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CHICAGO - Documents released this week by Kmart Corp. as part of its bankruptcy filing have revealed some interesting truths about the company's handling of money.
The discount retailer said its "retailing revenue" was $27.68 billion for the year ended Jan. 30, 2002, compared with $30.05 billion for the fiscal year ended Jan. 26, 2001, Dow Jones reports.
Yet in the days before it filed for bankruptcy-law protection in January, Kmart gave out corporate loans to top executives, totaling millions of dollars, Wednesday's Wall Street Journal reported.
Kmart disclosed that it gave more than $30 million in retention and relocation loans, most between October and January, to senior officers. Included in that figure was more than $18 million to nine top executives -- all of whom have since left the company.
Compensation experts said the individual loan amounts were unusually high, including a previously reported $5 million loan to former chief executive Charles C. Conaway, and $3 million to Mark Schwartz, formerly the company's president and chief operating officer. Both have since left the company.
Dow Jones reports that less than a week before Kmart filed for Chapter 11 protection, it granted a $1.75 million retention loan to John T. McDonald Jr., who at the time had served as Kmart's chief financial officer only two months. The same week, Kmart's suppliers were cutting off shipments to stores, and the retailer's board was meeting to consider filing for bankruptcy-court protection. McDonald left Kmart last month.
A Kmart spokesman told the newswire that in general, the loans were granted on the condition that executives remain with the company for several years. He added that the loans are forgivable "under certain conditions," and that the company forgave Conaway's $5 million loan after he left this past month.
The Associated Press reports that Kmart also shelled out $9.9 million in severance pay last year, including millions to its former president.