Sunday, July 01, 2007

Ex-Wal-Mart Employee Claims Executives Took Gifts

Ex-Wal-Mart Employee Claims Executives Took Gifts (Update5)
By Lauren Coleman-Lochner and Margaret Cronin Fisk

May 25 (Bloomberg) -- Julie Roehm, the marketing chief fired by Wal-Mart Stores Inc. for alleged conflicts of interest, accused executives of accepting free plane travel, concert tickets, and, in the case of Chief Executive Officer H. Lee Scott, discounts on yacht purchases.

Roehm said in court papers filed in Detroit yesterday that she never put her own interests first, ``although other executive employees of Wal-Mart did on a frequent basis.''

The filing follows Roehm's lawsuit for breach of contract and fraud in December and a counterclaim by Wal-Mart in March that accused her of taking gifts from DraftFCB, an advertising agency she had hired, and having an affair with a subordinate. Wal-Mart fired Roehm after less than a year on the job and subsequently dropped the agency.

``This lawsuit is about Julie Roehm and her misconduct,'' said Wal-Mart spokesman John Simley. ``Her document shows how weak her case is.''

Scott bought yachts and a ``large pink diamond'' at a ``preferential price'' from companies run by Irwin Jacobs, the complaint said. Roehm also accused Scott of traveling to Las Vegas and Florida on jets owned by Jacobs.

One of Jacobs' companies, Plymouth, Minnesota-based Jacobs Trading Co., buys and sells returned and leftover merchandise from stores including Wal-Mart, and employs Scott's son as a consultant.

``We will address these issues in court,'' Simley said. ``Certainly we dispute the allegations involving our CEO and Irwin Jacobs.''

Jacobs denied giving preferential prices on at least two fishing boats and diamond to Scott and says Scott has never been in any of his planes. He doesn't sell diamonds, he said.

`Outright Lying'

``Wherever she's getting her information from is either wrong or from someone who is outright lying,'' Jacobs, 65, said in an interview by mobile phone from Turkey today. ``If they don't retract it, I'm going to sue them personally.''

``What bothers me about this whole thing is how hard he tries to make sure the things he does are done just the right way,'' Jacobs said of Scott. ``He made it very clear he did not want preferential treatment. He said that to me in person.''

Roehm attorney Sam Morgan said today that he would depose Jacobs, ``and we'll see what he has to say under oath.''

Separately, the state of Rhode Island has asked the U.S. Securities and Exchange Commission to look into whether Wal- Mart adequately disclosed a possible conflict of interest concerning Scott's son Eric's employment by Jacobs Trading.

Rhode Island

Rhode Island Treasurer Frank Caprio urged the SEC in a May 21 letter to probe whether Eric ``may have had a material interest in the transactions that investors would consider significant.'' Companies are required to disclose dealings that benefit directors' immediate family members.

Rhode Island has a $21 million stake in Wal-Mart in its pension funds.

The concern is baseless because none of Eric Scott's work or compensation involves Wal-Mart, said Jacobs. Scott rents office space from Jacobs Trading and contacts other companies to arrange purchases of their leftover merchandise, he said, noting the arrangement was approved by Wal-Mart attorneys.

``There are rules for what you should disclose and we follow all of them,'' including in this case, Wal-Mart spokeswoman Mona Williams said.

``It would probably be different if Eric Scott were a high-level executive officer with Jacobs Trading, but he is not. He has no interest, much less material interest,'' in two companies' transactions, she said.

SEC spokesman John Nester declined to comment on what action, if any, the agency will take.

Vodka Case

Wal-Mart didn't initially disclose the reasons why the retailer fired Roehm.

After Roehm filed the lawsuit for breach of contract and fraud, Wal-Mart accused her of taking gifts, including meals and a case of vodka, from DraftFCB, which was competing for the company's $580 million annual advertising budget.

Roehm denied those accusations in the filing yesterday. She also said other Wal-Mart executives, including her supervisor John Fleming, the company's executive vice president of marketing, accepted from vendors free tickets, backstage passes and souvenirs from an Eagles concert in Spain.

Roehm's lawsuit was initially filed in state court in Michigan in December and transferred to federal court in January. A trial is scheduled for May 2008, Morgan said.

The lawsuit is Roehm v. Wal-Mart Stores Inc., No. 07-CV- 10168, U.S. District Court, Eastern District of Michigan (Port Huron).

Shares of Wal-Mart rose 26 cents to $46.91 at 4:01 p.m. in composite trading on the New York Stock Exchange.

To contact the reporters on this story: Lauren Coleman-Lochner in New York at ; Margaret Cronin Fisk in Southfield, Michigan, at 2947 or .

Last Updated: May 25, 2007 17:31 EDT


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