A Kmart spokesman refused to comment on the investigation.

A Kmart spokesman also declined to give details, calling the investigation "a review of the stewardship of the company by management."

A Kmart spokesman confirmed that one executive who left the company "voluntarily" was repaying a loan made to him after the bankruptcy filing.

A $5 million loan made to him by Kmart has not been formally forgiven, a Kmart spokesman said.

A Kmart spokesman, Bob Burton, said talks with debt holders were continuing.

A Kmart spokesman, Jack Ferry, said the discount retailer received the letter "about a week ago."

The accounting inquiry began with a letter that a Kmart spokesman called "unsigned and very vague" at the time.

"They are the only carrier to do it," said Jack Ferry, a Kmart spokesman.

But talks broke down on Friday, a Kmart spokesman, Jack Ferry, said.

Jack Ferry, a Kmart spokesman, refused to comment on the company's plans.