Litigation Release No. 21438 / March 5, 2010

Securities and Exchange Commission v. Charles C. Conaway and John T. McDonald, Jr., 05 Civ. 40263 (E.D. Michigan, filed August 23, 2005)

Former CEO Of Kmart Ordered to Pay Over $10 Million   

The Securities and Exchange Commission announced today that Charles C. Conaway, the former Chief Executive Officer of Kmart Corporation, has been ordered to pay over $10 million in disgorgement, prejudgment interest and civil penalties.  On August 23, 2005, the SEC charged Conaway with misleading investors about Kmart's financial condition in the months preceding the company's bankruptcy. On June 1, 2009, a jury returned a verdict in the SEC's favor on all charges following a three-week trial in Ann Arbor, Michigan, before Magistrate Judge Steven D. Pepe of the United States District Court for the Eastern District of Michigan.  On March 3, 2010, the court ordered Conaway to pay disgorgement in the amount of $5,000,000, together with prejudgment interest thereon in the amount of $2,853,432, and a civil penalty of $2,500,000.  The court further ordered that Conaway provide a declaration that he has not received and will not seek any payment, reimbursement, or indemnification from any third party for any portion of the civil penalty, and if he fails to provide such declaration, that Conaway pay a civil penalty of $5,000,000.  The court enjoined Conaway from taking any action to transfer, conceal, or dissipate assets for 60 days while the parties attempt to negotiate the terms of a stay pending appeal.  For additional information, see Litigation Release Nos. 21065 (June 1, 2009) and 19344 (Aug. 23, 2005).

Last modified: 3/05/2010