The world's largest retailer had previously disclosed in a Securities and Exchange Commission filing that it was terminating Coughlin retroactively for "gross misconduct." The lawsuit, filed in Bentonville, home to Wal-Mart headquarters, seeks to formally sever the pact.

Coughlin was Wal-Mart's second-in-command before his retirement last year and left his board seat when the company disclosed in March that it was handing documents over to the Justice Department showing that $500,000 had been misspent.

A federal grand jury is now investigating.

The lawsuit, filed in Benton County Circuit Court, outlines page upon page of instances in which Coughlin allegedly misused company gift cards on items such as watches, Bloody Mary mix, headphones, sunflower seeds, a Toby Keith CD, underwear and a karaoke machine. Fake expense accounts also covered the purchase of snake boots, an XM radio, truck accessories and airplane tickets, the complaint said.

Through his attorney, Coughlin has denied wrongdoing. He says his use of corporate money and property was related to what he described as "union activity" for which he was obtaining "reimbursement."

Wal-Mart said in June it wanted Coughlin to forfeit all outstanding stock awards and all incentive payments under his retirement pact. It also said in an SEC filing that interest credited to Coughlin's own deferrals to the deferred compensation-plan account is to be reduced by 50 percent. His supplemental executive retirement account will be recalculated as if no employer contributions were credited on or after Jan. 31, 1996, the filing said.

In April, Wal-Mart said it had frozen millions of dollars in benefits for Coughlin.

According to the SEC filing, Wal-Mart suspended Coughlin's vesting of 186,407 shares of restricted stock, worth $9.77 million at the end of the company's last fiscal year, and 302,503 stock options exercisable within 60 days pending further investigation into Coughlin's actions.

In a letter to Coughlin lawyer William W. Taylor III of Washington, the company last month accused Coughlin of violating his fiduciary duties, and it accused him of "a scheme to misappropriate corporate funds and property for his own personal benefit." <!--