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The Penn Traffic Co. said yesterday that it come to a settlement with the Securities and Exchange Commission, bringing to a close the SEC's investigation into the grocer's accounting practices and policies before its emergence from bankruptcy in April 2005.
The focus of the investigation had been the practices and policies relating to promotional allowances at Penn Traffic from fiscal years 2001 through 2003, in addition to those of its wholly owned Penny Curtiss bakery subsidiary from fiscal 2000 through the first quarter of fiscal 2003.
Without admitting or denying the allegations in the commission's complaint, the grocer agreed to settle the charges by consenting to a permanent injunction against any future violations of the federal securities laws. The SEC imposed no fines or monetary penalties on Penn Traffic.
Also as part of the settlement, the grocery chain will hire an independent examiner who will provide annual reports over a three-year period to the SEC, the U.S. Attorney for the Northern District of New York, and the company's board on such issues as the company's promotional-allowance internal controls and financial reporting. The examiner is expected to be hired within the month.
"The company has worked hard to address a number of legacy issues so Penn Traffic's resources and attention can be fully dedicated to our customers, our stores, and our operations," noted s.v.p. and general counsel Daniel J. Mahoney. "One of the legacy issues facing the company was this SEC investigation, so the settlement is another important step in the right direction."
Among the additional settlement terms were Penn Traffic's agreement to reform its internal controls and policies and procedures on promotional allowances, as well as the implementation of a telephone hotline for associates and vendors to anonymously inform the company of misconduct relating to promotional allowances. The company had already instituted many such reforms and others, including the updating of its promotional allowance policy and extensive companywide compliance training, in the wake of a 2006 internal promotional allowance investigation by the audit committee of Penn Traffic's board of directors.
The grocer closed its Penny Curtiss division in January 2008 as part of its continuing strategy for boosting long-term financial performance and concentrating resources on retail stores. The closure was unconnected with the SEC investigation.
At the present time, Penn Traffic is also being investigated by the U.S. Attorney's Office for the Northern District of New York for the same issues targeted by the SEC's probe. The company says it's fully cooperating with the investigation, which is not yet completed.
Syracuse, N.Y.-based Penn Traffic operates or supplies over 210 supermarkets in upstate New York, Pennsylvania, Vermont, and New Hampshire. The company's retail food business includes corporate-owned stores under the P&C, Quality and BiLo banners, and its wholesale food distribution business supplies independently operated supermarkets and other wholesale accounts.