SEC Opens Formal Probe of Allowances Collected by Saks

Saks Inc., owner of the Saks Fifth Avenue chain, said Monday that the Securities and Exchange Commission had opened a formal investigation into whether the company improperly collected as much as $21.5 million from vendors.

The company received a “formal order of private investigation” from the SEC on Thursday, Birmingham, Ala.-based Saks said. In a formal probe, SEC enforcement lawyers can subpoena information from the company.

Saks said that its internal probe into collections of vendor discount allowances would be completed by next month, one month later than it had expected.

The department store operator on March 3 disclosed that the SEC was informally investigating the allowances, which occurred at one of its divisions. The retailer said it was cooperating with the SEC.

Spokeswoman Julia Bentley did not comment. Earlier this month Chief Financial Officer Douglas Coltharp declined to comment on who or what caused the collections. He said the company had no similar incidents previously.

The company said Monday that the board’s audit committee also was examining the adequacy of a 2002 internal investigation into the matter as well as accounting and disclosure issues.

Saks has said it intends to reimburse vendors for collection of the allowances, which primarily occurred in fiscal years 2000 to 2002. The collections also may have occurred to a lesser extent in its 1999 and 2003 fiscal years, the company said.

Saks had net income of $60.9 million on revenue of $6.44 billion in the year ended Jan. 29.

The company operates 57 Saks Fifth Avenue stores, 52 Off Fifth stores and 238 department stores, including those under the Parisian, Proffitt’s and Carson Pirie Scott names.

Shares of Saks rose 15 cents to $15.75 on the New York Stock Exchange. They have risen 8.6% this year.