The U.S. Securities and Exchange Commission wants former Kmart Chief Executive Charles Conaway to pay $22.6 million, alleging he mislead investors before the company filed for bankruptcy in 2002, court documents showed.
In a filing with the U.S. District Court for the Eastern District of Michigan on July 30, the SEC said Conaway should be penalized for intentionally lying, and causing others to lie, about Kmart's financial condition.
The agency asked the court to ask Conaway to return $13.7 million in what it described as ill-gotten gains and impose an $8.9 million civil penalty on him.
The SEC had accused Conaway of making omissions and misrepresentations about Kmart's financial condition in its 10-Q regulatory filing in October 2001.
Prepared in accordance with Conaway's directive to suppress any disclosure of the crisis, however, the Form 10-Q misled the investing public into believing that all was well with the company's cash flow, the SEC said in the filing.
The document included no disclosure of the liquidity crisis or the fact that Kmart had delayed over $1 billion in vendor payments in an effort to survive it.
A Michigan Federal jury, in June, upheld the civil charges against Conaway, according to the SEC.
Conaway's attorney Scott Lassar could not be immediately reached for comment by Reuters outside regular office hours.
Kmart is now a part of Sears Holdings Corp .
Lassar was quoted in the Wall Street Journal on Monday saying his client never profited from the situation.
He didn't make any money from his actions, the paper quoted Lassar as saying.
(Reporting by Ajay Kamalakaran in Bangalore; Editing by Dhara Ranasinghe)