Friday, March 2, 2007
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 .