Good bye gold star….

Last March, I handed out a rare gold star to Ingles Markets (IMKTA) because its CEO Robert Ingle dug into his own pocket to pay his son-in-law, Tony Federico $250K in severance. The reasoning was that that sort of thing is very rare.

Well, it turns out that Federico, who died last year, didn’t exactly deserve that severance and probably wound up costing the company a pretty penny in legal fees. That’s because yesterday, the SEC issued this release which spelled out a tried-and-true accounting scheme of having lots of money come in (at ingles, it was from vendors) just before the close of the quarter. Here’s how the SEC described the outcome:

Taken by itself, Federico’s misconduct accounted for more than half of the pretax income reported in quarterly reports filed in May 2002 and February 2003 and material amounts of pretax income in annual reports filed in December 2002 and 2003.

Ingles neither admitted or denied the SEC’s allegations and in its own press release said it was not required to pay a fine. Shortly after that release came out, Ingles reported robust second quarter earnings.