Down & Out in Bentonville: Back-Up

Tom Coughlin

Tom Coughlin is the embattled former Vice Chairman of Wal-Mart; he began his career with the company in 1978 and was a friend and hunting partner of its founder Sam Walton. Coughlin retired as an executive at Wal-Mart in January 2005 and resigned his position on Wal-Mart’s board at the company’s request on March 25, 2005; he had been slated to remain on the board until June 2005. In a June 10, 2005 filing with the Securities and Exchange Commission (SEC) Wal-Mart retroactively terminated Coughlin for “gross misconduct” in order to negate his retirement package. Coughlin disputes the company’s version of events. [Wall Street Journal, 4/8/05; 4/28/05; Washington Post, 3/26/05; Associated Press, 6/11/05]

SIGNIFICANCE

Coughlin was a Wal-Mart “Legend” and “Protégé” of Founder Sam Walton. According to the Wall Street Journal, “Coughlin was a Wal-Mart legend -- a protégé and old hunting buddy of founder Sam Walton and for five years the second-highest-ranking executive in a company of more than a million employees. The suggestion that he might have betrayed the company he served for 27 years has shocked many at Wal-Mart and around Bentonville, where the world's biggest retailer is based.” [Wall Street Journal, 4/8/05]

Coughlin Now Under Investigation by Federal Grand Jury for Ethical Lapses. In April 2005, a federal grand jury was named to investigate fraud allegations surrounding former Wal-Mart Vice Chairman Thomas M. Coughlin. Wal-Mart contends that Coughlin misappropriated up to $500,000 in funds for personal expenses. [Wall Street Journal, 4/8/05; 4/28/05; New York Times, 4/23/05; Los Angeles Times, 6/11/05]

Coughlin Attorney’s Says Funds Spent on Off-The-Books Payments to Unions for Information Gathering. The Wall Street Journal reported that Coughlin has said the money was used to fund a top-secret antiunion effort to pay off union employees and gather information. Coughlin began his career in 1978 and was a friend and hunting partner of founder Sam Walton; Coughlin retired in January 2005 but was retroactively terminated by Wal-Mart in June 2005. [Wall Street Journal, 4/8/05; 4/28/05; New York Times, 4/23/05; Los Angeles Times, 6/11/05]

Wal-Mart Claims “No Evidence Whatsoever” of Alleged Anti-Union Fund. After the company conducted an internal investigation, Mona Williams, Wal-Mart's director of corporate communications, said: Wal-Mart “found no evidence whatsoever to support it [Coughlin’s assertion about union payments]. To the contrary, the evidence shows that corporate funds were misappropriated and used for the personal benefit of specific individuals. … Neither Mr. Coughlin nor anyone else at Wal-Mart was ever authorized by the company to make payments to anyone about union activity.” [Wall Street Journal, 4/8/05]

Wall Street Journal: Abuses by Coughlin “Seem Surprisingly Petty.” The Wall Street Journal reported, “For a man of Mr. Coughlin's means -- his total compensation topped $6 million last year -- the alleged abuses seem surprisingly petty. In a terse announcement, Wal-Mart said it found questionable transactions totaling between $100,000 and $500,000.” [Wall Street Journal, 4/8/05]

Eduardo Castro-Wright

Eduardo Castro-Wright is the Executive Vice President and Chief Operating Officer of Wal-Mart. Castro-Write was promoted from president of Wal-Mart de Mexico in February 2005. DSN Retailing Today reported, “His appointment to the top operations job marks the first time Wal-Mart has tapped its global repository of executives to fill a high-level domestic position.” [DSN Retailing Today, 1/24/05]

SIGNIFICANCE

Maryland Passed Historic Legislation to Increase Employer Health Care Benefits for Workers.

