Ex-Kmart CEO might pay $22.6 million for deceiving investors in 10-Q

Ex-Kmart CEO Charles Conaway faces a fine of $22.6 million by the .S. Securities and Exchange Commission on charges he mislead investors before the company filed for bankruptcy in 2002. In its filing with the U.S. District Court for the Eastern District of Michigan on July 30, the SEC said Conaway "should be penalized for intentionally lying, and causing others to lie, about Kmart's financial condition."

The court was asked by the regulator to make Conaway return $13.7 million in what it described as "ill-gotten gains" and impose an $8.9 million civil penalty on him. Conaway was accused in making omissions and misrepresentations about Kmart's financial condition in its 10-Q regulatory filing in October 2001.

"Prepared in accordance with Conaway's directive to suppress any disclosure of the crisis, however, the Form 10-Q misled the investing public into believing that all was well with the company's cash flow," the SEC said in the filing.

"The document included no disclosure of the liquidity crisis or the fact that Kmart had delayed over $1 billion in vendor payments in an effort to survive it."

According to the SEC the charges against Conaway were supported by the Michigan Federal jury in June. Meantime, Conaway's attorney Scott Lassar said that his client never profited from the situation.