Pay it back!

Now that the SEC has filed charges against Kmart’s (old ticker: KMRT) former Chairman and Chief Executive, Charles C. Conaway, and former CFO, John T. McDonald for essentially making stuff up in the company’s MD&A, it seems like a good time to demand that the two executives pay back some of the bounty they walked away with when they left in March 2002.

A quick skim of Conaway’s separation agreement shows that he made out pretty well: $5 million in loan forgiveness, $4 million in severance and $3.8 million to cover tax gross ups. As for McDonald, he received $2.5 million in loan forgiveness and presumably some amount of tax gross-up, though I couldn’t find anything in the filings about it.

In their press release earlier today, the SEC said that investors are entitled to an “accurate description of the story behind the numbers.” That’s true. But Kmart’s former investors also deserve something else: to be paid back by Conaway and McDonald.