The Securities and Exchange Commission on Tuesday filed civil charges against two former Kmart executives, accusing them of making "materially false and misleading" disclosures to shareholders before the retailer's 2002 bankruptcy filing.
The complaint filed in U.S. District Court in Detroit charges former Chairman and Chief Executive Charles C. Conaway and former Chief Financial Officer John T. McDonald with securities fraud and aiding and abetting securities fraud. It also accuses them of aiding and abetting violations of rules that require publicly traded companies to file quarterly reports and to include material information in the reports so they are not misleading.
"Investors are entitled to both accurate financial data and an accurate description of the story behind the numbers," Peter H. Bresnan, an associate director in the SEC's enforcement division, said in a statement.
Conaway's lawyer, Scott Lassar, said in a statement that Conaway is disappointed by the action: "Mr. Conaway acted at all times in good faith and in the best interest of Kmart."
McDonald's lawyer, Jack Sylvia, said in a statement that his client "expects to be exonerated when the facts are tested in a court of law."
Kmart filed for bankruptcy protection Jan. 22, 2002, leading to the closing of about 600 stores and the termination of 57,000 Kmart employees.
The retailer acquired Sears, Roebuck & Co. in March. The new company, called Sears Holdings Corp., is based in Hoffman Estates, Ill.
The company declined to comment on the charges.