A federal judge has ordered former Kmart Chief Executive Charles Conaway and former financial chief John McDonald to stand trial on accusations they misled investors about the retailer's financial problems before its 2002 bankruptcy filing, according to a published report.
U.S. District Judge Paul Gadola in Flint on Tuesday rejected Conaway and McDonald's request to dismiss a civil complaint that the Securities and Exchange Commission filed in August 2005, The Detroit News reported Wednesday.
Conaway lawyer Scott Lassar declined comment. Messages seeking comment were left before business hours Wednesday for McDonald lawyer John Sylvia.
In the past, Conaway and McDonald's lawyers have said the men acted in good faith.
Kmart Corp. filed for bankruptcy on Jan. 22, 2002, leading to the closing of about 600 stores, termination of 57,000 Kmart employees and cancellation of company stock. The Troy-based retailer reorganized as Kmart Holding Corp. in 2003.
It acquired Sears, Roebuck & Co. in 2005. The new company, called Sears Holdings Corp., is based in Hoffman Estates, Illinois.
The SEC wants to bar the men from serving as officers at public companies and recover an unspecified amount of money.
"The SEC now looks forward to presenting its case to a jury for decision," SEC enforcement lawyer Dean Conway told The Detroit News.
The SEC says the men made false statements during a Nov. 27, 2001, conference call with investors that concealed the extent of Kmart's financial difficulties.
On the Net: