Scandal on Aisle 5

June 7, 2007 — -- Did Wal-Mart's CEO, Lee Scott, receive a pink diamond and boats at discount price?

Was the hiring of Scott's son by a Minnesota businessman a violation of the retailer's stringent ethics code?

Did a fired Wal-Mart executive who has made these claims carry on an illicit affair with a subordinate while feasting on fine food and drink at a swanky New York restaurant hosted by a company seeking business with Wal-Mart?

These are all questions being posed in a series of lawsuits and countersuits in what is quickly turning into a distracting sideshow for the world's largest retailer.

So far, there are two suits and counting.

The latest legal shot came last week when Irwin Jacobs, the Minnesota businessman alleged to have arranged discounts on the diamond and the boats for Scott, sued those who had made the allegations, saying that he had been defamed.

Jacobs told ABC News that those who had made the allegations "are going to pay the price for it."

"The fact that I even have to answer [questions] is an embarrassment and outrageous to me," Jacobs said.

The Drama Begins

What can now be described as a soap opera started in December when Wal-Mart suddenly fired Julie Roehm who had been the senior vice president for marketing communications. Roehm had been hired to shake up and revitalize the company's advertising and during her short, 10-month tenure oversaw the selection of a new advertising agency, the firm Draft FCB.

At the time of her firing, the company also terminated her colleague Sean Womack, canceled the contract with Draft FCB and awarded the reportedly $580 million account to the Martin Agency, based in Richmond, Va.

Wal-Mart gave no official explanation for the firings at the time, but reports surfaced that Roehm was having an affair with Womack, a subordinate, in addition to accepting free meals and drinks from Draft FCB.

Roehm sued Wal-Mart in January for wrongful termination and breach of contract.

Wal-Mart quickly fired back. The retailer alleged that Roehm and Womack, both of whom are married, were romantically involved. To support its claim, Wal-Mart presented an e-mail it had obtained from Womack's wife.

Read more about the e-mail.

In the e-mail, purportedly from Roehm to Womack, Roehm wrote, "I think about us together all the time. Little moments like watching your face when you kiss me."

Roehm fired back in May, accusing Scott, the company's CEO, of receiving discounts on jewelry and yachts. Additionally, she accused other executives at the world's largest retailer of accepting free gifts like tickets to an Eagles concert valued at $300. Her legal grenade landed just in time for Wal-Mart's annual shareholder's meeting in Bentonville, Ark.

Roehm also used the filing to deny the affair and said the racy e-mail was taken out of context. She also denied violating any gift policy as she believed the advertising agency was going to bill Wal-Mart for her share of the "small, White Castle-sized burgers" she accepted at the dinner.

Undernegotiating and Overpaying

Wal-Mart has vehemently denied the most recent accusations from Roehm.

Talking to reporters at the meeting last week, Thomas D. Hyde, Wal-Mart's corporate secretary, said, "Mr. Scott did not and has not committed ethical violations."

"Wal-Mart's ethical standards are equal to or more stringent than those of more retailers," Hyde said, noting that in his view Scott "undernegotiates and overpays and leaves too much on the table when he buys things. He knows he lives in a fishbowl."

As for the employment of Scott's son at a company owned by Jacobs, the businessman said that the boards of both companies had approved the hiring, as long as Eric Scott did not conduct any business with his father's company.

"Here you've got a person that is no doubt desperate and doing desperate things," Jacobs told ABC News. "What she claims is totally outrageous. It's sinful."

Now Jacobs, the billionaire businessman whom Roehm accused of supplying the pink diamond for Scott's wife, of hiring Scott's son and of providing Scott with a reduced-price boat, has filed a lawsuit against Roehm and her lawyers.

"All I was asking for was a retraction," he said. "Somebody screwed up. Fix it."

The lawsuit seeks damages and lawyer fees.

Jacobs said that he had done nothing wrong and denied every accusation Roehm had made.

Are There Other Players?

Jacobs suggested that the case went beyond Roehm and that parties opposed to Wal-Mart -- he didn't say who -- were using her.

"I don't think it's about Wal-Mart. I think somebody else is driving Julie Roehm with thoughts and ideas about what they can do to hurt Wal-Mart. There's something more here. It's just my instincts," he said.

Roehm did not return a call to her cell phone.

One of Roehm's lawyers named in the suit, B. Andrew Rifkin, said he couldn't comment on the specific details of the case.

But he said that "if courts [started] allowing definition suits to occur for everything lawyers said in pleadings, then no one would ever be able to plead a case."

"It's not surprising that in this type of case somebody would attempt to pursue something like this," Rifkin said. "Frankly, you see these a lot when the big guys try to beat up on the little guys."

At last year's annual shareholder meeting, Roehm oversaw the creation of a 1½-hour-long musical celebrating the retailer, which culminated in a ballad entitled "My Life Began the Day That I Met Sam," a reference to company founder Sam Walton.

The drama this year will now be played out in court.