Two ex-Penn Traffic execs charged

Two ex-Penn Traffic execs charged

	Published : Mon, 17 Sep 2007 19:08 By : Agencies Print this Story

SYRACUSE, N.Y. (AP) - Two fired executives of Penn Traffic Co., a regional grocer, have been charged with fraud for repeatedly inflating reported income through improper promotional allowances, federal regulators said Monday.

The Securities and Exchange Commission filed a complaint alleging the company's former chief marketing officer, Leslie Knox, and a former vice president, Linda Jones, orchestrated a scheme to inflate Penn Traffic's income and other financial results by prematurely recognizing promotional allowances.

Promotional allowances -- also known as rebates, slotting fees or vendor allowances -- are paid by vendors in exchange for various marketing and promotional activities, such as inclusion in a supermarket's weekly circular.

U.S. Attorney Glenn Suddaby said a federal grand jury has handed up indictments against Knox and Jones on related criminal charges.

Jones, 48, of Reynoldsville, Pa, and Knox, 61, of Titusville, Fla., were charged with conspiracy to commit securities and mail fraud and causing false filings to be made by Penn Traffic. If convicted, each faces a sentence of up to 20 years and fines totaling $5 million.

According to the complaint, Penn Traffic prematurely recognized promotional allowances from the second quarter of 2001 through at least the fourth quarter of 2003.

Knox and Jones directed and took part in the scheme in an effort to meet internal budget plans, the complaint said. As a result, the company pulled forward about $10 million in operating income that was included in Penn Traffic's public filings.

Penn Traffic, which emerged from a two-year bankruptcy reorganization in April 2005, began its own internal review before the federal investigations were launched in July that year. Knox and Jones were fired in February 2006 in connection with the probe.

Previously, former operations director Michael Lawler, 57, of Solvay, pleaded guilty to wire fraud charges in connection with fraudulent accounting practices at the Penny Curtiss Baking Co., a subsidiary of Penn Traffic.

Penn Traffic employs about 8,800 people and operates as P&C Foods, Fresh Markets, Quality and BiLo stores in New York, Pennsylvania, Vermont and New Hampshire.

The company emerged from a nearly two-year bankruptcy reorganization in April 2005 but has continued to lose money -- $4.1 million in 2006. It also went through a bankruptcy reorganization in 1999.