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Sears Paying Government $63 Million

December 27, 2001

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CHICAGO (AP) _ Sears, Roebuck and Co. has agreed to pay the government $63 million to settle fraud allegations involving the sale of defective DieHard auto batteries in 1994-95.

The settlement was announced Thursday by the Hoffman Estates, Ill.-based retailer and the U.S. attorney for southern Illinois, ending a more than two-year investigation into the batteries made by Sears supplier Exide Technologies.

Sears said it will take a one-time charge in the fourth quarter of 12 cents per share to reflect the settlement.

``Faced with the continuing expense and distraction of protracted litigation, we have decided that settling it now is in the best interests of all of our constituents,″ said chairman and chief executive officer Alan Lacy.

After rising earlier in the session to a 2 1/2-year high of $48.93, Sears shares were trading 47 cents lower at $47.80 Thursday afternoon on the New York Stock Exchange.

Assistant U.S. attorney Joel Merkel said Sears admitted it had misrepresented to the public that the defective batteries were the ``longest-lasting″ and had other positive features. In addition, he said, Sears’ corporate battery buyer was paid sham ``consulting fees″ by Exide that amounted to an illegal gratuity.

Sears said Exide informed it in October 1994 that a small percentage of DieHard batteries were defective but assured the retailer it had fixed the problem and showed it test data indicating that the batteries met specifications. Sears, which kept advertising the DieHards as before, said it learned later that the test data was false.

An Illinois subsidiary of Exide agreed earlier this year to pay $27.5 million over five years in the case. As part of the plea deal, Exide Illinois admitted making defective batteries, trying to cover up the defects and spending $80,000 to bribe the Sears battery buyer.

The Sears buyer, Gary Marks, and Exide’s vice president of marketing, Joseph Calio, also were charged along with Exide and pleaded guilty to wire fraud. Sears has sued both Exide and Marks.

Former Exide executives Arthur Hawkins, Douglas Pearson and Alan Gauthier are scheduled to go to trial March 18 on charges of conspiracy and wire fraud in the case.

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