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AR High Court Breathes New Life into Wal-Mart Exec Fraud Suit
The Arkansas Supreme Court ruled a state judge was wrong to dismiss Wal-Mart’s lawsuit to void the nearly $15-million package for former Vice Chairman Tom Coughlin, now serving a sentence after a fraud conviction, according to a Springdale (Arkansas) Morning News report.
Wal-Mart and Coughlin signed a retirement deal in January 2005 in which the two sides agreed not to sue the other for grievances that might come to light after Coughlin’s departure. According to the newspaper, Wal-Mart said later that it discovered Coughlin’s fraud and believes he was obligated to reveal the crime before quitting.
The company pulled back Coughlin’s retirement
package in June 2005 and the two parties went to court
over the matter.
Under his retirement agreement, Coughlin was to receive
his base salary of $1.03 million for two years. The
agreement also provided that Coughlin would not forfeit
186,407 shares of unvested restricted stock, worth about
$10 million, that would have otherwise expired on his
retirement date under the terms of the restricted stock
award agreements, the news report said.
Also, the retirement agreement said Coughlin was eligible
to receive a pro-rated portion of any incentive payment
earned under Wal-Mart’s management incentive
plan, for the fiscal year ending January 31,
2005.
An Arkansas Circuit judge ruled in November 2005
that Wal-Mart failed to showArkansas law required a
company officer to disclose any improprieties before
signing a general release from liability. The case on
which the Supreme Court ruled involved Wal-Mart’s
appeal of the lower court’s dismissal of its lawsuit.
“We hold … that Arkansas law is clear that a
release induced by fraud is invalid. The circuit court
erred in (its) ruling. The question of whether Coughlin,
by his actions, exhibited the requisite intent to
fraudulently induce the retirement agreement and release
is a question of fact for the jury,” the court
stated.
“We’re pleased that the Arkansas Supreme Court
has reversed the trial court’s ruling and reinstated
this lawsuit. This case raises important issues about the
duties of corporate officers and directors to act
honestly and fairly, and we look forward to the next
stage of the proceedings,” said Wal-Mart spokesman
John Simley.
Coughlin retired from Wal-Mart in January 2005 and then
resigned from its board the following March after an
internal investigation by the company revealed his misuse
of money and gift cards in an amount approaching $500,000
(See
Wal-Mart Explains
Firing of Former Vice President
).
He pleaded guilty to wire fraud and tax evasion in
February 2006 in federal court and was sentenced to 27
months of home detention, which he began serving in
October (See
Coughlin Pleads
Guilty to Wal-Mart Misappropriation Charges
).
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