Sears to Pay $63M to Gov't
By DAVE CARPENTER, AP Business Writer

CHICAGO (AP) - Sears, Roebuck and Co. has agreed to pay the government $62.6 million to settle allegations it advertised and sold DieHard auto batteries in 1994-95 as the nation's ``longest-lasting'' even after it learned some had defects.

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 21/2-year high of $48.93, Sears shares closed 27 cents lower at $48 Thursday on the New York Stock Exchange (news - web sites).

Assistant U.S. attorney Joel Merkel said Sears became aware during the week of Oct. 22, 1994, that some of the batteries had latent ``formation defects'' - including containing only a trace of the silvium II alloy needed in greater amounts for the battery to operate up to specifications.

Nonetheless, he said, Sears continued distributing and advertising the product until the following January as America's most-trusted and longest-lasting battery.

In addition, Merkel said, Sears' corporate battery buyer was paid sham ``consulting fees'' by Exide that amounted to an illegal gratuity.

Sears ultimately admitted its battery misrepresentation to investigators in writing, Merkel said.

In a statement, Sears confirmed that 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 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 that 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 buyer, Gary Marks, and Exide's vice president of marketing, Joseph Calio, also were charged along with Exide and pleaded guilty to wire fraud. They have not yet been sentenced. Sears and Exide settled their lawsuits against each other earlier this year but Sears' November 1999 suit against Marks is still pending, spokeswoman Jan Drummond said.

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.