Adamson Reports Kmart Demise Surprise

Even though he'd been on Kmart Corp.'s board of directors for more than five years, Jim Adamson told the Free Press on Monday that he "was totally surprised" by the retailer's financial collapse. He says he "had no inclination that this company would end up in bankruptcy," and that he had learned about the company's impending demise with the rest of the world from a Wall Street expert's warning in early January.

Apparently, Kmart managers failed to tell the board was that Kmart wasn't paying its suppliers on time, and it was running out of cash. Mr. Adamson says that if he had known, he would have never agreed to loan two dozen top Kmart executives $23.8 million, under the condition that they wouldn't have to pay it back, if they were fired.

In one of his first interviews since becoming chairman of Kmart in January, Mr. Adamson said the board would fully investigate those loans and any possible wrongdoing by Kmart's ousted management team, including former Chairman and CEO Chuck Conaway and former President Mark Schwartz. The internal investigation, which Kmart officials expect to complete by Labor Day, has already uncovered accounting practices that understated losses in the first three quarters of 2001 that lead to Kmart restating 2001 financial reports.

Mr. Adamson says he is now focused on getting consumers, employees, vendors and shareholders to trust Kmart's management team and on fixing the corporate culture created by previous leadership.

Moderator Comment: Is James Adamson the right person to lead Kmart out of Chapter 11?

Hello! Earth to Mr. Adamson... Earth to Mr. Adamson! Five years on the board of Kmart and he did not know how much trouble the retailer was in. Someone needs to show Mr. Adamson the door and remind him not to let it hit him in the arse on the way out. [George Anderson - Moderator]

• Kmart's Trouble Came as a Surprise; Exec Fights to Rebuild - Free Press