A Closer Look At The Defamation Suit By Walgreen’s Former Finance Chief

The news hasn’t been great for Walgreen Co. over the past couple of months.  According to the Wall Street Journal, in early July, chief financial officer Wade Miquelon slashed his forecast for pharmacy unit earnings to $7.4 billion from $8.5 billion.  Miquelon left the company in early August.  Shortly thereafter, the Journal ran an article stating that Miquelon’s “billion-dollar forecasting error” had cost Miquelon his job and alarmed Walgreen’s big investors.

Now, Walgreen is fighting a battle on another front – against Miquelon.  Last week, Miquelon sued Walgreen in state court in Illinois, alleging that the company, its CEO, and its largest shareholder had defamed him.  According to Miquelon, the company’s big investors were told that Walgreen’s finance department was “weak” and had “lax controls.”

The four things that a defamation plaintiff must typically prove to prevail are: (1) the defendant made a false statement about him; (2) the statement was published, i.e., made, to one or more other persons; (3) the defendant was at least negligent in making the statement; and (4) the publication damaged the plaintiff.  Thus, if Walgreen and the other defendants can show that any harmful statements they made about Miquelon were true, they stand a good chance of defeating his claims.  On the other hand, as we covered in this article, if Miquelon can prove that the defendants engaged in a “premeditated scheme” to do him harm by falsely criticizing his performance, he might be able to recover a substantial verdict.

In addition to the allegations about defamation, Miquelon’s suit delves into other territory that could be embarrassing for Walgreen, including descriptions of corporate “battles to allegedly goose earnings forecasts and push the envelope on tax policy.”   Walgreen immediately fought back on these allegations, filing an emergency motion to seal what it says are confidential communications included in the lawsuit.  Walgreen’s motion also criticizes Miquelon for being “overly optimistic” in his financial forecasts and says that his departure wasn’t “wholly voluntary.”

We’ll be interested to see where this lawsuit heads.  Although it’s hard to evaluate Miquelon’s case without seeing the complaint, the August article in the Journal – which appears to be part of the basis for his suit – doesn’t include any quotes from company officials that are particularly pointed as to his conduct.  It’s still possible the case could settle quickly for other reasons: Miquelon appears ready to defend himself and criticize the actions of the other key executives at Walgreen, and the company may want to avoid a nasty public battle with a former key employee.  However, Miquelon has already received a healthy severance package, so Walgreen may be reluctant to award him more cash. 

Perhaps the most interesting piece of information in the articles covering the dispute: Miquelon is still employed by Walgreen until Dec. 1, in a nonexecutive role.  That might make for some uncomfortable water-cooler chat.

• Civil Litigation
• Confidentiality
• Defamation