Kmart Corporation

Kmart's legal battles began with two former Kmart Corporation vice presidents that were indicted on federal charges that claim their actions inflated the company's income for part of the year before the retailer filed for bankruptcy. They were charged with security fraud, making false statements to the U.S. Securities and Exchange Commission, and conspiracy to commit those offenses. Not only were they charged, but accused by the SEC in federal court of accounting fraud. The SEC is seeking the return of financial gains related to their alleged actions. If convicted, they will both face a maximum sentence of 10 years in prison, a one million dollar fine on the security fraud charge, five years in prison, and a two hundred fifty thousand dollar fine for the conspiracy and false statement charges. In addition to the two former Vice Presidents problems, the FBI is investigating twenty-five Kmart executives that received more than twenty eight million dollars in loans before the bankruptcy. Most of the executives have left the company. Along with the executives, Kmart is dealing with Martha Stewart's legal issues.

Martha Stewart has a high possibility of being charged for civil charges from the Securities and Exchange Commission. The situation has dragged on for months since she sold ImClone shares before the stock tumbled on news. There were allegations that she was given inside information, something she has denied. Stewart's legal predicament has affected Kmart and Martha Stewart Living. For the most part, Martha Stewart fans have supported her in her struggles. She may have to step down as chairman and CEO of the company to keep the company alive, but the she still owns about sixty one percent of Martha Stewart Living's stock and controls virtually all of its voting shares. With that kind of assets, it is going to be hard to just walk away.