Retail executives have been found guilty in the past of intentionally inflating sales and earnings numbers by booking vendor promotional allowances before they were due. The question, after the latest indictment against two former executives who worked at Penn Traffic, is when will people wise up and put an end to the practice once-and-for-all?
According to a Bloomberg News report, a federal grand jury has indicted Les Knox, the former chief marketing officer at Penn Traffic, and Linda Jones, former vice president of non-perishable merchandising for the company, for improperly booking promotional fees that fraudulently boosted company earnings in 2001 and 2003.
U.S. Attorney Glenn Suddaby said, "The defendants caused Penn Traffic to 'pull forward,' or prematurely report more than $9 million in operating income."
According to the Bloomberg report, Mr. Knox and Ms. Jones have been charged with conspiring to commit securities and mail fraud, as well as causing Penn Traffic to make false SEC filings. If convicted, the two could each get up to 20 years in jail and be forced to pay up to $5 million in fines. The accused were fired in 2006 after an internal investigation conducted by Penn Traffic.
Discussion Questions: Has this case, U.S. Foodservice and others put an end to companies booking promotional allowances before it is legal to do so? Have the individuals occupying executive offices at retail become more motivated by ethical business behavior in recent years? Is this reflected throughout the business organization?