Penney executives emphasized that while the stock ownership plan would serve as a long-term defense, their main purpose was to raise the stock price by restructuring Penney's balance sheet.

Penney executives said their goal was to improve the company's return on equity, a basic measure of corporate performance.

He said the project had prompted interest from top Penney executives.

The lawsuit also said the Lazars inflated the cost of their work and submitted fake invoices while doing renovation work at the homes of Penney executives.

Mr. McClain said he was told by Penney executives that True North would be "invited to participate" in the review "as a holding company, putting together a group to pursue the business" that would not include Temerlin McClain.

Penney executives modified sales and advertising programs earlier this year toward lower-priced merchandise, including the chain's private-label clothing brand.

Penney's new strategy was developed after sales stalled through most of the 1970's and Penney executives discovered that women wanted fashion-oriented goods and apparel when they shop in malls, not lawn chairs or motor oil.

"He had a total identification with the Penney company," said Gordon Lindsey, a Penney executive who helped Mr. Jordan put together his memoirs.

Tim Lyons, a spokesman for J. C. Penney, said that in December, immediately after learning about problems at the factory, Penney executives stopped selling apparel obtained from it and canceled contracts with a supplier that was getting goods there.