Attorney at Law
rodharmon@abusivechargebacks.com
425.402.7800
Kmart was recognizing and forecasing income from undocumented vendor allowance agreements. The result was to inflate Kmart's income and income projections at a time when the board of directors was deciding whether to grant senior managers millions of dollars in retention loans and bonuses. The problem was so serious that, in August 2002, Kmart established new internal oversight over vendor allowance procedures. The new controls required merchandising and finance personnel to undergo training about the proper procedures and accounting treatments for vendor allowances.
Serious charges have already been made. Attorneys and forensic accountants have interviewed more than 570 current and former Kmart employees, have collected and analyzed over 1.5 million pages of documents, and have processed more than 620,000 pages of documents for production in response to subpeonas and requests for documents from the Securities & Exchange Commission, the U.S. Attorney''s Office, a Chicago grand jury, and the U.S. House of Representatives. Kmart has already determined that ten former officers and senior managers engaged in conduct that would constitute a material breach of the "termination for cause" provisions of their employment agreements. Criminal charges may be in the offing.