The Securities and Exchange Commission on Tuesday charged former top executives of discount retailer Kmart with misleading investors about the retailer's financial condition in the quarter before it filed for Chapter 11 bankruptcy reorganization in 2002.
The financial fraud charges, filed in U.S. District Court for the Eastern District of Michigan, allege former CEO Charles Conaway and former CFO John McDonald were responsible for "materially false" disclosures in the financial report for the quarter ended Oct. 31, 2001.
The SEC seeks to ban the two from being officers of public companies and wants them to give up ill-gotten gains (as a result of false information), which can include salary, bonuses and proceeds from stock sales plus interest.
In the Management's Discussion and Analysis (MD & A) section of the financial report, the executives failed to explain a huge inventory buildup in the summer of 2001 and its impact on liquidity, the charges say.
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