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Sometimes what a general counsel doesn’t do is as important as what he or she does. Saks Inc. has ousted Senior Vice President Brian Martin, who was GC during a 2002 internal investigation into claims that its employees had defrauded some of its suppliers. Saks now says that probe was a failure, since it didn’t catch wrongdoing that occurred before 2002, and it didn’t stop fraud from happening afterward. In documents filed with the Securities and Exchange Commission (SEC) in May, Saks said a new internal investigation found that its employees had improperly collected about $20 million in “markdown fees” from its suppliers between 1999 and 2003. Retailers traditionally demand these fees from their suppliers when they have to discount hard-to-sell merchandise. Saks, the Birmingham, Ala.-based operator of department store chains, promises to reimburse its suppliers for the excessive collections. Decisive action Though Saks’ response to the markdown problem may have been lacking in 2002, this time the company has taken decisive action. In May, it announced that it was giving the boot to three executives, including Martin, who is the brother of Saks Chairman and CEO R. Brad Martin. Brian Martin could not be reached for comment. Saks Senior Vice President Julia Bentley said the company won’t comment beyond the press release that accompanied its latest SEC filings. Bentley also declined to respond to specific questions about the 2002 probe, Brian Martin’s role in that investigation nor why he was asked to resign. But Saks has submitted several 8-K reports to the SEC about the markdown fee overcollections. One of these reports suggests that though Brian Martin was not directly involved in the markdown fraud, he failed to stop it. According to this 8-K, individuals who “were determined to have failed to adequately supervise those directly involved in [markdown fee] overcollections, or otherwise performed inadequately in respect of this issue, are receiving disciplinary actions ranging from termination to reprimand.” The next sentence said, “Brian Martin, who was general counsel of the company at the time of the 2002 investigation and is now a senior vice president of the company with responsibility for certain [Saks Fifth Avenue Enterprises] real estate matters, has been asked to resign.” Saks’ directors quietly began the latest internal probe after the retailer was sued by the U.S. subsidiary of Onward Kashiyama Co., a Japanese apparel firm, in May 2004.

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