While the courts are likely to resolve the truth of the matter, the public allegations and war of words underscore the risks that suppliers and retailers take when they become friendly. As Wal-Mart states in its 25-page internal ethics statement, "The appearance of a conflict may be just as damaging to Wal-Mart's reputation as an actual conflict."

Most large retailers have strict rules that govern their relationships with suppliers. But Wal-Mart is among the most stringent. Buyers at the Bentonville, Ark.-based retailer aren't allowed to accept free meals, supplier-paid trips or tickets to sporting events, among other items. To prevent cozy relationships with suppliers, Wal-Mart rotates its buyers frequently among different departments.

One reason is that Wal-Mart is constantly under close scrutiny from labor unions, consumer advocates and even presidential candidates.

Which is why some retail observers are baffled by Scott's close relationship with Jacobs. Nothing unethical may have taken place between the two executives, but in an environment when Wal-Mart employees can't even accept a free cookie from a vendor, some critics question why Scott was so close to a major vendor.

"If you're the CEO of Wal-Mart, you're a target," said Howard Davidowitz, chairman of Davidowitz & Associates, a retail investment banking and consulting firm in New York. "Everyone is after you. So you want to be super-careful not to give your opponents the slightest ammunition."

A 'large pink diamond'

In her court filing, Roehm accused the company of a double standard, detailing alleged instances when top executives received gifts from suppliers while firing her for alleged conflicts of interest. Wal-Mart said it fired Roehm because she had an affair with an employee, Sean Womack, and took gifts from an advertising firm, Draft-FCB, that was vying for a large advertising account with the retailer.

Roehm claimed in the lawsuit that Jacobs offered "a number of yachts" to Scott, as well as a "large pink diamond" to Scott's wife. Both were offered at "preferential prices," the lawsuit said. She also claimed that Scott accepted free trips on "private airplanes provided by Mr. Jacobs," which were used by Scott and his wife to travel to their residences in Longboat Key, Fla., and Las Vegas.

In addition, Roehm charged that Scott's son, Eric Scott, "created the appearance of conflict" by going to work for Jacobs Trading, which is owned by Jacobs and sells unsold Wal-Mart merchandise, among other products.

Wal-Mart declined to make Scott available, and Roehm's attorney, Sam Morgan, declined to comment beyond the lawsuit or allow his client to be interviewed.

Within a day after her lawsuit was filed, Roehm's accusations were printed in the national press and were echoed on television stations across the country. Critics of the giant retailer claimed that Scott had broken the retailer's own ethics rules.

Jacobs, for his part, wasted little time going on the offensive.

Though traveling in Turkey meeting with suppliers at the time the allegations arose, he fielded calls from the Financial Times, CNBC, the Wall Street Journal and others. "I didn't want people to think I was running away from it, because Irwin Jacobs never has," he said.

Jacobs said the accusations made by Roehm are untrue. Jacobs said he doesn't own any private planes, and he didn't know about the diamond ring until Roehm's accusations appeared in the national media.

"My wife called me and said, 'I'm really upset at you,' " he said. "I asked her why and she said, 'Because you gave a diamond ring to Linda [Scott] and not to me.' We thought it was an absurd joke."

The $404,652.24 boat

As for the "yachts," Jacobs said one of his companies actually sold Scott three fishing boats -- all at market prices. Scott purchased a 39-foot Wellcraft boat for $404,652.24, as well as a used, 29-foot coastal fishing boat for $75,000, according to receipts shown by Jacobs.

Both purchases were made at a Sarasota, Fla., factory of one of Jacobs' 14 boat companies, Wellcraft Marine Corp. The factory is about 15 minutes from Lee Scott's residence in Longboat Key. At the time of the purchases, Eric Scott worked at the Wellcraft factory in Sarasota; but Jacobs insists Lee Scott didn't call him about the boat purchases or take advantage of a discount that could be available through his son.

Jacobs said the accusations of preferential deals could affect his business. Jacobs said he was made aware of one instance in which a competitor of his company, Jacobs Trading, was urging his clients to switch business. The competitor, which Jacobs declined to identify, suggested that the only reason Jacobs was successful was that he offered favors in return for business, he said.

Even if he had offered Scott a gift, the executive never would have accepted it, he said. Jacobs said that once, Scott insisted on paying $12 for a promotional hat offered to him by an employee at one of his boat companies. "Scott told me, 'Thanks, but I don't intend to get fired over a $12 hat.' "