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Washington (Feb. 27, 2003) -- The Securities and Exchange Commission on Wednesday accused two former Kmart Corp. vice presidents of masterminding a $42 million accounting fraud.The federal suit, filed in Michigan, said Enio Montini and Joseph Hofmeister made a long-term deal with a vendor, American Greetings Corp., under which Kmart would get an "allowance" of about $42 million on June 20, 2001.
Generally accepted accounting principles, as well as the company's own accounting policies, required that the money be recognized over the term of the agreement.
"Montini and Hofmeister lied to Kmart accounting personnel and concealed a side letter relating to the $42 million payment from American Greetings in order to improperly recognize the entire amount in the quarter ended Aug. 1, 2001. Those deceptions caused Kmart to understate losses by $0.06 per share," the suit added.
The SEC said Montini and Hofmeister have also been indicted on related criminal charges.
-- Electronic Accountant Newswire staff
