Saks Inc. announced that it has asked for the resignations of three senior executives, including its chief accounting officer, stemming from its investigation of improperly collected vendor markdown allowances in one of Saks Fifth Avenue’s merchandising divisions.
In March, the Securities and Exchange Commission launched an informal investigation that it soon upgraded to a formal order. According to the company, the U.S. Attorney for the Southern District of New York has initiated an investigation of its own.
The three executives asked to leave are chief accounting officer Donald Wright; Brian Martin, former general counsel and now a senior vice president in charge of overseeing Saks Fifth Avenue real estate; and Saks Fifth Avenue chief administrative officer Donald Watros. The company added that Watros was also asked to forfeit vested options and suffer other financial penalties.
Saks also stated that it will cut or eliminate the bonuses for chief executive officer Brad Martin and chief financial officer Douglas Coltharp due to poor communication with the audit committee and poor follow-up regarding the vendor markdown allowances. The company added that Coltharp will no longer be responsible for accounting or financial reporting matters; he will continue to have responsibility for treasury, strategic planning, external development, and real estate.
Other unnamed individuals at Saks Fifth Avenue who failed to adequately supervise those directly involved in the improper collections “or otherwise performed inadequately in respect of this issue” are receiving disciplinary actions ranging from termination to reprimand, the company stated.
Saks also clarified an earlier regulatory filing by disclosing that during fiscal years 1999 through 2003, the total markdown allowances improperly collected from vendors was about $20 million. The company stated that it did not identify any improper collections during the 2004 fiscal year.