FORMER ‘JUST FOR FEET, INC.’ EXECUTIVE PLEADS GUILTY TO
CONSPIRACY TO COMMIT WIRE, SECURITIES FRAUD

WASHINGTON, D.C. - Deputy Attorney General Larry Thompson, Assistant Attorney General Michael Chertoff of the Criminal Division, and U.S. Attorney Alice Martin of the Northern District of Alabama announced today that a former executive of Just for Feet, Inc., has pleaded guilty to a charge of conspiracy to commit wire fraud and securities fraud related to a scheme to fraudulently inflate the company’s earnings.

Adam Gilburne, 40, of Paradise Valley, Arizona, entered the plea at U.S. District Court in Birmingham, Alabama, this afternoon. Gilburne had been charged in a criminal information with one count of conspiracy to commit wire fraud and securities fraud, in violation of 18 U.S.C. Section 371.

Just for Feet, Inc., was a publicly traded corporation with headquarters in Shelby County, Alabama. The company was founded in 1977 with a single store in Birmingham. By 1999 it had grown to be the second largest athletic shoe retailer in the United States, with locations in 30 states and annual sales of approximately $775 million. Gilburne was employed in a variety of positions with Just for Feet since March 1994, including as executive vice president and president of the Superstore Division from August 1997 until May 1999. Gilburne reported directly to Just for Feet’s chief executive officer.

According to the criminal information, from about December 1996 until approximately November 1999, Gilburne and others devised a scheme to artificially inflate Just for Feet’s financial condition through the improper recognition of income received from Birmingham-based Rogers Advertising, the company’s sole advertising agency.

The information alleges that beginning in about 1996, Just for Feet’s CEO would conduct meetings at the end of every quarter in which he would lay out analysts’ expectations of the company’s earnings, and then drew up a list of “goods” - items which produced or added income - and “bads” - those which reduced income. The information alleges that the CEO directed Just for Feet’s employees to increase the “goods” and decrease the “bads” in order to meet his own earnings expectations, and those of Wall Street analysts.

According to the charges, the CEO of Just for Feet and the president of Rogers Advertising would meet prior to the end of Just For Feet’s fiscal year and agree that Rogers Advertising would pay the agency commissions which it would earn for the upcoming year, minus a monthly retainer, back to Just for Feet. This became known within Just for Feet as the “Rogers Rebate.” The information alleges that although Gilburne, the CEO and others knew that the Rogers rebate represented income earned by and paid to Just for Feet in the following fiscal year, they nonetheless caused Just for Feet to record the rebate as a receivable due in the current fiscal year. The charges state that when insufficient rebates would not support the previously

booked receivable, Just for Feet authorized Rogers Advertising to submit bogus bills to Just for Feet to generate income for Rogers Advertising, in order to pay down the receivable on Just for Feet’s books.

As part of the alleged conspiracy, the CEO instructed Gilburne and others, if asked about the Rogers rebate, to respond that the rebate was based on services already performed during the current year.

The information also alleges that Gilburne and others made false and fraudulent entries in Just for Feet’s financial books and records, and caused false entries to be filed with the Securities and Exchange Commission. The charges state that on or about April 24, 1998, the CEO signed Just for Feet’s 10-K for fiscal year 1997, knowing that the company’s income was overstated by $3 million because of the Rogers rebate scheme. In addition, the 10-K for fiscal year 1998 was allegedly overstated by $5.3 million as a result of the scheme.

“Corporate fraud is a matter of grave concern for investors,” said U.S. Attorney Alice H. Martin. “We will continue to focus manpower, and work with the Department of Justice Fraud Section to bring these important cases to court.”

Gilburne faces a maximum sentence of five years in prison and a $250,000 fine on the charge of conspiracy to commit wire fraud and securities fraud. Sentencing will be set at a later date. As part of his plea agreement, Gilburne is cooperating with the government’s ongoing investigation into Just for Feet’s finances.

The Just for Feet investigation is being led by the office of U.S. Attorney Alice Martin of the Northern District of Alabama, working with the Federal Bureau of Investigation and the Fraud Section-Criminal Division at the Department of Justice. The investigation is being overseen by the President’s Corporate Fraud Task Force, chaired by Deputy Attorney Larry Thompson. The task force was created by President Bush in July 2002 to oversee and direct federal law enforcement actions against corporate corruption that had eroded investors’ confidence in the integrity of U.S. markets. The Justice Department and the Corporate Fraud Task Force have brought criminal charges against more than 200 individuals, including executives and former employees at WorldCom, Adelphia, Enron, Imclone, Qwest Communications and others.

###

03-283