U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20266 / September 5, 2007
Accounting and Auditing Enforcement Release No. 2674 / September 5, 2007
SEC v. Saks Incorporated, 07 Civ. 7821 (S.D.N.Y.) (CM)
Saks Inc. Settles Financial Reporting and Related Charges by SEC
On September 5, 2007, the Securities and Exchange Commission filed a civil injunctive action charging Saks Incorporated, owner of luxury department store Saks Fifth Avenue among other retail chains, with violating the financial reporting, books-and-records, and internal control provisions of the Securities Exchange Act of 1934. Saks has agreed to settle the case, without admitting or denying the Commission's allegations, and has agreed to an injunction barring future violations of these provisions.
The Commission's complaint, filed in federal court in Manhattan, alleges that from the mid-1990s until 2003, certain employees of the company's Saks Fifth Avenue Enterprises division ("SFAE") engaged in two deceptive practices in order to achieve their financial targets for the month, quarter or retail season and that these practices resulted in the company's overstatement of income by material amounts in its financial statements for its 2000, 2001, and 2002 fiscal years and for two quarters in fiscal 2001 and 1999. According to the complaint, the improper accounting by Saks resulted from aggressive financial targets the company set for SFAE, the belief by some SFAE buyers that they were expected to achieve their targets by deceptive means, if necessary, and Saks' lack of adequate internal controls.
More specifically, the complaint alleges:
The complaint alleges that by engaging in this conduct, Saks violated the financial reporting, books-and-records, and internal controls provisions of the Exchange Act. Specifically, the complaint alleges that Saks violated Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 12b-20, 13a-1, 13a-11 and 13a-13 thereunder. Without admitting or denying the Commission's allegations, Saks has agreed to settle the charges by consenting to a permanent injunction against further violations of the above reporting, books-and-records, and internal controls provisions.
Saks is a Tennessee corporation headquartered in Manhattan.