A former Wal-Mart executive accused of ripping off the company to the tune of a half-mil claims the money was part of the 'union project' -- a company black op to pay off union reps to say which stores they might be trying to organize.

Wal-Mart calls bullshit on that, but its reputation means the denial isn't sticking -- even though it may be true.

An excerpt from the NYT story:

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.