Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Friday, March 5, 2010

Former Kmart CEO Ordered to Pay Over $10 Million in Financial Fraud Action

The SEC announced today that Charles C. Conaway, the former Chief Executive Officer of Kmart Corporation, has been ordered to pay over $10 million in disgorgement, prejudgment interest and civil penalties.  On August 23, 2005, the SEC charged Conaway with misleading investors about Kmart's financial condition in the months preceding the company's bankruptcy. On June 1, 2009, a jury returned a verdict in the SEC's favor on all charges following a three-week trial in Ann Arbor, Michigan.  On March 3, 2010, the court ordered Conaway to pay disgorgement in the amount of $5,000,000, together with prejudgment interest thereon in the amount of $2,853,432, and a civil penalty of $2,500,000.  The court further ordered that Conaway provide a declaration that he has not received and will not seek any payment, reimbursement, or indemnification from any third party for any portion of the civil penalty, and if he fails to provide such declaration, that Conaway pay a civil penalty of $5,000,000.  The court enjoined Conaway from taking any action to transfer, conceal, or dissipate assets for 60 days while the parties attempt to negotiate the terms of a stay pending appeal.

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