Kmart Sued for Severance Payments

David Montoya, former executive vp of operations at Kmart Corp. (Troy, Mich.) — whose up-and-down career at the bankrupt retailer reflected the company's struggles and misfortunes — has sued his former employer for $132,000 in severance payments and bonuses.

In just seven months, in late 2001 and early 02, Montoya went from being a “world-class retail leader” in charge of all 2100 Kmart stores — reporting directly to the company's president — to involvement in questionable internal financial arrangements, demotion and, finally, resignation.

Montoya, a 20-year retail veteran with experience at Wal-Mart Super Centers, Big V Supermarkets, Hechinger's/Builder's Square and HEB Grocery Co., was named executive vp of store operations at Kmart in September 2001, hailed at the time by president and coo Mark Schwartz as “a first class retail leader. His experience will be instrumental in helping Kmart achieve our goal as a world-class retailer.”

Shortly after Kmart filed for Chapter 11 bankruptcy protection in January 2002, an audit of the company placed Montoya's name on a list of executives who had received, several months earlier, what the retailer had called “retention bonuses” — large payments, in the form of loans, meant to entice top managers not to jump the ship. Some of the loans were for as much as $750,000, the amount Montoya among others was said to have received.

In February, Kmart demoted Montoya to senior vp of specialty operations, in charge of restaurants and one-hour photo departments. And in late March, Montoya left the company.

A Kmart attorney has asked for time to complete an internal review before dealing with Montoya's claim, a delay that is expected to last throughout the summer. Montoya has agreed to the request.