Aug. 11 (Bloomberg) -- Thomas M. Coughlin, the former vice chairman at Wal-Mart Stores Inc., was sentenced to 27 months home detention, avoiding prison after admitting he falsified expense reports to buy liquor, care for his dogs and upgrade his truck.

U.S. District Judge Robert T. Dawson in Fort Smith, Arkansas, took into consideration Coughlin's fragile health in sentencing him to home detention, five years probation and a $50,000 fine. Coughlin, 57, will also pay $411,218 in restitution to Wal-Mart and the U.S. government. Prosecutors asked Dawson to sentence Coughlin to up to a year in prison.

``I think it's clear Mr. Coughlin is an exemplary citizen who has risen to the top, but he has had a pretty spectacular fall,'' Dawson said before announcing the sentence in a hearing today. ``Considering the worldwide ridicule and embarrassment, the worst punishment may have already been administered.''

Wal-Mart, the world's biggest retailer, has accused Coughlin in a civil suit of wrongly claiming reimbursement for hundreds of thousands of dollars worth of items including hunting gear, dog food, underwear, beef jerky and a stuffed wild boar. Coughlin, a friend of the late Wal-Mart founder Sam Walton, was head of theft prevention when he joined the company in 1978.

In January, Coughlin pleaded guilty to five counts of wire fraud and a single count of failing to report income from the fraud on his 2000 federal tax return. At the time of Coughlin's guilty plea, Wal-Mart called the case ``embarrassing and painful.''

Walton Friend

Coughlin was the retailer's second-ranking executive before he retired in January 2005. Coughlin's salary and bonus amounted to $3.9 million in 2005 and 2004, $3.2 million in 2003 and $1.8 million in 2002, according to data compiled by Bloomberg.

Prosecutors said Coughlin committed his thefts with the help of Robert E. Hey Jr., Wal-Mart's director of operations development. Hey pleaded guilty to three counts of wire fraud in November and was sentenced to six months probation and a $3,300 fine. As part of a plea agreement, Hey was required to cooperate with the government's case against Coughlin.

``I'll never forgive myself for involving my subordinates,'' Coughlin said in today's hearing.

False Expenses

Coughlin began in 1996 to order subordinates at Bentonville, Arkansas-based Wal-Mart to help him falsely claim reimbursement for expenses and obtain company gift cards, prosecutors said. In February 2005, a Wal-Mart employee noticed that Coughlin used a gift card to buy contact lenses, sparking an internal probe.

Coughlin admitted using a stolen gift card in a Joplin, Missouri Sam's Club to buy a cooler, two cases of Miller beer, two cases of Smirnoff vodka, a container each of Jack Daniels and Crown Royal whisky, a carton of Patron tequila, and a patio torch.

Coughlin was forced to resign from Wal-Mart's board in March 2005.

Wal-Mart sued Coughlin in July 2005, seeking to revoke his multimillion retirement deal. A trial judge in Bentonville, Arkansas dismissed the suit last year, ruling that Wal-Mart and Coughlin agreed not to sue each other as part of the retirement agreement. Wal-Mart has appealed to the Arkansas Supreme Court.

In his guilty plea, Coughlin admitted to five thefts of cash and Wal-Mart shopping cards amounting to $14,395. The tax evasion count said Coughlin's actual taxable income in 2000 was ``substantially in excess'' of a reported $1.7 million.

``We are pleased that the Tom Coughlin felony fraud and tax evasion sentencing has been concluded,'' said Wal-Mart spokesman John Simley in a statement. ``Our company's actions throughout this process have been consistent with our core values and the principle that all associates are held accountable to the same standard, regardless of their position.''

57 Going on 87

Joel Carver, Coughlin's doctor, said his patient has severe pulmonary hypertension, diabetes, sleep apnea and a severe heart problem that would make it dangerous for him to serve a prison sentence. ``He is very fragile,'' said Carver. ``He's 57 going on 87.''

Coughlin at one time claimed he took the money as reimbursement for funding a secret anti-union program at Wal- Mart. The company, which has battled unionization throughout the U.S., denied the claim.

``It is obvious that the activity that I was involved in has gone on for a number of years and was, in fact, acknowledged by members of management, even though they did not know the specific details,'' Coughlin said in a statement distributed after the sentencing.

In a press conference after the sentencing, prosecutors said Wal-Mart fully cooperated with the criminal investigation. The investigation turned up no evidence of an illegal anti-union program, they said.

Wal-Mart shares fell 20 cents to $44.69 today in New York Stock Exchange composite trading.

The case is U.S. v. Coughlin, 06-CR-20005-001, U.S. District Court, Western District of Arkansas (Fort Smith).

To contact the reporter on this story: Jennifer Boulden in Fort Smith, Arkansas, at jen.boulden@gmail.com; Bob Van Voris in New York at rvanvoris@bloomberg.net.

Last Updated: August 11, 2006 17:16 EDT