Saks Ousts Three Execs After Audit

Saks Inc. said Monday that it ousted three top executives, including its chief accounting officer, after an audit committee probe into improper vendor markdown allowances.

The committee also recommended lower bonuses for the company’s chief executive and chief financial officer, who it said failed to communicate effectively with the board of directors regarding the matter.

In a statement, the luxury department store operator said it asked for the resignations of Donald Wright, its chief accounting officer, as well as Brian Martin, a senior vice president who was general counsel at the time of an initial 2002 investigation into the matter, and Donald Watros, the chief administrative officer of its Saks Fifth Avenue division.

Watros forfeited his vested options and received other financial penalties, Saks said.

Efforts to reach the three men were not successful.

Birmingham, Ala.-based Saks also said its audit committee was critical of “the quality of follow-up by several members of senior management” with respect to the vendor markdown allowances and recommended that bonuses for its chief executive and chief financial officer be reduced or eliminated.

Douglas Coltharp, the finance chief, has also been stripped of his responsibility for accounting or financial reporting matters, Saks said.

The company said it would name a new chief accounting officer who would report directly to both the CEO and the audit committee.

Saks first announced an informal probe in March related to improper collections of vendor markdown allowances in one of Saks Fifth Avenue’s merchandising divisions.

The probe found that from 1999 to 2003, the company improperly collected about $20 million in markdown allowances from vendors. No improper collections were identified in 2004, though the company is in the process of determining if any were collected improperly before fiscal year 1999.

Saks, which is being investigated by the Securities and Exchange Commission, is also the target of an inquiry from the office of the U.S. attorney for the Southern District of New York related to the vendor allowances, the company said.

Shares of Saks were up 9 cents at $17.70 on the New York Stock Exchange.