Footwear discount retailer Footstar Inc has received a Wells notice from the staff of the Securities and Exchange Commission in connection with the Commission's outstanding enforcement proceedings into the facts and circumstances that gave rise to the company's restatement of financial results from 1997 through 2002, which the company announced on November 13, 2002 and completed in September 2004.
Footstar is continuing to cooperate with the SEC staff in connection with this matter and is in discussions with the staff regarding the possible resolution of this matter.
Following Footstar's disclosure in November 2002 that management had discovered discrepancies in the reporting of the company's accounts payable balances, the SEC began an investigation.
The Wells notice states that the SEC staff, as a result of its investigation, is considering recommending that the SEC bring a civil injunctive action against Footstar for alleged violations of provisions of the Securities Exchange Act of 1934 relating to the maintenance of books, records and internal accounting controls, the establishment of disclosure controls and procedures and the periodic SEC filing requirements as set forth in Sections 10(b), 13(a) and 13(b)(2) of the Exchange Act and in SEC Rules 10b-5, 12b-20, 13a-1 and 13a-13.
Under SEC procedures, a Wells notice indicates that the staff has made a preliminary decision to recommend the SEC authorize the staff to bring a civil or administrative action against the recipient of the notice. A recipient of a Wells notice can respond to the SEC staff before the staff makes a formal recommendation regarding whether the SEC should bring any action.
Footstar Inc is a discount footwear retailer. It operates Meldisco licensed footwear departments nationwide in Kmart and Rite Aid Stores. It also distributes own Thom McAn brand of quality leather footwear through Kmart and Wal-Mart stores.