Saks, SEC Conducting Internal Investigation

Saks Inc. (Birmingham, Ala.) has delayed its annual report and annual meeting amid an expanding regulatory and internal investigation into its payment and accounting practices. The company also said some employees had been put on leave.

The department store retailer said an initial internal investigation, which concerned payments from vendors, had been broadened to include related financial and accounting issues. As a result, Saks said it had not been able to complete its financial statements for fiscal 2004.

The company said that “certain individuals who are not executive officers” (as defined by Securities and Exchange Commission, which has launched its own inquiry) had been placed on administrative leave because of the probe. Saks did not identify the affected employees.

Last month, the company announced it was launching a probe of vendor payments known as “markdown money funds” that vendors pay department stores to compensate for merchandise that doesn’t sell. The probe triggered an informal SEC inquiry. Saks said that during its fiscal years 1999 through 2003, its Saks Fifth Avenue division improperly collected up to $21.5 million in markdown money from vendors, and it intended to reimburse or otherwise compensate the affected vendors.