Purchase, N.Y. (May 5, 2004) – It’s bad enough to have the Securities and Exchange Commission sending you letters about your own accounting; now you have to worry about whether your company is involved in improprieties at its customers and suppliers.
PepsiCo Inc. announced that it had received notification from the SEC that the commission is proposing to recommend bringing a civil action against its Pepsi-Cola and Frito-Lay divisions over the alleged involvement of two non-executive employees in the improper recording of revenues at Kmart Corp. The employees are alleged to have signed documents acknowledging payments of $3 million from Pepsi-Cola and $2.8 million from Frito-Lay, which the SEC alleges Kmart used to improperly record the timing of revenue.
Both divisions are cooperating with the SEC and submitting reasons why the action should not be recommended or brought, according to a PepsiCo statement issued on April 30, which pointed out that an internal review showed that none of the company’s officers were involved. The investigation involves no allegations regarding PepsiCo’s own accounting.
In a separate statement issued later the same day, Kmart hastened to point out that the improper transactions had been previously identified in early 2003, prior to its emergence from bankruptcy. The company said that it had fired all the employees responsible, and restated the appropriate financial statements.
-- WebCPA staff
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