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ANALYSIS: Was Wal-Mart's Anti-Union Image Used as a Shield?

by Michael BarbaroThe New York Times
January 9th, 2006

In December 2004, shortly before Thomas M. Coughlin left his job as the second-ranking executive at Wal-Mart Stores, he instructed a subordinate to order him a $1,700 laptop computer, which he later charged to Wal-Mart. "This," he wrote to the aide, in an e-mail message later disclosed by the company, "is to be used on the union project."

The union project, according to Mr. Coughlin, was a secret scheme, approved by senior Wal-Mart executives, to pay union members for information about which stores they planned to organize.

A year later, when Mr. Coughlin was accused of misusing more than $500,000 in company funds through fraudulent reimbursements, the union project became the heart of his defense, and it immediately transformed the case into a symbol of anti-unionism on the part of Wal-Mart. Reporters seized on it, labor groups issued a flurry of angry press releases about it and the National Labor Relations Board began an investigation into it.

But Mr. Coughlin's agreement to plead guilty to federal wire fraud and tax evasion charges, which two people close to the negotiations disclosed on Friday, and the lack of evidence that he used the missing money to spy on unions raise doubts as to whether such a project even existed.

A nearly yearlong investigation, in which prosecutors reviewed records of Mr. Coughlin's travel, phone calls and e-mail messages, produced no evidence that he or any other executive at Wal-Mart ever paid a union member for information, according to one person briefed on the inquiry who spoke on the condition of anonymity because Mr. Coughlin is not scheduled to officially enter the plea until later this month.

Lacking evidence of the scheme, the Coughlin case follows a far more familiar track - a highflying executive, paid millions of dollars a year, who stole from his company.

Wal-Mart, in a separate legal complaint with a former Coughlin subordinate, called the union project a "complete fabrication." But what made Mr. Coughlin's defense so powerful - and, in a way, so convenient - was that it seemed so plausible to longtime observers of the company.

Such a scheme "certainly would not be out of character," said Harley Shaiken, a professor on labor issues at the University of California, Berkeley, who has studied Wal-Mart for years. "Given Wal-Mart's antipathy for unions and its aggressiveness in fighting them, what Coughlin fabricated appeared to be real."

Wal-Mart has long been known for its bare-knuckled approach to fighting unions. When employees at an outlet in Canada voted last year to unionize, the retailer shut the store down, arguing it was unprofitable. In 2000, shortly after 11 Wal-Mart meat cutters in Texas voted to form a union, the company eliminated meat-cutter jobs companywide and announced it would use prepackaged meat instead.

The National Labor Relations Board has filed dozens of complaints accusing Wal-Mart of using hardball tactics to fight unions, such as improperly firing union supporters and threatening to deny bonuses to management if workers unionized.

In one case, Mr. Coughlin - at the time, he was chief of Wal-Mart Stores in the United States - was accused by the United Food and Commercial Workers Union of personally trying to improperly influence a union vote at a Wal-Mart auto center in Arizona by showing up at the store and speaking with employees about their working conditions.

Indeed, when word of the union project first emerged a year ago, the food and commercial workers union, which is trying to unionize Wal-Mart's 1.3 million workers in the United States, believed it enough to file an unfair labor practice complaint with the National Labor Relations Board.

The complaint touched off an agency investigation that is continuing.

It was Mr. Coughlin who worked hardest to keep the union project - or at least the idea of it - alive, according to corporate records from Wal-Mart.

Over a period of several years, when he headed the United States operations of Wal-Mart and was vice chairman of the company and a board member, he mentioned it frequently to his underlings, almost always to explain why he needed large sums of company money.

In 2002, for example, Mr. Coughlin told one of his aides to prepare two fake invoices, each for $5,000, that "the union people in Vegas needed," according to a lawsuit Wal-Mart filed to strip Mr. Coughlin of his retirement benefits.

The aide sent the money, which was used to purchase a $10,810 custom-built hunting vehicle for Mr. Coughlin, according to Wal-Mart.

In 1997, Mr. Coughlin told the same aide to obtain a corporate calling card number so he could make long-distance calls to "the union people," Wal-Mart said. For five years, the company alleges, Mr. Coughlin used the card number to make lengthy telephone calls to and from cities where his children were attending college.

Neither Mr. Coughlin nor a representative for Wal-Mart returned phone messages yesterday.

Mr. Coughlin's employees appeared to have doubts about the union project. According to the company, one of Mr. Coughlin's top deputies disclosed in interviews with company investigators that he "always suspected there was no union project. " After reviewing expense account statements and e-mail messages, he concluded instead that it was a "cover for his fraud."

But if Wal-Mart employees had doubts about the project, and the validity of Mr. Coughlin's expenses, they kept them private. Mr. Coughlin, a 6-foot-4 former football player and hunting buddy of Wal-Mart's founder, Sam Walton, was among the most powerful executives at the company.

By 2003, as vice chairman, he oversaw Wal-Mart, Sam's Club and walmart.com. For much of that time, he was responsible for Wal-Mart's loss prevention department, which investigated alleged theft and fraud by employees.

Indeed, Mr. Coughlin's supposed use of misappropriated gift cards and false invoices to pay for personal purchases like CD's, beer and hunting gear was not disclosed by the people he worked with but by a low-level store employee. The worker called Wal-Mart's headquarters to inquire about Mr. Coughlin's use of a gift card - originally designated for store employees to improve morale - to buy a pair of contact lenses.

People briefed on the matter said Mr. Coughlin might still advance the union project defense before a judge later this month in Fort Smith, Ark., not far from the company's headquarters in Bentonville. It is unclear why he would pursue such a defense, because his lawyers apparently presented no firm evidence to support it and prosecutors found no evidence to back it up, according to people involved in the case.

If the plea deal holds, Mr. Coughlin may serve more than two years in jail and pay restitution of at least $350,000, according to people briefed on the matter.

"This is probably his last choice," said Mr. Shaiken, the professor of labor studies. "It represents few options and a pretty grim reality for him."

"He wanted to bargain with" the union project, Mr. Shaiken said, "but it did not prove possible."



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