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ON THE HOT SEAT Charles Conway has been accused of duping investors in a 2001 third-quarter securities filing and on a conference call. |
NEW YORK - A former Kmart Corp. chief executive, Charles Conaway, found liable in June for misleading investors, should pay $22.6 million in sanctions, a US regulator told a federal judge.
Conaway should be ordered to forfeit $8.9 million in “ill-gotten gains,’’ plus interest, and pay a fine equal to profits, the Securities and Exchange Commission said in documents filed last week. His lawyer, Scott Lassar, said he plans to dispute the request.
The regulator sued Conaway in 2005, alleging he duped investors in a 2001 third-quarter securities filing and on a conference call.
Kmart sought bankruptcy protection in January 2002, fired Conaway two months later, and then shut 599 stores.
“The defendant’s fraud was, at least for him, highly profitable,’’ the SEC wrote in the court documents. It was also “devastating for Kmart, its employees, and its shareholders.’’
The SEC accused Conaway of concealing that the company was short of cash and had a program to delay payments to vendors.
Had he disclosed Kmart’s financial condition, he probably would have been fired, losing $8.9 million in forgiven loans and other compensation, the agency wrote to the court last week.
“He didn’t get a penny from Kmart that he wasn’t entitled to,’’ Lassar said in an interview.
The SEC’s argument is faulty, and without it, the agency knows Conaway’s fine is limited to $120,000, he said. “We’ll be arguing that it should be less,’’ he added.
Conaway has asked the court to rule on the case in his favor, or in the alternative, to order a new trial, the lawyer said.
The company exited bankruptcy protection in May 2003.
Kmart Holding Corp. later acquired Sears, Roebuck & Co., which created Sears Holdings Corp., based in Hoffman Estates, Ill.
© Copyright 2009 Globe Newspaper Company.
