Troy, MI, Jan. 20--Kmart Corp. has fired the five remaining executives who received millions in retention loans just months before the retailer filed for bankruptcy protection and demanded that all 25 recipients repay the $28 million.
Kmart said it had "severed employment relationships" with all remaining executives who received the loans during former chairman and chief executive officer Charles Conaway's tenure.
"The company felt it was important to put the controversy surrounding employees involved in the special retention loans behind it as the company prepares to emerge from Chapter 11," chairman James B. Adamson said. "We are confident that there will be an orderly transition and will now focus our efforts on establishing an emergence management team."
Kmart also named president Julian Day to the additional post of CEO. Day said that the firm hopes to emerge from Chapter 11 bankruptcy protection around April 30. Day succeeds Adamson, who will continue to serve as the company's chairman through the final stages of Kmart's reorganization. Adamson, who was hired to save the company from possible liquidation and ensure its survival amid a dire financial situation, will serve as a non-executive chairman.
Day, 50, came aboard with Adamson in March, when he was named president and chief operating officer. Prior to joining Kmart, Day worked for Sears, where he was chief financial officer and later served as chief operating officer.
The retailer has been investigating the loans given to 25 Kmart executives, including Conaway, in 2001. Conaway left the company in March of that year.
The FBI and U.S. Securities and Exchange Commission are investigating possible wrongdoing at Kmart. Kmart has said it may sue the former executives, possibly to recover money they received in the loans.
Company officials said an internal review had found evidence that the 2001 special loan program had been established without appropriate disclosure of information to the board of directors by former members of executive management.
The five executives dismissed were: Janet Kelley, executive vice president, general counsel and assistant secretary; Mariana Keros, vice president of trend and product development; Douglas Meissner, president of the western division; Paula Paquette, senior vice president of hardlines and home; and Lee Viliborghi, regional vice president.
Viliborghi told the Detroit Free Press that he got a phone call at work Friday morning telling him his 33 year career with Kmart was over because he had received a loan. Viliborghi, who is based in Colorado, said he repaid the $300,000 loan last April.
