• The Buffalo News/Bloomberg, Tuesday, September 18, 2007 11:45 AM

A federal grand jury in Syracuse, N.Y., on Monday indicted Penn Traffic Co.'s former chief marketing officer Les Knox and ex-vice president of non-perishable merchandising Linda Jones. They are charged with allegedly inflating the company's income by prematurely booking promotional fees paid by vendors in exchange for marketing--such as inclusion in supermarkets' weekly advertisements.

"The defendants caused Penn Traffic to 'pull forward,' or prematurely report more than $9 million in operating income," according to U.S. Attorney Glenn Suddaby. The U.S. Securities and Exchange Commission also sued the two ex-company officials, who face as much as 20 years in prison and $5 million in fines if convicted.

Penn Traffic operates the Quality Markets, BiLo and P&C supermarkets in the northeastern U.S. It fired Knox and Jones in February 2006 after an internal probe. The company says it will cooperate with the government's inquiries. Lawyers for the two defendants did not return calls seeking comment.

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