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Attorney: Wal-Mart Collected On Deaths [Life Insurance Policies on People Without Telling Them]
Tampa Tribune ^ | Jul 3, 2007 | ELAINE SILVESTRINI

Posted on 07/03/2007 8:28:15 AM PDT by Excuse_My_Bellicosity

TAMPA - When Karen Armatrout died in 1997, her employer, Wal-Mart, collected thousands of dollars on a life insurance policy the retail giant had taken out without telling her, according to a lawsuit filed in U.S. District Court.

Armatrout was one of about 350,000 employees Wal-Mart secretly insured nationwide, said Texas attorney Michael D. Myers, who estimated the company collected on 75 to 100 policies involving Florida employees who died.

Myers is seeking to make the Armatrout lawsuit a class-action case on behalf of the estates of all the Florida employees who died while unwittingly insured by Wal-Mart.

"Creepy's a good word for it," Myers said. "If you ask the executives that decided to buy these policies and the insurance companies that sold them, they would say this was designed to create tax benefits for the company, which would use the benefits for benevolent purposes such as buying employee medical benefits.

"If you asked me, I would say they did it to make more money."

Wal-Mart spokesman John Simley said he could not comment because the company has not been served with the lawsuit.

The company settled two lawsuits with employees represented by Myers in Texas and Oklahoma, one for about $10 million and one for about $5 million. He said Karen Armatrout came to his attention when Wal-Mart mistakenly gave her husband's phone number to an Oklahoman who called the retailer inquiring about the settlement.

Myers said he also has filed a lawsuit against Wal-Mart in Louisiana.

Payouts Up To $80,000

Richard Armatrout, who is retired, does not want to speak publicly about his case, Myers said. Armatrout did not respond to a message left by the Tribune.

Karen Armatrout was 50 when she died of cancer, said Myers, who said she had worked several years in the pharmacy of the store on West Waters Avenue.

Myers said the policy payouts ranged from $50,000 to $80,000, depending on the person's age and gender. They were taken out on all full-time Wal-Mart employees who, in December 1993, were between ages 18 and 70 and participated in the medical benefits plan.

He said the company stopped taking out the policies in 1995 but continued to receive payouts on employees who died, even those who had left Wal-Mart.

Wal-Mart, which said it canceled its policies in early 2000 because it was losing money on the arrangement, says the program was intended to reduce its income taxes to help pay rising employee health care costs. Workers were notified and given the opportunity to opt out, the company said.

The Armatrout lawsuit says the policies were all written in Georgia, where the laws allowed such policies to be obtained.

The lawsuit says Wal-Mart used confidential information it received from employees for use in their employment, such as Social Security numbers and dates of birth, to obtain the life insurance policies.

Myers said this corporate practice is not uncommon. He estimates that up to 25 percent of Fortune 500 companies have taken out such policies on employees. The vast majority of the time, the employees didn't know, Myers said.

The practice evolved over time, Myers said. Corporations started by taking out large life insurance policies on key executives, getting tax breaks when they paid the premiums and collecting the payouts.

IRS Not Pleased, Attorney Says

The amounts of those policies grew to the point that Congress limited how much a company could insure an individual for, Myers said. Insurance companies then suggested buying lots of small policies on companies' work forces, the attorney said. He said the Internal Revenue Service has labeled the practice a sham and has successfully litigated the issue against several corporations.

Myers said his law firm has sued corporations for the practice, including Winn-Dixie and Fina Oil and Chemical. The latest case is its first in Florida.

The practice spread beyond top executives in the 1980s when the industry successfully lobbied states to allow employers to claim an "insurable interest" in the lives of rank-and-file workers.

Many employers seized on the practice because they could borrow against the policies, and the interest paid was tax-deductible. Congress closed that loophole in 1996, but COLI - corporate owned life insurance - remained a popular investment strategy.

The chief appeal was that interest accrues over time on the money in such policies. When a worker dies, the employer collects without paying taxes on the gain.

In 2001, premiums on such policies swelled to $2.8 billion from $1.5 billion the year before, according to a report by CAST Management Consultants of Los Angeles.

Information from The Associated Press was used in this report. Reporter Elaine Silvestrini can be reached at (813) 259-7837 or esilvestrini@tampatrib.com.


