updated 8/28/2007 12:32:50 PM ET 2007-08-28T16:32:50

A former Wal-Mart executive who was sentenced to home detention in a fraud case got off too light and must be sentenced again, an appeals court ruled Tuesday.

Prosecutors had argued U.S. District Judge Robert T. Dawson failed to consider the gravity of Tom Coughlin's offense while giving him credit as a pillar of the community.

The 8th U.S. Circuit Court of Appeals agreed, saying the sentence of 27 months of home detention and 33 months of additional probation was too lenient.

"Perhaps Coughlin's family ties and station in the community, as well as his lofty corporate position of trust and power, exacerbate the nature of his crimes, especially for Coughlin's victims: Wal-Mart, and more generally, American businesses," the court wrote in a split decision.

Coughlin, a protege of company founder Sam Walton, was a 28-year employee who rose to the No. 2 job at Wal-Mart Stores Inc., world's biggest retailer. He retired in January 2005.

Months later, the company based in Bentonville, Ark., accused him of using Wal-Mart money and gift cards to pay for about $500,000 in personal items that ranged from hunting trips and hunting dog training to clothes, alcohol and work on his car.

Coughlin pleaded guilty to five counts of wire fraud and one count of filing false tax returns — all felonies — in January 2006.

Coughlin could have faced more than 28 years in prison and fines of $1.35 million. Prosecutors had sought a sentence of six months to a year in prison.

Dawson had cited Coughlin's age, 58, his good works within the community and his failing health when sentencing Coughlin to five years probation, of which 27 months was to be spent at home. Dawson also fined Coughlin $50,000 and ordered $411,218 in restitution.

Coughlin was allowed to leave home for doctors' appointments and church.

The sentence "does not fall within the range of reasonableness," Judge William Jay Riley wrote. Riley also said Coughlin must also pay interest on the money due; Coughlin's net worth was calculated at $50 million but Dawson erroneously found Coughlin couldn't afford it.

In a dissent, Judge Kermit E. Bye said Dawson properly found that Coughlin suffered from poor health and that the sentence should stand.

He said Coughlin would have a tougher time in prison than the typical inmate because of five heart "episodes" that included a sudden cardiac death from which he survived.

The court said Coughlin weighs 330 pounds and has had an electronic defibrillator since 2003. It says the former executive suffers from a number of ailments, including hypertension, atherosclerosis, diabetes and gout.

"Doctors have ordered Coughlin to control his weight and blood pressure since at least 1980, yet these warnings have generally gone unheeded," the court wrote.

A doctor testified at Coughlin's sentencing hearing that prison would increase the risk of another heart attack, but the appeals court disregarded much of the testimony, saying he offered no proof that prison doctor's couldn't take care of Coughlin's medical needs.

Prosecutor Robert Balfe had acknowledged that Coughlin's health problems were substantial, but disputed the district court's assertion that the simple stress of going to prison could have made those conditions worse and potentially life-threatening.

Coughlin lawyer Blair Brown had argued there was no guarantee Coughlin would have been sent to a prison with the most advanced medical facilities, or even that he would have had access to medications he needs. He said a prison sentence would be a death sentence.

Separately, Wal-Mart is trying to break a $12 million and $15 million retirement pact with Coughlin, saying it wouldn't have agreed to it if it knew about Coughlin's crimes.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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