Yet Another

It seems like only a few weeks ago that TPM Update published a newsletter beginning:

“Ahold
Kmart
Office Max
Saks
… and now, Home Depot.”

Oh, that’s right – it was only a few weeks ago. As we noted at the time, Home Depot was far from the first in the line of retailers with apparent problems about allowances. We also predicted that there would be more to follow (and probably soon). Of course, that’s pretty much like predicting that it will be hot in Phoenix next summer.

On Friday, Penn Traffic, a 110-store grocery chain in the northeast, fired two top execs as the result of an audit committee report. A press release attached to their SEC filing said:

PENN TRAFFIC ANNOUNCES EMPLOYMENT TERMINATIONS AND INTERIM FINDINGS OF ONGOING INTERNAL INVESTIGATION

SYRACUSE, NEW YORK - FEBRUARY 3, 2006 - The Penn Traffic Company announced today that the Board of Directors has terminated the employment of Les Knox, Senior Vice President, Chief Marketing Officer, and Linda Jones, Vice President, Non-Perishable Merchandising, following the presentation by the Audit Committee of an interim report in connection with its internal investigation into the Company's promotional allowance practices and policies. To date, the internal investigation has found certain improper practices relating to the recognition of promotional allowances in periods prior to the Company's emergence from Chapter 11 under the Bankruptcy Code in April 2005.

The Audit Committee's internal investigation, which was suspended as previously announced, has recommenced and is ongoing. Penn Traffic continues to cooperate with the previously disclosed investigations by the U.S. Securities and Exchange Commission and the U.S. Attorney's Office.

The company operates stores under the Bi-Lo Foods, Quality Markets, Riverside Markets, and P&C Foods names, and also operates as a wholesale food distributor.

They’ve been having their problems lately. The company came out of Chapter 11 last April, and then on July 1 announced that the SEC was investigating them over promotional allowances.

The Penn Traffic Company announced today that it has received requests for information in the form of subpoenas from the U.S. Securities and Exchange Commission (SEC) for documents concerning its promotional and allowance practices and policies. As Penn Traffic disclosed in its Disclosure Statement for its recently confirmed Plan of Reorganization, Penn Traffic continues to cooperate with the SEC and the U.S. Attorney's office in their investigation into these matters and will comply with these subpoenas. Penn Traffic's Audit Committee also commenced an internal investigation into these matters which it has suspended while the government investigations continue and the Company has placed an employee on leave of absence pending completion of these investigations.

As a result of these pending investigations, Penn Traffic also announced that it would be delaying the finalization and release of its audited financial statements for its 2003, 2004 and 2005 fiscal years ...

They had gone into Chapter 11 in May of 2003, so the alleged fiddling with promotional allowances apparently coincided with the period of the bankruptcy.

Here's a report from the Syracuse Post-Standard, and a short AP item from Newsday.

We’ll keep an eye on this issue and update when we have additional news.

Oh, and here's another bold prediction: More to come.