TOPICS: Crime/Corruption; News/Current Events
KEYWORDS: buymorejunk; chinamart; itscrapjustbuyit; lifeinsurance; walmart
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Not to worry, it's all about the low prices on low-quality garbage.
1 posted on 07/03/2007 8:28:19 AM PDT by Excuse_My_Bellicosity
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To: Excuse_My_Bellicosity

Key employee insurance for employers is nothing new - can’t they find something else to complain about?? I know...it’s Walmart!


2 posted on 07/03/2007 8:30:06 AM PDT by Clintons Are White Trash (Lynn Stewart, Helen Thomas , Molly Ivins, Maureen Dowd - The Axis of Ugly)
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To: Excuse_My_Bellicosity

Where do they get these immature crybabies who write this drivel?

KEY-MAN insurance has been around for decades. It is a good way to protect your business (oh and the thousands of other employess)


3 posted on 07/03/2007 8:32:10 AM PDT by Mr. K (Some days even my lucky rocketship underpants don't help)
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To: Clintons Are White Trash

If you ask me that is a disgusting practice and Wallmart should be ashamed of itself, honestly, trying to get a tax break of the death of others? I’m beginning to see why everybody hates them.


4 posted on 07/03/2007 8:33:04 AM PDT by Scythian
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To: Excuse_My_Bellicosity

it would be irresponsible for a corporation NOT to have key man insurance.


5 posted on 07/03/2007 8:33:11 AM PDT by avital2
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To: Excuse_My_Bellicosity

I fail to see what the problem is.


6 posted on 07/03/2007 8:34:30 AM PDT by HEY4QDEMS (Sarchasm: The gulf between the author of sarcastic wit and the person who doesn't get it.)
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To: Excuse_My_Bellicosity
So what? it is fully appropriate for companies to insure the lives of their workers. It isn't creepy, it is sound business practice. You insure your property and inventory, why not insure your key employees?

When a company loses a valuable employee to death, the expense of recruiting and training a new one to take his place can be quite high. I would be surprised if more companies didn't do the same thing.

7 posted on 07/03/2007 8:34:38 AM PDT by Guyin4Os (My name says Guyin40s but now I have an exotic, daring, new nickname..... Guyin50s)
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To: Excuse_My_Bellicosity

So? IF they paid the premiums and didn’t kill the individual in question, it’s none of anyone’s bidness.


8 posted on 07/03/2007 8:35:53 AM PDT by Still Thinking (Quis custodiet ipsos custodes?)
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To: Excuse_My_Bellicosity

Is this going to become another one of those annual stories the media publishes to fill space. Many employers take out term life insurance policies on their employees, about the only part about it that’s bad is that the insurance company frequently puts on travel restrictions (like no more than 5 employees on the same plane) that can be kind of annoying if you’re trying to get a large number of employees someplace other than the office. By and large if your company offers some kind of life insurance benefit you can bet they’ve probably taken out a policy on you. And this is like the 3rd or 4th time somebody has whined about WalMart doing that, people just need to get over it.


9 posted on 07/03/2007 8:37:10 AM PDT by discostu (indecision may or may not be my biggest problem)
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To: Scythian

And this negatively impacted the employees how, exactly?

They intended to use the money from the policies to offset rising health care costs, a BENEFIT to all of the employees receiving the coverage.


10 posted on 07/03/2007 8:37:54 AM PDT by craig_eddy
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To: Scythian
If you ask me that is a disgusting practice and Wallmart should be ashamed of itself,

What a bunch nonsensical drivel! It is a standard and prudent practice of companies to have insurance on key personnel.

11 posted on 07/03/2007 8:37:57 AM PDT by AmericaUnited
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To: Excuse_My_Bellicosity

WHAT an ignorant “journalist.” And, what a scummy attorney.


12 posted on 07/03/2007 8:40:14 AM PDT by goodnesswins (Being Challenged Builds Character! Being Coddled Destroys Character!)
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To: Scythian
The company settled two lawsuits with employees represented by Myers in Texas and Oklahoma, one for about $10 million and one for about $5 million.

What's a disgusting practice is this lawyer bilking WalMart (and thus their customers) out of $15 million. THAT'S a disgusting practice.

13 posted on 07/03/2007 8:40:56 AM PDT by craig_eddy
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To: Excuse_My_Bellicosity
It seems that each person covered sould have at least been advised that they were covered.

But if 'Key man' coverage was common, then how could a 'key man' not know?

