Quality Markets’ parent charged with accounting fraud by SEC
SYRACUSE — Federal regulators charged an upstate New York-based regional grocery chain with fraud, claiming Tuesday a multimillion-dollar accounting scheme made the company’s finances look better than they were.
In a complaint filed in U. S. District Court, the U. S. Securities and Exchange Commission said Penn Traffic Co. — the parent company of Quality Markets — inflated operating income by approximately $10 million over a nearly three-year period and overstated its aftertax net income by about $7 million.
SEC officials also said the company failed to file certain required financial reports or filed reports that did not fully comply with SEC regulations.
Without admitting or denying the allegations, Penn Traffic agreed to settle the charges by consenting to a permanent injunction against any future violations of federal securities laws. The SEC imposed no fines or monetary penalties on Penn Traffic, said David Rosenfeld, associate director of the SEC’s New York Regional Office.
Additionally, Penn Traffic agreed to hire an independent examiner who will provide annual reports to the SEC, the U. S. Attorney and the company’s board of directors. It has also reformed its internal controls and policies to prevent future violations.
“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,” said Daniel Mahoney, the company’s senior vice president and general counsel. “The settlement is another important step in the right direction.”
Penn Traffic operates or supplies more than 210 supermarkets in New York, Pennsylvania, Vermont and New Hampshire. Its stores do business under the P&C, Quality and BiLo names. The company operates 15 Quality Markets in Western New York in Attica, Dunkirk, Ellicottville, Falconer, Frewsburg, Jamestown, Lakewood, Lockport, Mayville, Randolph, Silver Creek, Westfield and Williamsville.
The company has struggled financially for the past decade. It emerged from a nearly two-year bankruptcy court reorganization in April 2005 with new management but has continued to lose money. It also went through bankruptcy reorganization in 1999.
Penn Traffic remains under investigation by the U. S. Attorney’s office.
