Penn Traffic settles lawsuit with S.E.C.
September 30, 2008
by Eric Schroeder
SYRACUSE, N.Y. — The Securities and Exchange Commission today charged The Penn Traffic Co. with accounting fraud, saying the East coast-based supermarket operator and wholesale food distributor failed to file certain required financial reports with the S.E.C. or filed reports that did not fully comply with S.E.C. regulations.
"Penn Traffic’s fraudulent conduct lasted several years and distorted the company’s financial reports," said David Rosenfeld, associate director of the S.E.C.’s New York regional office. "The commission continues to focus on accounting improprieties and will take action when a company engages in fraudulent conduct that falsifies the company’s true financial condition."
Penn Traffic agreed to settle the charges by consenting to a permanent injunction against any future violations of the federal securities laws. The company did not admit or deny the allegations in the S.E.C.’s complaint and does not face any fines or monetary penalties.
According to the S.E.C., Penn Traffic inflated operating income by approximately $10 million over a three-year period and overstated its after-tax net income by approximately $7 million.
The S.E.C. also alleged that Penn Traffic’s Penny Curtiss bakery falsified accounting records to overstate inventory and reduce the cost of goods sold. Penn Traffic closed the Penny Curtiss bakery in January as part of its ongoing strategy for improving long-term financial performance and focusing resources on retail stores.