Federal judge says former Kmart CEO must pay

Posted Feb. 25, 2010 at 3:23 p.m.

Dow Jones Newswires | A federal judge Thursday ordered former Kmart Corp. chief executive Charles Conaway to pay more than $10 million in penalties for misleading investors about the retailer’s finances, the Detroit News reports on its Web site.

The penalties include repayment of a $5 million loan the company forgave, more than $2.6 million in interest on that loan and a $2.5 million civil penalty, U.S. Magistrate Judge Steven Pepe in Detroit wrote in his order. But Pepe rejected calls for an injunction barring Conaway from serving as a director or officer of another public company, saying that although Conway’s violations were “serious and clearly wrong,” they didn’t approach the “level of egregiousness found” in other cases brought by the U.S. Securities and Exchange Commission.

The SEC filed a civil complaint against Conaway in 2005 alleging false
statements made in 2001 before Kmart filed for bankruptcy protection in
2002. In June 2009, a jury found Conaway liable on all claims.

Conaway’s lawyers have said they’re seeking to get the verdict overturned on appeal.

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