According to the Baltimore Sun, “The [Maryland] General Assembly this session passed legislation - which effectively applies only to Wal-Mart - that requires companies with at least 10,000 employees to spend 8 percent of their payroll on worker health care or pay the shortfall into a state fund. It was the first bill of its kind nationwide. … Gov. Robert L. Ehrlich Jr. has said he will veto the bill, though legislators appear to have enough support for an override.” [Baltimore Sun, 5/7/05]

Gov. Ehrlich Appeared With “Grateful” Wal-Mart COO to Veto Historic Health Insurance Legislation. On May 19, 2005, Gov. Bob Ehrlich scheduled a public ceremony to veto the landmark health insurance legislation. Wal-Mart Chief Operating Officer Eduardo Castro-Wright was on hand to attend the official veto of the bill. “We are so grateful to the governor for doing what is right and drawing a line and vetoing this bill,” Castro-Wright said. [Associated Press, 5/19/05]

Castro-Wright Cryptically Threatened to Reconsider Distribution Center, If Maryland Health Bill Went Forward. The Baltimore Sun reported, “Wal-Mart recently signed a contract for land several miles south of Princess Anne on which it plans to build the distribution center, and a spokesman said the construction delay is not related to the health care bill. But if the veto is overturned, ‘the project could well be reviewed,’ Castro-Wright said in an interview before the news conference.” [Baltimore Sun, 5/20/05]

Ehrlich Pocketed Wal-Mart Donations Right Up To First Day of Legislative Session. On December 15, 2004, Wal-Mart held a reception honoring Gov. Robert Ehrlich in Annapolis, MD. According to the invitation, tickets to the event cost $1,000 per person. The Baltimore Sun reported, “A $1,000-per-head fund-raiser hosted by Wal-Mart Stores Inc. for Gov. Robert L. Ehrlich Jr. last week in Annapolis has raised some eyebrows, especially among groups that don't like the company's business practices.” On January 12, 2005, the opening day of the Maryland General Assembly’s 2005 session and the last day to legally receive contributions, Gov. Robert Ehrlich’s campaign committee disclosed a donation from Wal-Mart for $4,000. [Baltimore Sun, 12/28/04; Wal-Mart Invitation ; Maryland State Board of Elections, Campaign Finance Database, http://www.elections.state.md.us/campaign_finance/database/index.html; ]http://mlis.state.md.us/]

Eugene Scalia

Eugene Scalia is a partner at Gibson, Dunn & Crutcher in Washington, DC, former Acting Solicitor general of the Department of Labor and son of Supreme Court Justice Antonin Scalia. On June 9th, 2005, Wal-Mart announced it had hired Eugene Scalia to defend the Company against Jared Bowen’s whistle-blower complaint, filed with the Department of Labor under the Sarbanes-Oxley Act. [Arkansas Democrat-Gazette, 6/9/05]

SIGNIFICANCE

Scalia Worked to Undermine Certain Whistleblower Rights at the Department of Labor. In 2002, during his tenure as acting Solicitor General of the Department of Labor, Eugene Scalia filed a friend-of-the-court brief that would have limited the ability of workers to get whistleblower protection under the Sarbanes-Oxley act. Scalia’s brief said that whistleblowers were not protected against retaliation if they disclosed information to a Member of Congress, but only if they disclosed to a “duly authorized” investigative committee of Congress. After Scalia left the Department of Labor, the Acting Solicitor Howard M. Radzely reversed Scalia’s position. [Washington Post, 10/25/02; 1/28/03]

Experts Said Scalia’s Position was Aimed at Defending Corporate America. According to the Washington Post, “Whistle-blower advocates, however, said Scalia was attempting to use the Sasse case, which concerns whistle-blower provisions in environmental protection laws, to establish a precedent that would undermine whistle-blowers in cases against corporations. ‘That would have sweeping ramifications," said Stephen M. Kohn, chairman of the nonprofit National Whistleblower Center. ‘Going to a member of Congress has always been protected,’ said Kohn, who cited the Lloyd-LaFollette Act of 1912 that upheld the right of federal employees to report concerns to Congress.” [Washington Post, 10/25/02]

Sen. Grassley Denounced Scalia’s Interpretation of Whistleblower law. In 2002, Sen. Chuck Grassley (R-IA), who wrote the provisions that outlined whistleblower protections in the Sarbanes-Oxley Act, criticized Scalia’s position. “If this is the way the Labor Department intends to enforce the new law, then most corporate whistle-blowers won't be protected,” Grassley said. [Washington Post, 10/25/02]

