Don W. Watson, 55, of Gilbert, Ariz., pleaded guilty before U.S. District Judge Susan R. Bolton to conspiracy to commit securities and mail fraud in connection with a scheme to misstate the company’s reported earnings from 2001 through 2006.

Watson, the former chief financial officer (CFO) of CSK Auto Corp. (CSK), admitted that, from 2001 to 2006, he and others conspired to misstate CSK’s income by concealing that the company had tens of millions of dollars in vendor rebates that CSK had claimed as income but were never collected.

As a result of the fraud scheme, CSK reported tens of millions of dollars more in pre-tax income than it in fact earned. The rebates were in fact not owed to the company or could not be collected and therefore should have been written off CSK’s books.

“Don Watson made the crucial mistake of thinking he was above the law,” said Assistant Attorney General Lanny A. Breuer. “He used his position as CFO to manipulate CSK’s books and lie about the company’s true worth. In doing so, he misled shareholders and the investing public. We are determined to continue investigating and prosecuting corporate executives who, like Watson, should know better.”

CSK operated under the brand names Checker Auto Parts, Schucks Auto Supply and Kragen Auto Parts. During the time of the conspiracy, CSK was the largest specialty retailer of auto parts and accessories in the western United States and one of the largest such retailers in the entire United States.

Watson admitted that, instead of writing off rebates that CSK had claimed but could not collect, he and others concealed the uncollectible amounts by causing vendor rebates from later years to be moved to cover the shortfalls in prior years and by causing vendors to be billed for rebates CSK was not owed.

As a result of the scheme, CSK misstated its receivables and pre-tax income in its annual reports (Forms 10-K) in fiscal years 2002, 2003 and 2004 by approximately $10 million, $23 million and $19 million, respectively.