SEC strikes one for the little guys: Kmart chief guilty of lying to investors
Chalk one up for corporate accountability. Kmart's former leader has been found guilty of misleading shareholders as the retailer sped toward a Chapter 11 bankruptcy filing.
All this happened in 2001, but Charles Conaway, Kmart's CEO at the time, has been on trial for misleading investors prior to the bankruptcy protection filing in January 2002. He had been in charge for less than two years.
It's not like Conaway is being blamed for pushing Kmart into bankruptcy, that all started long before he arrived. He was found guilty of not being honest about how bad things were at a very specific moment -- a conference call with Wall Street analysts in November 2001.
See, the company had prepared and filed a quarterly report with the Securities and Exchange Commission identifying excess inventory and problems paying vendors for merchandise. But on a call to report those financial results, Conaway never mentioned any of it. In fact, his defense was ignorance, saying he didn't write the report or even read it.
There's really no scenario that makes sense. Either he knew and deliberately misled investors or he wasn't paying attention; you know, doing his job. As for his punishment, that's still to be decided. Apparently he could be banned from ever serving as an executive at a public company.
Aren't punishments supposed to fit the crime?