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The federal government decided last week to drop its case against two former Kmart executives - Enio A. "Tony" Montini Jr. and Joseph Hofmeister - who were accused of securities fraud and making false statements to the Securities and Exchange Commission (SEC) in an effort to artificially inflate Kmart's earnings.

"In light of the testimony and evidence to date, the government believes that it is more likely than not that the evidence will not sustain a conviction," prosecutors said in their motion seeking dismissal.

However, the Justice Department says it is continuing to investigate the circumstances that led to Kmart's bankruptcy.
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