Scalia is “Openly Hostile to Whistle-Blowers.” The Arkansas Democrat-Gazette reported, “Grassley spokesman Beth Levine said the senator has not softened in his views since then [2002]. ‘Grassley feels that Scalia is openly hostile to whistle-blowers,’ Levine said Friday.” [Arkansas Democrat-Gazette, 6/18/05]

Forced Arbitration Threatens Whistle-Blower Protections. Securities Week reported, “[I]ndustry observers believe that efforts to require arbitration circumvent the true intent of Sarbanes-Oxley, which is to offer greater protections to industry employees--especially whistle-blowers--than they had received before it was drafted. Critics of the arbitration system believe that it is stacked against plaintiffs and industry employees as it is mainly funded by the very securities industry it judges. … Michael Unger, partner at Rubin & Rudman, in Boston, said that ultimately firms are going to try to keep Sarbanes-Oxley matters in arbitration, even as he said it would be contrary for public policy if the federal arbitration act trumped Sarbanes-Oxley when it comes to whistle-blowers.” [Securities Week, 8/9/04]

Eugene Scalia Set Federal Policy “Favoring” Arbitration over Investigation. In an article about Sarbanes-Oxley enforcement, Eugene Scalia wrote, “As the solicitor of labor, I issued a memorandum to the lawyers in the Labor Department noting the general federal policy favoring arbitration, and identifying circumstances where it was appropriate for the department to stay investigation and enforcement in deference to the arbitral process.” [Legal Times, 5/19/03]

Jared Bowen

Jared Bowen was a Wal-Mart Vice President who reported to then-Vice Chairman Tom Coughlin. Wal-Mart fired Bown, citing “loss of confidence in associate as a company officer,” according to his official exit interview, which occurred April 4, 2005. [Wall Street Journal, 4/28/05 Arkansas Democrat-Gazette, 4/22/05]

SIGNIFICANCE

Bowen Says: Fired For Blowing the Whistle on Questionable Payments by Former Wal-Mart Vice Chairman Tom Coughlin. Jared Bowen filed for whistle-blower protection because he says that he was fired after reporting questionable payments requested by former Wal-Mart Vice Chairman Thomas Coughlin, who resigned in January but was retroactively terminated by Wal-Mart in June. Bowen says Coughlin had told him the expenses were part of a “union project.” “I believe they were trying to clean house of everybody that was associated with or knew about this,” Bowen said of his firing. [Associated Press, 6/11/05; Wall Street Journal, 4/28/05; Arkansas Democrat-Gazette, 4/22/05]

Wal-Mart Says: Bowen Not a Whistle-Blower and “Assisted Coughlin in a Scheme to Defraud” Wal-Mart. The Wall Street Journal reported, “Wal-Mart said yesterday that it had acted properly in firing Mr. Bowen. ‘First of all, Mr. Bowen is not a whistleblower,’ says Mona Williams, vice president of corporate communications at Wal-Mart. … ‘Mr. Bowen was terminated because he, along with others, assisted Tom Coughlin in a scheme to defraud the company,’ said Wal-Mart's Ms. Willliams. ‘Additionally, once the investigation began, he did not give a complete and accurate account of his knowledge and involvement in multiple improper transactions.’” [Wall Street Journal, 4/28/05]

Bowen Cooperated with Wal-Mart Investigation on Coughlin. In November 2004, Coughlin asked Bowen to approve roughly $2,000 in expenses that did not have receipts, an unusual practice at Wal-Mart. “He [Coughlin] told me some expenses were coming through for the union project and just to approve them,” Bowen said. Bowen did not approve the expenses and “Bowen eventually alerted another executive, helping trigger an internal probe.” [Wall Street Journal, 4/8/05]

James Lynn

James Lynn was a global services manager for Wal-Mart; he was “responsible for easing shipments and inspecting factories for workplace violations and product quality.” Lynn was fired by Wal-Mart in 2002 after working for the company since 1993. [New York Times, 7/1/05]

