Saks Settles SEC Charges

New York City, The Securities and Exchange Commission (SEC) said Wednesday that Saks Inc. has agreed to settle a lawsuit that Saks Fifth Avenue understated sales to some vendors and didn't record markdowns properly, inflating its earnings, according to the Associated Press.

The regulatory agency said the company has agreed to settle the lawsuit without admitting or denying wrongdoing. The company also agreed to an injunction barring further violations.

The lawsuit, filed Wednesday in federal court in Manhattan, alleged that Sakes Fifth Avenue Enterprises employees engaged in the deceptive practices from at least 1999 to 2003 in order to achieve financial targets.

"Throughout that period, Saks set aggressive financial targets for SFAE and some SFAE employees believed they were expected to achieve these targets by deceptive means if necessary," the lawsuit said. "In addition, as a result of its inadequate internal controls, Saks failed to detect or adequately address the misconduct at SFAE."

From 1996 to 2003, more than a dozen employees intentionally understated to the vendors sales of their merchandise, according to the lawsuit. As a result, SFAE was able to collect millions of dollars in vendor-allowance payments to which it wasn't entitled, the SEC said.

The second practice involved the improper deferral of permanent markdowns from one period to another at SFAE, which also began in the mid-1990s.