Kmart Defendants Settle with SEC

The SEC announced that it  settled  charges  against  the final two defendants in  its  case  against  several  individuals  for causing Kmart to improperly account for millions of dollars  worth  of   vendor "allowances." Kmart obtained allowances from  its  vendors  for various promotional and marketing activities. According to  the  SEC'S complaint, Kmart executives and employees of  Eastman  Kodak  Company, Coca  Cola  Enterprises   Inc.   and   PepsiCo   Inc.'s   wholly-owned subsidiaries, Pepsi-Cola Company and Frito-Lay, Inc., caused Kmart  to  recognize allowances prematurely on the  basis  of  false  information   provided to the company's accounting department.

On Dec.  2,  2004,  the  SEC  announced  settlements  with  two  Kmart  executives and three vendor defendants. The three non-settling defendants were John Paul Orr, former Divisional Vice President of Kmart's photo division, David C.  Kirkpatrick,  former  National  Sales  Director  for   Coca   Cola Enterprises, Inc., and  David  N.  Bixler,  a  former  National  Sales Director of PepsiCo's Pepsi-Cola Division. On March 6, 2006, the  U.S.  District Court for the Eastern District of Michigan  granted  Bixler's motion to dismiss in its entirety and granted  Orr  and  Kirkpatrick's motions to dismiss in part. Without admitting or denying the charges  against  him,  Orr  has  now agreed to settle by consenting to an administrative order to cease and  desist from committing or causing violations of  Rule  13b2-1.  Without  admitting  or denying the charges against him, Kirkpatrick has agreed to  settle  by paying a $25,000 civil penalty and by consenting to an  administrative order to cease and desist from committing  or  causing  violations  of Rule 13b2-1 of the Exchange Act and causing any  violations  and  any future violations of Section 13(a) of the Exchange Act .