Saks Gets Tough with Top Execs Following Probe

U.S. retailer Saks Inc has requested the resignation of three top executives, including its chief accounting officer, after an audit committee inquiry into improper vendor markdown allowances.

The panel also recommended reduced bonuses for its chief executive and chief financial officer, who the company said failed to communicate effectively with the board of directors over the issue.

Saks said it asked for the resignations of Donald Wright, its chief accounting officer, as well as Brian Martin, a senior vice president who was general counsel at the time of an initial 2002 investigation into the matter, and Donald Watros, the chief administrative officer of its Saks Fifth Avenue division.

The audit committee also voiced criticism of "the quality of follow-up by several members of senior management" with respect to the vendor markdown allowances and recommended that bonuses for its chief executive and chief financial officer be reduced or eliminated.

Saks first announced an informal probe in March related to improper collections of vendor markdown allowances in one of Saks Fifth Avenue's merchandising divisions.

The investigation found that from 1999 to 2003, the company improperly collected about $20 million in markdown allowances from vendors. No improper collections were identified in 2004, though the company is in the process of determining if any were collected improperly before fiscal year 1999.

Saks said it would reimburse or otherwise compensate affected vendors for any improperly collected markdown allowances and said employees who were directly involved in the over-collection were being terminated or asked to resign.

Saks, which is being investigated by the U.S. Securities and Exchange Commission, is also facing an inquiry by the U.S. Attorney for the Southern District of New York related to the vendor allowances, the company said.