Two Ex-Kmart Executives Charged With Accounting Fraud

Yesterday federal authorities charged two former Kmart executives with committing an accounting fraud that resulted in the bankrupt retailer overstating earnings by $42 million.

Separately, the Securities and Exchange Commission (SEC) filed civil and criminal complaints against Enio Montini, a former senior vice president and general manager, and Joseph Hofmeister, a former divisional vice president.

According to the SEC, Mr. Montini and Mr. Hofmeister conspired to mislead Kmart accountants about the true nature of a $42 million payment from American Greetings Corp., a Kmart vendor. The SEC alleges that the $42 million was improperly included in the financial reports for the second quarter of 2001, causing Kmart to understate losses by $0.06 per share.

Both Mr. Montini and Mr. Hofmeister were let go from Kmart in May 2002, following a reorganization of the company’s Troy, MI, headquarters. Kmart filed for bankruptcy on Jan. 22, 2002 and exits bankruptcy protection in April.

If they are convicted, Mr. Montini and Mr. Hofmeister face a maximum penalty of 10 years in prison and fines up to $1 million.

On Tuesday, Kmart said that it has enough evidence to take legal action against former Chief Executive Charles Conaway, who left the company two months after it filed for bankruptcy.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

Upcoming CPE Webinars

Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.