As many as 150,000 employees and retirees of the former Kmart Corp. would share $11.75 million in a proposed settlement of a lawsuit against ex-company officials over the investment of pension funds in Kmart's now worthless stock.
The agreement involves those who participated in Kmart pensions from March 15, 1999, to March 6, 2003. Court documents say the people involved lost between $28 million and $300 million.
"The settlement is fair, reasonable and in the best interest of the class and should, therefore, be approved," Glen Connor, a Birmingham, Ala., lawyer for one retiree who filed a class-action lawsuit, said in court papers filed Monday. The papers asked Detroit U.S. District Judge Avern Cohn to approve the deal.
A message seeking comment was left for Sears Holdings Corp., Kmart's successor, before business hours Tuesday.
Connor's client, Quincie Rankin, is a former employee of Kmart in Fairfield, Ala. Rankin sued ex-Kmart Chief Executive Charles Conaway and other former executives and board members in March 2002.
The suit said the company officials invested Kmart pension money in Kmart stock after the company filed for Chapter 11 bankruptcy protection on Jan. 22, 2002. It said the officials failed to exercise proper care for the pension money.
The settlement would be paid from proceeds of a $25 million insurance policy from National Union Fire Insurance Co., the Detroit Free Press said.
Kmart emerged from Chapter 11 bankruptcy protection in 2003 as Kmart Holding Corp. In March, the Troy-based company combined with Sears, Roebuck and Co. to form Sears Holdings. The new company is based in Hoffman Estates, Ill.
In August, the U.S. Securities and Exchange Commission filed civil charges of securities fraud and aiding and abetting securities fraud against Conaway and former Kmart Chief Financial Officer John T. McDonald.
The SEC said the executives made "materially false and misleading" disclosures to shareholders before the retailer's bankruptcy filing.
The agency's complaint filed in U.S. District Court in Detroit also accused the men of aiding and abetting violations of rules that require publicly traded companies to file quarterly reports and to include material information in the reports so they are not misleading.
Lawyers for Conaway and McDonald have said that their clients acted in good faith.