FBI investigates Kmart's accounting practices

Kmart, the US retail giant that has filed for bankruptcy protection, today joined a growing list of American companies being investigated by the authorities.

The FBI said that it was examining Kmart's records to determine whether any of its accounting activities warranted criminal charges. In its annual report released on Wednesday, Kmart said it was conducting its own investigation into accounting problems and "other matters", including management's handling of the company.

Anonymous letters sent to Kmart headquarters in Troy, Michigan, lawyers, board members, auditors and the Securities and Exchange Commission (SEC), the US financial watchdog, led to the investigation, the company said.

Kmart this week restated financial results for the first three quarters of 2001. Kmart increased its loss for the first quarter to $233m (£159m) from the previously announced $25m, bringing total losses for last year to $2.4bn.

Kmart filed for bankruptcy protection in January and has installed a new management team. The company plans to close 283 stores and axed 22,000 of its 250,000 workers. Most of the former management, including the chief executive, Charles Conaway, and the president and chief operating officer, Mark Schwartz, have left the company.

Earlier this month, Kmart said it was suspending severance payments to some departed executives, pending the conclusion of what it called "a review of the stewardship of the company by management". A report Kmart filed with the SEC this week showed that it forgave $3m in loans made to the company's former president.

Kmart is the latest in a raft of companies that have come under investigation since the collapse of US energy giant Enron last December. The SEC and the New York state attorney are investigating allegations of conflict of interest among Wall Street analysts, while energy companies are under scrutiny amid accusations that they withheld power supplies in California to push up prices during blackouts last summer.