JCPenney Looks Into Its Big Remodeling Project: Did Execs Bend Legal Requirements?

JCPenney's (NYSE:JCP) plan to turn its stores into villages of shops-within-the-store is now facing claims that the beleaguered retailer's construction team pressured contractors to work without required building permits, according to the New York Post.

Benjamin Fay, the JCPenney executive in charge of real estate and construction, recently left the company, but there's no indication that his exit is related to the investigation by an in-house legal team. Fay was one of the former Apple (NASDAQ:AAPL) execs that former Penney's CEO Ron Johnson hired when he took charge at the chain in late 2011.

The legal and H.R. investigation is focusing on construction project managers at the first 700 stores to be remodeled, who reportedly told contractors to move fast and proceed even at sites where legally required permits weren't in place. Contractors were also reportedly fired when because of missed deadlines and bills for costly change orders.

The fact that the investigation is internal suggests that the chain's legal team hasn't found much that goes beyond the usual corner cutting in short-deadline construction projects. One likely source for concern is disgruntled contractors who were fired from jobs where building permits had been applied for but not yet issued. City building departments could cause expensive delays in cases like that (and require expensive lawyers to fly across the country for hearings).

Another likely concern, and the probable reason H.R. is involved: It looks very bad to appear to be pressuring employees to break the law.

But the ultimate purpose for the investigation may be to gather the evidence newly rehired JCPenney CEO Mike Ullman needs to justify scrapping the huge remodeling project.

Working in too much of a hurry raises risks, costs extra and generates mistakes. In this case, even if Ullman likes the village-of shops idea—he did launch JCPenney's Sephora shop-within-the-store, after all—it may have already become too costly for JCPenney to afford.

For more:

- See this Post story

Related stories:

JCPenney's CEO Cleans House, But How Far Can He Go?
JCPenney Brings Back Old-Guard Sourcing Executive Ken Mangone
JCPenney's Johnson Out, Ullman Back—What Now?

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