14 posted on 07/03/2007 8:41:04 AM PDT by Michael.SF. ("The military Mission has long since been accomplished" -- Harry Reid, April 23, 2007)
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To: HEY4QDEMS

I am insured with key employee insurance here at my work, but since it is a family business the money will go directly to my wife when I die. The cost of the insurance is dirt cheap and it is a nice bonus coverage on top of my regular policy, I fail to see why people are getting upset over this, companies have been doing this for decades.


15 posted on 07/03/2007 8:41:24 AM PDT by Abathar (Proudly catching hell for posting without reading the article since 2004)
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To: Scythian
I have to admit that it does look like a confusing tax scam (like so much of life insurance is). Basically WalMart figured that X number of its employees would die, and the insurance overhead was less than the tax savings on converting taxable income to non-taxable insurance payouts.

Key employee insurance is one thing because loosing the replacing the president of the company or even a store manager is expensive, but insuring everyone as a tax dodge? No wonder so many people hate the IRS.

16 posted on 07/03/2007 8:41:34 AM PDT by KarlInOhio (A base looking for a party.)
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To: craig_eddy
And this negatively impacted the employees how, exactly? I would take this to the supreme court. No company should be able to make a profit from the death of an employee. I would investigate walmart in relationship to every employee death as they have motive, period. That's my opinion folks, and you're going to have to live with it.
17 posted on 07/03/2007 8:42:04 AM PDT by Scythian
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To: Excuse_My_Bellicosity
Not to worry, it's all about the low prices on low-quality garbage.

Not to worry, it's all about the low prices on low-quality garbage...........from china!

18 posted on 07/03/2007 8:43:27 AM PDT by processing please hold (Duncan Hunter '08) (ROP and Open Borders-a terrorist marriage and hell's coming with them)
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To: Scythian

Oops, I mean “That’s my opinion folks, and you’re going to have to live with it, that is, unless you’re a walmart employee, then you might wind up dead?”


19 posted on 07/03/2007 8:43:43 AM PDT by Scythian
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To: Excuse_My_Bellicosity

Other then not telling the employees who were insured what is creepy about this? Companies do this all the time! If you lose an employee there is a financial cost to the company and why would you ensure your assets but not youre most important resource, your employees..


20 posted on 07/03/2007 8:44:10 AM PDT by N3WBI3 (Light travels faster than sound. This is why some people appear bright until you hear them speak....)
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To: KarlInOhio
loosing the replacing -> losing and replacing

What in the world am I doing behind the keyboard?

21 posted on 07/03/2007 8:45:00 AM PDT by KarlInOhio (A base looking for a party.)
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To: Excuse_My_Bellicosity

key man insurance.

this is just hurt walmart image to force settlement insurance.


22 posted on 07/03/2007 8:45:00 AM PDT by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: Scythian

I got some bad news for you, you’re going to wind up dead n matter who does or doesn’t have an insurance policy on you.

I know that must be shocking, and I’m sorry to have to break it to you. But alas, that’s one of the problems with being human.


23 posted on 07/03/2007 8:45:11 AM PDT by craig_eddy
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To: Michael.SF.
Why should they even know? It is a business decision only, it has nothing to do with the employee at all.

Unless the policy is in effect after the employee leaves like a regular term life would be, then that is kind of creepy.

We have been doing it here for years, whether the employee wants us to do it or not he can’t stop us from doing it, it’s our businesses expense to replace him if he dies and the policy is dirt cheap.

24 posted on 07/03/2007 8:45:42 AM PDT by Abathar (Proudly catching hell for posting without reading the article since 2004)
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To: Michael.SF.

I think that doing it in secret is the only problem. However, the company claims that employees were notified. If they were, then this is a non issue.


25 posted on 07/03/2007 8:46:13 AM PDT by SALChamps03
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To: Excuse_My_Bellicosity
So what? Lots of companies take out life insurance on employees. It’s not costing the employees anything. Unless the charge is that Wal Mart is killing it’s employees in order to collect on it’s life insurance policies I fail to see what the big deal is.
26 posted on 07/03/2007 8:46:50 AM PDT by monday
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To: Scythian
If you ask me that is a disgusting practice and Wallmart should be ashamed of itself, honestly, trying to get a tax break of the death of others? I’m beginning to see why everybody hates them.

