Judge Hears From Former Wal-Mart Executive

Tom Coughlin, far right; his wife Cynthia, on his arm; and children, far left, enter the Benton County Courthouse on Tuesday. Coughlin is fighting a lawsuit from his former employer, Wal-Mart Stores Inc.
J.S. Wedgeworth, The Morning News Tom Coughlin wants to keep nearly $12 million in retirement benefits and stock options, despite his alleged thefts and misdeeds, because his attorneys say Wal-Mart Stores Inc. released its longtime executive from any wrongdoing.

"This is not an ambiguous contract. Wal-Mart got what it wanted," Coughlin's attorney, William Taylor of Washington, D.C., said Tuesday during a hearing in Benton County Circuit Court. "In this case, it is a plain question of contract interpretation."

Wal-Mart's attorney, P.K. Holmes III, contends Coughlin used fraud -- not meeting his duty to reveal his alleged thefts and misdeeds -- to get Wal-Mart to sign the contract releasing him from liability.

"Had Wal-Mart known that he (Coughlin) had been engaged in a scheme to defraud them for a period of nine years, they would not have paid him $12 million in retirement benefits and certainly would not have signed a document to release him from all claims," Holmes said in Tuesday's hearing. Those arguments played out in a courtroom Tuesday about a mile from the Wal-Mart Stores general office in Bentonville. But no one knows yet who won the arguments, or if the judge will grant Coughlin's request to dismiss the lawsuit Wal-Mart filed against him in July.

Circuit Judge Jay Finch gave attorneys time to file more legal briefs and cite any relevant cases they find to bolster their arguments. Finch said he will issue a ruling in a week to 10 days. He continually asked attorneys to cite Arkansas laws that address whether a corporate officer with a duty to disclose certain facts and issues ever can be released from that duty, even if the officer leaves the company. The one item Holmes and Taylor agreed on was there was no case law in Arkansas that squarely addresses that point and how it might affect Coughlin's release from Wal-Mart.

However, Holmes said it's not reasonable to expect Wal-Mart attorneys and executives to ask Coughlin, who had been with the company for more than 25 years, "Hey, have you been stealing from the company for nine years?"

Finch interrupted and said all parties to Coughlin's contract releasing him from liability had attorneys present. The attorneys were consulted about the agreement, which sat for 21 days before the parties came back and signed it, Finch said.

"Wal-Mart was in the best position to know that Mr. Coughlin had been their trusted employee for many, many decades. And they, it seems to me, could have very easily simply said, 'We are not releasing you from any (wrongdoings) we may not know anything about. We may do it in six months or two years, but we're going to look at it first,'" Finch said.

Finch must decide whether the signed release would let Coughlin keep $1.03 million -- his base salary for two years -- along with 186,407 shares of Wal-Mart stock, worth approximately $10 million. The mutual general release apparently was signed before Wal-Mart discovered Coughlin's alleged thefts.

The release not only bars Wal-Mart from enforcing claims that arose out of Coughlin's employment. It also bars Coughlin from bringing any claims against Wal-Mart that arose while he worked there, Taylor said.

Wal-Mart announced Dec. 6 that Coughlin would retire as vice chairman in January after being with the company for 25 years. However, Coughlin was to remain a company director. Coughlin resigned from the Board of Directors on March 25 after a company internal investigation was forwarded to the U.S. Attorney's Office in Fort Smith.

The office has not commented on the investigation. A grand jury that was in session in May in Fort Smith could have reviewed the allegations, but laws prohibit attorneys and grand jurors from talking about what happens in grand jury sessions.

Wal-Mart's internal investigation revealed misuse of company gift cards and expense reports. Coughlin allegedly used the money obtained to buy items including a customized dog kennel, cowboy boots, underwear and a $10,000 customized hunting vehicle, Wal-Mart claims in its lawsuit.

Coughlin said he used the money for a "union project" when he was questionedduring an internal investigation, the company says in court filings. Wal-Mart officials deny any knowledge of Coughlin using company money on such a project and say in court filings that Coughlin has not presented documentation to back his union project claims.

Wal-Mart in June rescinded Coughlin's retirement agreement and asked him to forfeit most benefits, including the base salary and stock options.

Anita French contributed to this report.

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Judge Hears From Former Wal-Mart Executive