Ex-Penn Traffic Officials Charged

Two former executives of Penn Traffic Co. could each face prison sentences of up to 20 years and fines of $5 million for improperly accounting for promotional allowances, federal officials said last week. Leslie Knox and Linda Jones were indicted on charges of securities fraud and mail fraud, officials of the U.S. Attorney's office and the Federal Bureau of Investigation said.

SYRACUSE, N.Y. — Two former executives of Penn Traffic Co. here could each face prison sentences of up to 20 years and fines of $5 million for improperly accounting for promotional allowances, federal officials said last week.

Leslie Knox and Linda Jones were indicted on charges of securities fraud and mail fraud, officials of the U.S. Attorney's office and the Federal Bureau of Investigation said. In a separate action last week, the U.S. Securities and Exchange Commission filed civil charges against Knox and Jones.

Knox, Penn Traffic's former senior vice president and chief marketing officer, and Jones, vice president, non-perishable merchandising, were dismissed by Penn Traffic more than a year ago after an internal accounting investigation revealed they had engaged in “improper practices.” Knox had been with the company for seven years and Jones for 25 years when they were fired.

Federal authorities said Jones and Knox led a scheme to “pull forward,” or prematurely recognize, more than $9 million in income from vendors related to slotting, rebates and other fees in order to meet internal budget plans between 2000 and 2003. These falsified financial results were included in public filings.

According to the SEC, Knox and Jones routinely lied to accounting personnel at the company and submitted false invoices to carry out their scheme. The SEC is seeking disgorgement of ill-gotten gains, civil monetary penalties and to bar the executives from serving as officers of public companies.

Penn Traffic referred questions to its 10-K report filed in August, acknowledging its cooperation with the ongoing investigations. That document noted the company could be subject to damage claims, fines or penalties related to the investigation.