WEST PALM BEACH, FL (www.hedgeco.net) – The Securities and Exchange Commission has charged two former Kmart executives with financial fraud. According to the complaint filed by the agency, �formerChief Executive Officer Charles C. Conaway and former Chief Financial Officer John T. McDonald are responsible for materially false and misleading disclosure about the company’s liquidity and relatedmatters in the Management’s Discussion and Analysis (MD&A) section of Kmart’s Form 10-Q for the third quarter and nine months ended October 31, 2001, and in an earnings conference call withanalysts and investors.�

The director of the Division of Enforcement, Linda Chatman Thomsen said, “The SEC has repeatedly emphasized the important role MD&A disclosure is intended to play in giving shareholders the ability to examine a corporation ‘through the eyes of management. Kmart senior management deprived its shareholders of that opportunity.�

According to the SEC, the executives being charged, Conaway and McDonald failed to �disclose the reasons for a massive inventory overbuy in the summer of 2001 and the impact it had on the company’s liquidity.� Peter H. Bresnan, an Associate Director in the Division of Enforcement said, “Investors are entitled to both accurate financial data and an accurate description of the story behind the numbers. Kmart’s senior management failed to honestly inform investors that Kmart faced a liquidity crisis in the third quarter of 2001, how the company’s own ill-advised action had caused the problem and what steps management took to respond to it.� The complaint was filed at the United States District Court for the Eastern District of Michigan.

Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net

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