Gottschalks, 2 Officers May Be Indicted

Gottschalks, the Fresno-based department store chain, has revealed that its two top executives and the company itself could be indicted in connection with an improper federal income tax deduction.

That announcement, contained in a proxy statement for the company’s upcoming annual meeting, was the first official word that Board Chairman Joseph Levy and President Gerald Blum were targets of a federal investigation. The company commented on the possibility of indictments in the proxy statement, which is sent to company shareholders, because such charges could affect the firm’s stock prices.

The statement noted that two former Gottschalks executives--Robert Lawson, who served as financial officer, and ex-controller Jack Farnesi--were recently indicted by the U.S. Justice Department on federal tax fraud and conspiracy charges.

“The government’s investigation, which is continuing, could also result in the filing of charges against the company and Messrs. Joseph Levy and Gerald Blum,” the company statement said.

However, the statement added that both Levy and Blum “have advised the company that they did not participate in, or have knowledge of, any wrongdoing.” Gottschalks executives were not immediately available for further comment.

According to the indictment, certain Gottschalks officials discovered in April, 1986, that the company failed to make a tax-deductible contribution to an employee health insurance plan for the fiscal fiscal year ending February, 1986.

The indictment, issued June 4, said Lawson, Farnesi and two outside consultants falsified company records to qualify Gottschalks for more than $3.6 million in insurance deductions. Lawson and Farnesi left Gottschalks in May, 1991, after the company conducted its own investigation.

“Gottschalks has been managed quite well,” said Harry Gaykian, a Shearson Lehman Bros. analyst in Fresno. “There won’t be any adverse effect on consumers unless top management is indicted.”

However, the investigation has helped weaken Gottschalks stock. Gottschalks stock fell 25 cents to $10.25 on the New York Stock Exchange on Wednesday, compared to a 1992 high of $22.125 on Jan 2.

However, Gottschalks has had relatively strong sales recently. Despite the recession, the company in 1991 had earnings of $4.3 million on revenue of $314 million, compared to earnings of $6.4 million and sales of $287 million in 1990.