Key man life insurance could save your business

Contemplating the death of your company leaders is pretty dismal subject matter. But think of the consequences - businesses have bitten the dust due to the death of just one employee. Key man life insurance is an affordable way to prevent your business from sinking after a critical employee passes away.

Key man life insurance works like individual life insurance - when the insured dies the policy pays out a benefit. Instead of an individual insuring himself or a family member, however, the business owns the policy and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout...

27 posted on 07/03/2007 8:48:39 AM PDT by E. Pluribus Unum (Islam is a religion of peace, and Muslims reserve the right to kill anyone who says otherwise.)
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To: AmericaUnited
>>>>It is a standard and prudent practice of companies to have insurance on key personnel.

How are we defining "key"??

If by 'key' you mean manager, department head, etc. yes, but the typical WalMart greeter? Are they key?

It should be against the law for anyone to take out insurance on you without your knowledge - pure and simple.

28 posted on 07/03/2007 8:48:42 AM PDT by Keith in Iowa (A dyslexic, agnostic insomniac asks, "Is there a doG?")
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To: Scythian

Who’s paying the premium? A good business venture, IMHO.


29 posted on 07/03/2007 8:50:42 AM PDT by Safetgiver (So simple, even a Muslim can do it.)
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To: E. Pluribus Unum
Key man life insurance works like individual life insurance - when the insured dies the policy pays out a benefit. Instead of an individual insuring himself or a family member, however, the business owns the policy and pays the premium. If the insured dies, the business is the beneficiary and will receive the policy payout...

A great thing - if done in the sunshine, with all participants knowing and approving. What makes WalMart's position weak is that is was done in secrecy.

30 posted on 07/03/2007 8:50:59 AM PDT by Keith in Iowa (A dyslexic, agnostic insomniac asks, "Is there a doG?")
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To: Scythian

You quite obviously don’t understand this subject at all.


31 posted on 07/03/2007 8:52:47 AM PDT by ishabibble (ALL-AMERICAN INFIDEL)
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To: monday

>>>I fail to see what the big deal is.

Ho ‘bout the fact it was done without people’s knowledge? Would you want your employer taking out a policy on you without telling you about it?


32 posted on 07/03/2007 8:53:29 AM PDT by Keith in Iowa (A dyslexic, agnostic insomniac asks, "Is there a doG?")
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To: Abathar
We have been doing it here for years, whether the employee wants us to do it or not he can’t stop us from doing it, it’s our businesses expense to replace him if he dies and the policy is dirt cheap.

The difference is that your company is probably small enough where losing an employee will affect the company. Wal-Mart is big enough that they are just playing statistical games. Let's say they figure 0.1% of the employees would die in a year. Insurance will then be 0.11% (or so) of the total insured value. If an average number of Wal-Mart employees die, Wal-Mart falls behind because of the insurance overhead - except that it looks like the insurance payout is tax-free. So the payout of 0.1% times the total insured value (tax free) is more than the premiums of 0.11% times the total value minus tax deductions because the insurance is a "legitimate" business expense.

33 posted on 07/03/2007 8:54:21 AM PDT by KarlInOhio (A base looking for a party.)
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To: processing please hold
Not to worry, it's all about the low prices on low-quality garbage...........from china!

And of course, Wal-Mart is the ONLY store that sells crap from China. /s

34 posted on 07/03/2007 8:54:52 AM PDT by dfwgator (The University of Florida - Still Championship U)
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To: Abathar
Why should they even know?

From management perspective I would think notifying an employee of this would be good:

"You are so valuable to us that we have ...."

Everyone likes to feel important and to occasionally be reminded of this.

35 posted on 07/03/2007 8:55:21 AM PDT by Michael.SF. ("The military Mission has long since been accomplished" -- Harry Reid, April 23, 2007)
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To: ishabibble
You quite obviously don’t understand this subject at all.

I do, it's disgusting ...
36 posted on 07/03/2007 8:55:35 AM PDT by Scythian
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To: Keith in Iowa
It should be against the law for anyone to take out insurance on you without your knowledge - pure and simple.

Why? How does it hurt the employee?

37 posted on 07/03/2007 8:55:52 AM PDT by dfwgator (The University of Florida - Still Championship U)
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To: Excuse_My_Bellicosity; Mrs.Nooseman; Diana in Wisconsin; bfree; Graybeard58; CSM; metesky; ...

WalMart Hit Piece Ping..............


38 posted on 07/03/2007 8:57:42 AM PDT by Gabz (Don't tell my mom I'm a lobbyist, she thinks I'm a piano player in a whorehouse)
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To: Keith in Iowa

My employer has insurance policies on every single employee in the engineering department, most of the high end people in the rest of the company, and everybody that’s manager or above. The only reason I found out about it was when we did a gathering of all of engineering and I asked the person that was arranging the travel of the people in my office why we were spread across so many flights. It’s no big deal, doesn’t bother me in the least.


39 posted on 07/03/2007 8:58:28 AM PDT by discostu (indecision may or may not be my biggest problem)
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To: Excuse_My_Bellicosity
More Wal-Mart bashing. Buried in the story:

Myers said this corporate practice is not uncommon. He estimates that up to 25 percent of Fortune 500 companies have taken out such policies on employees.

40 posted on 07/03/2007 9:01:57 AM PDT by Lurking in Kansas (Nothing witty here...)
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To: dfwgator

>>>Why?

It’s the principle of the thing. I simply believe that one is entitled to know when a second party takes out insurance on them that benefits said second party...and if you think that’s odd, well, I don’t care.


41 posted on 07/03/2007 9:01:58 AM PDT by Keith in Iowa (A dyslexic, agnostic insomniac asks, "Is there a doG?")
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To: Scythian
I would investigate walmart in relationship to every employee death as they have motive, period.

What an idiotic statement. Do you suggest the investigation into the deaths of every employee who works for a company with these policies, or is your veiled accusation only aimed at WalMart?

42 posted on 07/03/2007 9:02:14 AM PDT by Gabz (Don't tell my mom I'm a lobbyist, she thinks I'm a piano player in a whorehouse)
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To: Keith in Iowa

According to the article WalMart employees were notified and offeredd the opportunity to say no.


43 posted on 07/03/2007 9:03:23 AM PDT by Gabz (Don't tell my mom I'm a lobbyist, she thinks I'm a piano player in a whorehouse)
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To: Clintons Are White Trash

This is not key man insurance. This is what the industry calls Janitor Insurance.

How would it make you feel to know that the company that controls the quality of your health care coverage and workplace safety also has a financial interest in your premature death?


44 posted on 07/03/2007 9:04:03 AM PDT by Romulus (Quomodo sedet sola civitas plena populo.)
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To: discostu

>>My employer has insurance policies on every single employee in the engineering department, most of the high end people in the rest of the company, and everybody that’s manager or above.<<

More power to ‘em.

But you should have been notified up front about it.


45 posted on 07/03/2007 9:04:28 AM PDT by Keith in Iowa (A dyslexic, agnostic insomniac asks, "Is there a doG?")
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To: dfwgator
“Why? How does it hurt the employee?”

I can see where it could be abused by a company that also controls the medical care insurance for the employees.

46 posted on 07/03/2007 9:05:14 AM PDT by Beagle8U (FreeRepublic -- One stop shopping ....... Its the Conservative Super Walmart for news .)
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To: SALChamps03
I think that doing it in secret is the only problem. However, the company claims that employees were notified. If they were, then this is a non issue.

I got some news for ya. Companies do a lot of things in secret you don't know about. Generally for their benefit, not yours.

I know, I'm shocking you. ;-)

47 posted on 07/03/2007 9:06:01 AM PDT by Lurking in Kansas (Nothing witty here...)
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To: Gabz
According to the article WalMart employees were notified and offeredd the opportunity to say no.

Don't let facts get in the way of a good WalMart-bashing thread.

48 posted on 07/03/2007 9:06:28 AM PDT by dfwgator (The University of Florida - Still Championship U)
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To: Keith in Iowa

Why? What does it matter? It’s their money, so long as they aren’t using that policy to limit my off the clock behavior there’s no logical reason for me to give a damn.


49 posted on 07/03/2007 9:06:51 AM PDT by discostu (indecision may or may not be my biggest problem)
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To: craig_eddy
I got some bad news for you, you’re going to wind up dead n matter who does or doesn’t have an insurance policy on you.

I know that must be shocking, and I’m sorry to have to break it to you. But alas, that’s one of the problems with being human.

But Wal-Mart sells cheap stuff! /knee jerk

50 posted on 07/03/2007 9:07:35 AM PDT by 1rudeboy
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