Bankruptcy of a Retail Giant

In: Business and Management

Submitted By VibhuSingh
Words 726
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Bankruptcy of a Retail Giant

Blunders by former Chairman Charles Conaway and President Mark Schwartz led Kmart into bankruptcy. The retailer had to close 284 stores, including this one in Novi, and lay off 22,000 workers. They lived the good life of gated estates, a 47-foot yacht, corporate jets at their beck and call, and multiple pay hikes, perks, bonuses and loans. But even as Kmart Corp. struggled for survival, its chairman, Charles Conaway, and president, Mark Schwartz, wanted more, renegotiating employment contracts that would ultimately net them a combined $34 million in less than two years.
Conaway and Schwartz, the leaders of the $37-billion-a-year retail giant that lost $3.9 billion in its past five quarters and laid off 22,000 workers this year, were the central figures in the company's demise. Their management blunders led Kmart into bankruptcy, and questions abound as to whether they hid the company's financial condition from its board of directors, employees and shareholders.
But one thing is clear: As Kmart spiraled downward, Conaway and Schwartz grew richer. With Kmart mired in bankruptcy, the payouts to Conaway and Schwartz came under scrutiny in a federal criminal investigation of accounting practices.
Federal investigators zeroed in on the personal finances and compensation deals struck by Conaway, Schwartz and other former Kmart executives in the months leading up to the company's Jan. 22 bankruptcy filing in Chicago.
The Kmart investigation heated up in the wake of accounting scandals at corporate giants such as Enron Corp., WorldCom Inc., and Tyco International Ltd. At the behest of President Bush, the Justice Department created a task force to crack down on corporate fraud.
At Kmart, Conaway and Schwartz on multiple occasions leveraged new employment deals out of the company's board. They billed the company for extravagant…...

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