* Judge had ordered Conaway to pay $10.2 million
* Settlement would end Conaway’s appeal
NEW YORK, Nov 10 (Reuters) – Charles Conaway, a former chief executive of Kmart Corp, agreed to pay $5.5 million to end a U.S. Securities and Exchange Commission lawsuit accusing him of misleading shareholders about the retailer’s prospects prior to its 2002 bankruptcy.
The settlement, outlined in court papers, was reached about eight months after a federal judge in Detroit ordered Conaway to pay $10.2 million in the civil fraud case. A federal jury had found Conaway liable at a June 2009 trial.
Conaway had been appealing the $10.2 million judgment, and the settlement would end that appeal. His lawyers and the SEC did not immediately respond to requests for comment.
The SEC had accused Conaway of failing to tell investors that Kmart in 2001 had deferred at least $570 million of payments owed to suppliers to conserve cash. It also accused Conaway of misrepresenting Kmart’s liquidity problems.
Kmart filed for bankruptcy protection in January 2002. It emerged the following year and later acquired rival Sears Roebuck & Co. The combined company is now known as Sears Holdings Corp (SHLD.O)
In imposing the $10.2 million penalty, U.S. Magistrate Steven Pepe had said Conaway “played a central role” in the securities violations and gave false testimony under oath.