Jury sides with SEC in Kmart case

Detroit The former head of Kmart Corp., Charles Conaway, was found liable Monday for misleading investors about company finances before a bankruptcy filing in 2002, according to the Associated Press.

The verdict in the civil fraud trial followed 10 days of testimony in federal court in Ann Arbor, Mich. The case looked at Conaway's brief tenure and scramble to keep Kmart afloat before one of the largest bankruptcies in retail history.

The Securities and Exchange Commission accused him of failing to disclose that the retailer was delaying payments to suppliers to save cash. The trial centered on a conference call with analysts and Kmart's quarterly report to regulators, both in November 2001.

The jury found that he acted "with intent to defraud or with reckless disregard for the truth." It ruled that delaying payments to vendors was a "material liquidity deficiency" affecting Kmart's finances and should have been publicly reported.

Scott Lassar, Conaway's lawyer, said the verdict was disappointing and he would pursue an appeal.

U.S. Magistrate Judge Steven Pepe will handle the penalty phase. Conaway could be fined and banned from serving as an executive or director at a public company.