Former Kmart executives charged with fraud

Two former executives at Kmart, the bankrupt discount retailer, were facing criminal and civil fraud charges yesterday, the latest in a series of allegations to have sullied corporate America.

The indictment from the US attorney's office in Detroit named Enio Montini, a former vice-president and general merchandise manager of the drug store division, and Joseph Hofmeister, a divisional vice-president in the same part of the business.

In addition to securities fraud, the two men are charged with conspiracy and making false statements to the securities and exchange commission.

Kmart filed for bankruptcy at the beginning of last year after running out of cash. Subsequent internal investigations have portrayed a company riddled with corruption.

On Monday, the company demanded that former chief executive Charles Conaway return millions of dollars in compensation.

Mr Montini and Mr Hofmeister were among a dozen executives made redundant in May 2002.

A civil complaint filed by the SEC yesterday alleged that the two men concealed a letter regarding a $42m multi-year payment from one of the company's customers.

The aim, it claims, was to improperly book the entire amount in the quarter ended August 2001 and make the division appear more profitable than it was.

The US attorney's office was due to make an announcement on the criminal charges late last night.

Kmart accused Mr Conaway of misleading directors of the company about the precarious state of its finances as it began to run short of cash. The company is seeking the return of a $5m loan and $4m in severance pay awarded after he left the business in March last year.

A lawyer for Mr Conaway described the company's accusations as a "misguided attempt" to shift blame for the retailer's demise away from the board.