Wal-Mart Handled Investigation of Former Executive by the Book

So far, Wal-Mart Stores Inc. appears to have done the right things in handling a probe of what it said was expense abuse by a former top executive.

That could help the company avoid any lasting taint to a corporate image it has actively been trying to burnish in recent months.

“They are handling this in a textbook way,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. “Something is alleged, you investigate and if you think there is substance to it, you respond to it.”

Thomas Coughlin, 55, retired as an executive at Wal-Mart in January. Then last month, he quit his position on the company’s board of directors at Wal-Mart’s request after an internal probe into personal expenses, payment of third-party invoices and use of company gift cards.

On Friday, the Wall Street Journal reported that Coughlin, a former vice chairman and protege of Wal-Mart founder Sam Walton, may have had subordinates create fake invoices to get the company to pay for his personal expenses.

Coughlin last year asked a Wal-Mart employee to approve about $2,000 in expense payments without receipts, according to the report. Coughlin told the employee the money had been used for an unspecified “union project,” the Journal said.

Coughlin told several Wal-Mart employees that the money was actually being used for anti-union activities, including paying union staffers to tell him of pro-union workers in stores, the paper said, citing people familiar with the matter.

If Coughlin did pay union staffers for information, it could represent a criminal offense under U.S. federal law.

It also could prove a big black eye for Wal-Mart, which has strongly opposed unions since its founding.

“That would be a profound embarrassment for Wal-Mart,” said Kurt Barnard, president of Barnard’s Retail Consulting Group.

Wal-Mart said in March that it had referred the expenses investigation to federal prosecutors.

In a statement Friday the company said it investigated the allegation of payments to union representatives and found no evidence to support it.

“To the contrary, the evidence shows that corporate funds were misappropriated and used for the personal benefit of specific individuals,” spokeswoman Mona Williams said in the statement.

Coughlin’s attorney could not be reached for comment. But in a statement to the newspaper, his attorneys said Coughlin did not seek or obtain any improper reimbursements from the company.

Wal-Mart, which has been the focus of criticism for its treatment of workers and its effect on smaller competitors, has in recent months tried to improve its corporate image.

Wal-Mart brought journalists to its home base in northwest Arkansas this week as part of that campaign, with Chief Executive H. Lee Scott Jr. saying the company saved Americans billions of dollars a year with its low prices. He also said the company treated workers well and offered competitive wages and benefits.

The allegations surrounding Coughlin do not seem to reflect widespread conduct within the company, experts said, though Wal-Mart did say that it fired three employees and one officer in the probe, involving an amount estimated at $100,000 to $500,000.

“I’m guessing that this is a very contained problem and not a systematic problem,” said Nell Minow, editor at the Corporate Library, an independent research firm focusing on corporate governance.