Whitehall fires CFO over probe

Whitehall Jewellers, Inc., Chicago, on Thursday fired its Chief Financial Officer Jon Browne, as a result of an ongoing internal investigation and federal probes stemming from charges of fraud brought by a receivables factoring company.

Browne, who had been on leave as CFO, was informed of his termination by the board of directors, the company said in a statement. John Desjardins will continue as CFO on an interim basis, it said. The company said it continues to cooperate with the SEC and the United States Attorney in connection with their investigations.

The company, which operates 384 stores in 38 states under the Whitehall, Lundstrom, and Marks Bros. names, also said in the statement that because of “developments” in the ongoing internal and external investigations, it will not likely meet the deadline to complete its first-quarter report, ended Oct. 31.

Last month, Whitehall placed its top merchandising executive on leave after finding violations of its policy on documenting the age of inventory. It said at the time that the merchandise in question represented less than 1% of total inventory.

The inventory discrepancies were discovered as part of an internal investigation stemming from a lawsuit filed by Capital Factors Inc., a unit of banking company Union Planters Corp., against Whitehall and 14 other defendants. That lawsuit, which alleges Capital Factors was defrauded by the actions of a former jewel vendor, Cosmopolitan Gem Corp., helped spawn the SEC and Justice Department probes.

SEC filings say Capital Factors is looking for damages of $30 million, as well as unspecified punitive damages. Media reports indicate that the figure could triple should Capital Factors succeed in proving racketeering, though any damages would be shared among 14 defendants.

Friedman’s Inc has been caught up in the probe stemming from the Capital Factors suit. Earlier this month Friedman’s CEO resigned, just weeks after it placed its CFO on leave, and the company also suspended its dividend and plans to restate some past results.