, Wal-Mart needs to monitor union activities. It’s their fiduciary responsibility to the stockholders. But to do so in a less than ethical way was careless. They could have hired private investigators or consultants to work undercover, just like having secret shoppers shop your store, and paid them in an appropriate manner. It’s another pitfall of being a publicly held company.
My gut instinct is to side with those who suspect Wal-Mart is trying to smear this guy who may or may not have stolen some money but probably not as much as they make out. I’m also inclined to agree with Al that the general public really doesn’t care much and isn’t paying a lot of attention. First of all, shoppers are pretty much interested only in what they can buy and what it will cost. Secondly, there are now so many corporate scandals and so much finger pointing and blame dumping that people are cynical and just expect shenanigans at this level to happen. If it doesn’t affect them personally, I can’t see it making any difference at all.
I am not sure how to respond to this without being negative, but I’ll give it a shot.
I’ve met Mr. Coughlin, and I’ve seen first hand the level of respect this man carried from the associates. They had a degree of loyalty to him that I’ve not seen since the military, where there was that rare officer of whom one of the men would say, “I’d take a bullet for him.” It seems to me that it must be an absolutely crushing blow to morale to have someone who was held in such high regard be labeled as a scoundrel and thief.
On that point, it’s tough to get anyone around Bentonville to talk about it. People are clearly uncomfortable discussing the issue, and they change the subject as quickly as they can.
When the allegations first came to light, Coughlin’s defense was, “No, that wasn’t stealing, it was just money laundering to hide Wal-Mart’s illegal anti-union activities.” This gives me pause. In my imagination, there is a scenario where Wal-Mart figures it’s better off skewering Coughlin than it is admitting illegal anti-union activities, so it goes ahead with a lawsuit against him to keep appearances up.
Even if that isn’t true, this is a lose-lose for Wal-Mart. If Wal-Mart “wins” the lawsuit, that means that they had a scoundrel as their second-in-command for years and years.
I don’t even work for Wal-Mart and I find the whole thing very depressing.
Wal-Mart must be trying to protect some of its suppliers from being banned. Anyone who actually believes that any executive in a major retail establishment actually paid for recreation has to be out of their mind. Almost every major supplier to Wal-Mart is involved in Advertising/PR activities that tie them into every major sporting event, major airlines, major lodging chains, etc. — they always have tickets, rooms and meals. Many suppliers avidly pursue customers whose recreational preferences match up with their interest. To suggest that Coughlin spent company money on hunting trips is not believable. I can name corporations who do business with Wal-Mart (especially since they got into the grocery business) that actually maintain hunting preserves for their executives’ and/or owners’ enjoyment. By entertaining customers at these “facilities,” they become “tax friendly.” It’s sort of like buying a second home in a resort and allowing the resort to rent it most of the time. Coughlin certainly never had to pay for hunting, fishing, NASCAR, NFL, NBA, unless he wanted to and, if he is half the crook claimed, he certainly didn’t want to. I am afraid that Wal-Mart is looking for a settlement but the wily Coughlin will drag them into court and expose every wart on Wal-Mart’s hide. Looks like fun to me! Can’t wait to read the book – is it available in Wal-Mart?