Children’s Place ceo out, troubles in
SECAUCUS, N.J. —Something must have been brewing at The Children’s Place back in April when the company failed to file the Form 10-K for the fiscal year ended Feb. 3. Now that it’s September, and NASDAQ sent two more Staff Determination letters, the company has not gathered the needed paperwork, meaning that unless NASDAQ extends the Nov. 15 deadline, The Children’s Place will be delisted.
And that’s just the beginning. In a public announcement on Sept. 26, The Children’s Place revealed that ceo Ezra Dabah has resigned at the request of the board of directors, because, as they reported, he did not comply with the company’s policies related to securities trades. The violations stemmed from two occasions. First, he failed to properly report an immaterial increase in ownership shares his wife received as a result of a trust distribution. Second, he pledged shares of the company pursuant to a customary margin account during a “blackout period” without approval.
Although these actions break the company’s code of business conduct, it was determined that no personal benefit was obtained and the company did not suffer financially. Therefore dismissal from employment was not warranted and Dabah will remain a member of the board of directors. Chuck Crovitz, a current board member, will stand in as an interim ceo until a new replacement is found. While The Children’s Place is on the lookout for two new board members and a permanent chairman, Crovitz will need to busy himself with completing the overdue annual report on Form 10-K, including audited financial statements and other overdue SEC periodic reports.
In addition to the violations of Dabah, another unnamed executive has been tampering with the code of conduct of the company’s policies and procedures. The violation involved a chief creative officer who is responsible for irregularities in expense reimbursement practices. To reprimand the individual, the board imposed sanctions, which include a refund of the erroneous amounts, change in position and reimbursement of investigation expenses.
Other changes taking place this year at The Children’s Place include executing the letter of agreement between the company and The Walt Disney Co. The long-term license agreement under which the company manages the Disney Stores has been modified to remodel the 234 existing stores by 2011 to fit the new prototype developed by the company. New to the prototype is the “Mickey” format that will grace the first nine models, scheduled to be completed during the second half of fiscal 2007.
In addition, the company plans to open at least 18 new Disney Stores designed using the new format. The company has allocated a $175 million dollar capital toward the venture, making the submission of the Form 10-K and future financial documents particularly important.
The snowballing of recent events may very well be what stirs The Children’s Place in the wrong direction in upcoming months.