The New York Post, that Bible of American finance, devoted a full page in last Tuesday’s issue to take Footstar to task for its oft-delayed filing of its 10K and 10Q financial reports.

Columnist Christopher Byron wrote,


“What’s the point in requiring public companies to file timely and accurate financial reports with the Securities and Exchange Commission if they arent punished for filing nothing at all?

Case in point: A Nyack, N.Y., shoe company called Footstar Inc., is nearly a full year delinquent in filing financial reports with the SEC, yet it continues to trade every day, just as pretty as you please, on the New York Stock Exchange.

Stranger still, this 21,000-employee company is up to its nostrils in controversy, conflicts and fishy-sounding press releases about why its auditors have been unable to make sense of the company’s books and records.

Yet in spite of all that, the company trades daily on the Big Board, with no one in a position of oversight or responsibility at the exchange seeming to show the slightest concern that public investors in the stock cannot possibly know what they are buying and selling because all information about the company is nearly a year out of date.”


Byron correctly points out that the SEC has no regulatory power to punish delinquent filers. That task is left to the exchanges as part of the markets “self-regulatory” apparatus.

The only leverage the exchanges can have in such situations is to prevent the shares of the delinquent filers from being publicly traded by the exchanges brokers and floor traders.

Footstar Inc., hasnt filed either a proxy statement or an audited financial report in more than a year, and hasnt even filed an unaudited set of financials since last summer.

In November 2002, Footstar announced that it had uncovered some $35 million worth of “discrepancies” in its accounts payable records, most of which involved the athletic segment.

The company then said in a press release that it would not be able to get its quarterly financial report for the July-September period issued on time. This included having to issue restated financial reports for not just the previous nine months of 2002, but for the whole of 2001 and for prior periods as well.

Four months later, in March 2003, the company announced that it had completed its review and prepared restated financial statements; and that it expected to file an audited full-year financial report for the 2002 calendar year by April 30.

But April 30 came and went, without the promised filing, with the explanation by the company that its financials “continue to be under review by the company’s auditors.” This was followed, just two weeks ago, by a company statement that it would miss the due-date for its January-March 10Q quarterly filing as well again because its financial statements were under review.

The company hasnt filed a proxy statement since March 2002, at which time the largest single shareholder was listed as ESL Partners L.P. of Greenwich, Conn., with 3 million shares, or a controlling 14.75 percent of all common stock.

Byron continued, “Since then, ESL, headed by one Edward Lampert, has surfaced as the largest (and controlling) investor of Kmart as well, meaning Lampert now appears to be potentially conflicted in every business transaction the two companies conduct with each other.

The more Footstar benefits in any given deal, the more Kmart suffers, and vice versa and ESL is on both sides each time. Though Lampert has no management role in either company, it is preposterous to contend that he has no influence.”