Court rules that former Kmart CEO is liable for misleading investors

Well, this decision could set an interesting precedent. A jury in Michigan found the former head of Kmart, Charles Conaway, liable for misleading investors about company finances before a bankruptcy protection filing in 2002. The verdict was reached in a civil fraud trial, following 10 days of testimony in federal court.

The trial focused on a conference call with analysts and Kmart's quarterly report to regulators, both of which took place in November, 2001. The Securities and Exchange Commission (SEC) accused Conaway of withholding pertinent details from the analysts that had been highlighted in the management-analysis section of the report filed with the agency. On his call with the Wall Street analysts, Conaway did note that Kmart's sales were poor, leading to a 15 percent drop for the stock; however, he did not address any vendor strategy, or what has been deemed an "ill-timed purchase" of merchandise worth $800 million. In his defense (which obviously didn't go over too well with the jury), he testified that he had not written, or even read, the report and had relied on his CFO and others for its findings.