SIGNIFICANCE

Lynn Says He Was Fired For Being Too Aggressive About Finding Workplace Violations. The New York Times reported, “In a lawsuit filed two weeks ago in state court in Arkansas, where Wal-Mart Stores is based and Mr. Lynn lives, he asserted that he was terminated in 2002 ‘for truthfully reporting the abysmal working conditions in Central American factories utilized by Wal-Mart and for refusing to comply with Wal-Mart's demand that he certify factories in order to get Wal-Mart's goods to market.’” [New York Times, 7/1/05]

Lynn Says Wal-Mart’s Factory Inspection Process Aimed at Masking Sweatshops. In his lawsuit, Mr. Lynn asserts that “the factory certification process was designed only to create the impression that Wal-Mart was producing its goods under humane working conditions when, in fact, working conditions at the factories were terrible and violated the rules and regulations of Wal-Mart.” [New York Times, 7/1/05]

Lynn Detailed Human Rights Violations at Wal-Mart Factories. Lynn said Wal-Mart undermined its inspections by requiring monitors to give notice before visiting factories. Several of his monitoring reports noted that factories in Honduras padlocked exits, lacked drinking water, did not have toilet paper and did not pay overtime to some employees. He said some factories were so hot that people passed out and that several gave pregnancy tests to newly hired women, dismissing those found to be pregnant. Such tests and firings would violate Wal-Mart's rules. [New York Times, 7/1/05]

After 13 Years And Numerous Violations, Wal-Mart Has Failed Do Anything About Sweatshops, Which Endanger The Lives of Thousands of Workers. In 1992, NBC’s Dateline broke a story about 11 year old workers from Bangladesh who were making t-shirts for Wal-Mart. Due to the moral outrage, Wal-Mart promised to reform its ways but they failed repeatedly. After the exposing of Kathy Lee Gifford’s Wal-Mart clothing line for its human right violations just a few years later, no significant changes have been made. In 2000, The National Labor Committee reported that workers at Qin Shi Handbag factory in Zhongshan, China were forced to work 14-hour shifts, seven days a week for little or no money.” [New York Times, 12/24/92; Washington Post, 5/30/96; National Labor Committee, “Made in China: The Role of U.S. Companies in Denying Human and Worker Rights.”]

Wal-Mart Has Dismissed Human Rights Violations as “Common.” A recent report highlighted labor violations at a Wal-Mart apparel contractor in Bangladesh. Wal-Mart's director of international corporate affairs, Bill Wertz defended the company and dismissed the violations. Women’s Wear Daily reported, “Wertz said the labor violations depicted on ‘Dateline NBC’ are common.” [Woman’s Wear Daily, 6/21/05]

Wal-Mart’s Toleration of Sweatshops Led To Its Removal From The Domini 400 Social Index. The Domini 400 Social Index described as “the first benchmark for stock funds to screen for social responsibility…over the long term has outperformed the S&P 500, an index of the 500 large companies traded on the New York Stock Exchange.” Kyle Johnson, the project manager for the index, stated “Wal-Mart is a market leader in retail, yet has not taken a leadership position on labor issues and has been unresponsive to calls for change from shareholders...Given that we had removed Nike for similar reasons back in 1997, we could not justify keeping Wal-Mart.” [Palm Beach Daily News, 6/12/05; International Shareholder, 4/17/01]

Peter Kanelos

Peter Kanelos was Wal-Mart’s Community Affairs Director for Arizona and Southern California. Kanelos resigned on “on mutually agreeable terms,” according to a Kanelos email. His last day with the company was June 10, 2005. [Washington Post, 6/9/05]

SIGNIFICANCE

Kanelos Oversaw Local Wal-Mart “Nazi” Ad. In May 2005, Kanelos’ office approved an advertisement in the Arizona Sun that featured a 1933 photo of Germans throwing books on a pyre at Berlin's Opernplatz. The ad equated Nazis to supporters of a ballot initiative that would have restricted the Wal-Mart’s growth. The ad was produced by Wal-Mart’s advertising consultants and the company acknowledged approving the piece. [Washington Post, 6/9/05]

Wal-Mart Use of Nazi Ad was Widely Criticized Nationwide, Company Forced to Apologize. Wal-Mart’s use of Nazi imagery in its advertisement was widely criticized by community groups like the Anti-Defamation League and several members of Congress. Wal-Mart issued an apology. [Arizona Daily Sun, 5/14/05]

