HoukTPM

Ahold, Kmart, Office Max, Saks, Home Depot, Penn Traffic … I’ve probably missed a few, but that’s the list that comes to mind of retailers who have recently been accused of playing around with vendor allowances in one way or another. Now CSK Auto joins the list.

You may not know CSK if you live in the eastern half of the country, but in the west, the component parts of their name (Checker, Schucks, Kragen) are among the leading names in auto parts – they have almost 1300 stores and sales of about $1.6 billion – a good-sized outfit.

But apparently some of the top managers didn’t feel that profits were quite as good as they could be, and so they “improved” things. Here’s the press release CSK put out Thursday:

CSK Auto Corporation announced today that the Audit Committee of its Board of Directors has substantially completed its previously announced internal investigation (commenced in March 2006), which was conducted with the assistance of independent counsel and a separate accounting firm. The scope of the investigation focused primarily on the Company's accounting for inventory and vendor allowances associated with the Company's merchandising programs, but was not limited in any way by the Audit Committee. The investigation identified accounting errors and irregularities that materially and improperly impacted various inventory accounts, vendor allowances, other accrual accounts and related expense accounts.

The Company announced that Martin Fraser (President and Chief Operating Officer), Don Watson (Chief Administrative Officer and former Chief Financial Officer), as well as several other individuals in the Company's finance organization are no longer employed by the Company.

The restatements are tentatively expected to come to $82 million, most of it being related to inventory, but $12 million from vendor allowances.

As we’ve said previously, we don’t expect this to be the last such case. There simply is too much money available in allowances, and it is too easy for an executive under pressure to meet quarterly expectations to fudge those numbers.

Royal Ahold NV will not face criminal prosecution for an $800 million accounting fraud at its Columbia-based subsidiary U.S. Foodservice Inc., the U.S. attorney in Manhattan announced Thursday.

The Dutch company, which also owns Giant Food LLC, was forced to restate income of more than $800 million in 2003 after it was revealed that executives at U.S. Foodservice had systematically inflated promotional allowances to meet earnings targets.

Sixteen former executives and suppliers of U.S. Foodservice have been charged with crimes and 13 of them, including former finance chief Michael J. Resnick, have pleaded guilty. Mark P. Kaiser, the former marketing chief, is scheduled to go on trial Oct. 10.

Meanwhile, Penn Traffic still hasn’t released its financial reports, which has led its auditors, Deloitte & Touche, to resign. Gotta wonder what’s in those reports.

The just-concluded annual conference of the Trade Promotion Marketing Association had the biggest attendance for the association in many years, and was hailed as a great success by attendees.

Kudos to Mike Kantor and his team for putting on a great show and continuing the turn-around efforts Deb Kuhns put in place over the past few years. Mike has done a great job since taking over from Deb, and it showed in the capacity crowd and the strong agenda.

One More Time

I promise not to overdo the hype, but I thought I’d mention again that my new book, Trade Promotion Marketing, is out and is available at Amazon and at the Association of National Advertisers bookstore.

Our blog, TPMtoday, has more news on trade promotion and other issues of interest to marketers. It’s updated several times a week. Among recent items: