Kmart Corp. has revealed that it has identified evidence that its former CEO, Charles Conaway, hid the company’s deteriorating financial condition for months before it filed for bankruptcy protection.
"Conaway failed ... to adequately supervise and direct other company executives who reported directly or indirectly to him,” Kmart’s internal investigation of the events leading up to its bankruptcy concluded. The company said that there was “credible and persuasive” evidence to support legal actions against for former CEO.
The company maintains that Conaway did not keep the board of director apprised of the seriousness of the situation, and that he improperly approved more than $24 million in retention loans to senior executives.
Conaway himself received a $5 million retention loan, as well as $4 million in severance when he left the company. A lawyer involved in the internal probe has recommended that the company seek the return of both the loan and severance from Conaway,
Conaway denied the charges, and his lawyers released statement saying that he “acted honorably” and in the best interest in the company’s shareholders and employees.
"Conaway failed ... to adequately supervise and direct other company executives who reported directly or indirectly to him,” Kmart’s internal investigation of the events leading up to its bankruptcy concluded. The company said that there was “credible and persuasive” evidence to support legal actions against for former CEO.
The company maintains that Conaway did not keep the board of director apprised of the seriousness of the situation, and that he improperly approved more than $24 million in retention loans to senior executives.
Conaway himself received a $5 million retention loan, as well as $4 million in severance when he left the company. A lawyer involved in the internal probe has recommended that the company seek the return of both the loan and severance from Conaway,
Conaway denied the charges, and his lawyers released statement saying that he “acted honorably” and in the best interest in the company’s shareholders and employees.
- KC's View:
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It was just last week that Conaway was looking to get a company insurance policy to help him pay his legal defense costs. We don’t know how that request will be answered, but it certainly sounds like those defense costs are going to be growing.
There is one thing, though. Somehow, it sounds like maybe the board of directors wasn’t doing its job, either. Kmart already was in trouble, and Conaway was expected to lead a turnaround. You’d think at the very least the board would have been actively monitoring his progress.
By the way, Kmart also said yesterday that it will depend on promotional pricing to drive traffic into its stores and sales onto its bottom line. What this tells us is that Kmart isn’t doing anything to change the paradigm of its retailing existence – just cutting costs and prices and hoping to keep the death knell from sounding.
