SYRACUSE, N.Y. — Penn Traffic Co. here said last week it has reached a settlement with the Securities and Exchange Commission over accounting practices prior to 2003.
The company said it is continuing to cooperate with the U.S. Attorney for the Northern District of New York in an ongoing investigation of the same matters that were the subject of the federal probe.
The investigations involve practices and policies relating to promotional allowances by the chain from fiscal 2001 though fiscal 2003 and by its Penny Curtiss bakery subsidiary from fiscal 2000 through the first quarter of fiscal 2003. The bakery was closed last January.
The agreement with the SEC does not involve any fines or monetary penalties. Without admitting or denying the allegations in the complaint, Penn Traffic agreed to accept a permanent injunction against any future violations of federal securities laws.
According to Daniel J. Mahoney, senior vice president and general counsel, “The company has worked hard to address a number of legacy issues so Penn Traffic's resources and attention can be fully dedicated to our customers, our stores and our operations. One of the legacy issues facing the company was this SEC investigation, so the settlement is another important step in the right direction.”
Among other settlement terms, Penn Traffic said it agreed to hire an independent examiner who will provide annual reports for three years to the SEC, the U.S. Attorney and the company's board of directors on promotional-allowance controls and financial reporting.
It also said it agreed to reform its internal controls and policies related to promotional allowances and to implement a telephone hotline for associates and vendors to notify the company anonymously of misconduct related to promotional allowances.
As a practical matter, Penn Traffic said it has already implemented many of the reforms, including updating its promotional allowance policy and extensive companywide compliance training following completion of an internal investigation by the audit committee of the board in 2006.