TWO LEAVE NASH FINCH; SEC PROBES STOCK SALES

JON SPRINGER

MINNEAPOLIS - Two senior officers of Nash Finch here abruptly left the company last week at the same time the wholesaler said it had contacted the Securities and Exchange Commission regarding an investigation of stock trading by company executives.

A Nash Finch spokesman declined to comment on any connection between the internal investigation and the resignations of Ron Marshall, Nash Finch's chief executive officer; and Kathleen McDermott, the executive vice president, secretary and general counsel. An SEC spokesman declined comment.

With details scarce, industry observers were reluctant to comment on the significance of the events but noted they were cause for concern. "It's obviously not good for Nash Finch," said Neil Stern, partner at McMillan-Doolittle, Chicago. "When the CEO and general counsel are out, that's usually not just smoke but fire."

Marshall, who announced plans to retire in September, was scheduled to have departed on March 2, but a source close to the situation said he was out as of last week. Allister P. Graham, the chairman of Nash Finch's board of directors, was named interim CEO. Kathleen Mahoney, currently vice president and deputy general counsel of the company, has been named interim secretary and general counsel.

The board in a statement said it would continue to search for a permanent CEO.

Nash Finch said it voluntarily contacted the SEC "to discuss results of an internal review that focused on trading in the company's common stock by certain officers and directors of the company during 2005."

Andrew Cole, a spokesman for Nash Finch, told SN last week that the internal investigation followed an informal inquiry from the SEC.

"The company replied to that inquiry, and immediately afterward the board commenced its own internal review with outside legal counsel, to look at the situation themselves. They've essentially completed that review and have preliminary results," Cole said. "They've discussed the results of that internal review with the SEC."

Cole declined to comment on the results of the investigation.

Nash Finch had slashed its earnings outlook in October, citing problems integrating two warehouses it acquired from Roundy's Supermarkets earlier in the year. The stock plummeted 26% on the day of the announcement. The New York law firm Milberg Weiss subsequently filed a class action lawsuit, naming the company, Marshall, and Chief Financial Officer LeAnn Stewart as defendants. The suit said Nash Finch misled investors by not revealing the difficulties involved in the integration.

Records show Marshall made several sales of stock at prices as high as $41.94 a share during the summer, earning proceeds of more than $12 million. Several other senior officers, including McDermott, also sold stock over the summer.

While acknowledging the upheaval is "cause for some concern," Burt P. Flickinger III, managing director, Strategic Resource Group, New York, told SN that the naming of Graham to lead the company on an interim basis and continue a search for a new chief executive was "inspired."