SEC wants big penalty in Kmart CEO case

Ann Arbor, Mich. A Securities and Exchange Commission lawyer told a federal court on Wednesday that the ex-head of Kmart Corp. should pay millions of dollars for misleading investors about the retailer's financial health in 2001.

The SEC accused Charles Conaway of failing to disclose that Kmart was delaying payments to suppliers to save cash, months before a bankruptcy filing. In June, a federal jury in Ann Arbor, Mich., found him liable in a civil trial.

SEC lawyer Alan Lieberman told the court Conaway would have been fired "for cause" and not been entitled to a $5 million retention loan if the truth about Kmart's finances has been known at the time. He said Conaway still hasn't taken responsibility.

The penalty hearing was before U.S. Magistrate Judge Steven Pepe. Conaway last month asked the judge to throw out the jury's verdict, but Pepe hasn't ruled on that request.