Kmart investigates ex-officials

Company suspends severance payments


CHICAGO - Kmart Corp.'s board of directors is investigating possible wrongdoing by former senior executives and said it has suspended severance payments and will not forgive millions in loans given to some of the executives until the investigation is completed.

The loans were doled out in the months preceding the company's bankruptcy filing Jan. 22, the largest retail reorganization in history.

The board's so-called stewardship review is focused in part on $30.1 million in loans given to nearly 70 top-level employees, including then-Chief Executive Officer Chuck Conaway.

Kmart's use of corporate jets also is under review.

Kmart's bankruptcy lawyer, Jack Butler, announced the review at a meeting in Chicago yesterday with the retailer's creditors, who have been angry about the company's plans to give Conaway and other executives millions of dollars in bonuses and severance pay.

The investigation into management practices was revealed a day after Kmart said it would restate its 2000 profits and delay the release of its results from last year until May 15, with heavier losses than expected.

Experts say the review could open up a "can of worms" and is not a good sign for the retailer, after Kmart said it needed more time to file its annual financial report with the Securities and Exchange Commission.

Kmart said the review of its accounting methods had delayed the release of the report. The company also said it might overhaul its accounting system.

Butler said the management review is in addition to a company investigation of its accounting practices, which was prompted in part by an anonymous letter in January that alleged improprieties. He said the accounting review is substantively complete and that the management review should be wrapped up by summer's end.

Kmart is trying to get money back from at least one executive who has left the Troy, Mich., retailer since getting a loan and might require repayment from the others.

"It is fair to conclude the [management] review as both deliberate and comprehensive," Butler said.

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