Kanelos Refused to Comment, Originally Claimed He Had Not Seen the Ad. Amidst Wal-Mart’s forced apology for the Nazi ad, the Daily Sun reported, “Wal-Mart Regional Community Affairs Director Pete Kanelos had originally declined to comment on the ad because he had not seen it, he said.” [Arizona Daily Sun, 5/14/05]

Erik Winborn

Erik Winborn was Wal-Mart’s Vice President of National Government Relations. Winborn resigned his post on March 9, 2005. “I've been working since I was in seventh grade, and it's time for a break,” Winborn told The Hill yesterday. “I think it's time for a third career, and that's why I resigned.” [Hill News, 3/9/05]

SIGNIFICANCE

Speculation That Winborn Was Fired; Source says it was “Mutual Thing.” Hill News reported, “Speculation was rampant last week that Winborn was being fired after a Wal-Mart recruiter began circulating an e-mail last Wednesday that the company was seeking his replacement. Winborn dismissed that notion and said he has been discussing his plans to leave Wal-Mart with company officials since the fall of last year. ‘It wasn't a matter of being forced out,’ Winborn said. ‘It was a matter of my decision to resign.’ … One source familiar with the resignation said it was ‘sort of a mutual thing.’” [Hill News, 3/9/05]

With Winborn Out, Wal-Mart Ramps Up Its Washington Presence:

Wal-Mart Quadrupling Its DC Lobbying Staff. In January, under Winborn, Wal-Mart's office had three people. Now, with the hire of [new head lobbyist Lee] Culpepper, the office is up to nine people. By the end of summer, [Wal-Mart Vice President Ray] Bracy said it will have as many as 14. [Roll Call, 6/6/05]

Wal-Mart Executive Says Company Looking for Prominent Presence in DC. “We needed to be and wanted to establish a presence that was more in common with our prominence in the business environment,” said Ray Bracy, Wal-Mart's vice president of federal and international public affairs. [Roll Call, 6/6/05]

House Aide Says Wal-Mart Looking for Lobbying “Heavyweights.” “Wal-Mart is the next Microsoft,” one House leadership aide said. “They are the 800-pound gorilla, and hunting season is upon us. They need to form an internal team of heavyweights to stop the bloodletting before it starts.” [Hill News, 3/9/05]

Lee Culpepper

Lee Culpepper is Wal-Mart’s new Vice President of National Government Relations. Culpepper was hired to run Wal-Mart’s government affairs division in Washington, DC on June 6, 2005. [Roll Call, 6/6/05]

SIGNIFICANCE

Culpepper An Expert On Issues Wal-Mart Wants To Influence. Roll Call reported, “Culpepper's learning curve will be short on many of the issues Wal-Mart cares about, including labor and employment policy and health care, because they have also been priorities of the National Restaurant Association.” Culpepper is known to be an expert in the following issues: Tort Reform for obesity-related lawsuits, minimum wage, association health plans and immigration.” [Roll Call, 6/6/05; The Hill, 4/20/05]

Culpepper Celebrated 2004 Bush, GOP, Pro-Business Victories. The National Restaurant Association said today a second Bush term and a larger GOP majority in the Senate could move pro-business legislation that stalled this year. "To quote [James] Brown, 'I feel good, like I knew that I would,'" said Lee Culpepper, vice president of government affairs. [National Journal’s CongressDaily, 12/014/04]

Lawsuits: Culpepper Supports Limiting Ability to Hold Employers Accountable in Court. “It's not just lawsuits--it's the threat of suits, which are costing employers money,” Culpepper argued. “It's important to put some rational laws in place that can better define what is a valid suit and what is a frivolous lawsuit.” [Nation’s Restaurant News, 9/27/04]

Wages: Culpepper Highlighted his Work Opposing Wage Increases and Limiting Overtime. According to Roll Call, “Lee Culpepper, of the National Restaurant Association, cites his group's leadership of coalitions designed to fight minimum-wage increases and push for changes to overtime regulations.” [Roll Call, 1/18/05]

Lee Culpepper: “We're going to be vigilant in opposition to any wage hike.” [Fortune, 10/15/01]