Prosecutor says Rite Aid official will plead guilty
HARRISBURG, Pa. (AP) – Former Rite Aid chief executive officer Martin L. Grass was scheduled to plead guilty on Tuesday in a federal case accusing him of trying to defraud shareholders, a prosecutor said. Grass resigned in disgrace in October 1999 amid allegations of financial irregularities that led to criminal charges against him and three other company managers.
Assistant U.S. Attorney Martin Carlson confirmed on Monday that Grass was expected to enter a guilty plea before District Judge Sylvia H. Rambo on Tuesday morning.
Carlson declined to specify the charges.
Grass did not immediately return phone calls Monday and his lawyer, William H. Jeffress Jr., said by e-mail that he would not discuss the case until after the Tuesday hearing.
Grass, the former chairman and CEO, and Franklin C. Brown, former vice chairman and chief counsel, are both charged with conspiracy, fraud in the purchase or sale of securities, conspiracy to obstruct justice, obstructing grand jury proceedings, obstructing proceedings of a government agency, witness tampering, 13 counts of lying to the SEC, 10 counts of mail fraud and six counts of wire fraud.
Carlson said prosecutors would not comment until after they file documents related to Grass’ plea late Monday or early Tuesday.
A jury has already been picked for Grass’ and Brown’s trial, which was postponed until June 23 after Franklyn M. Bergonzi, Rite Aid’s former chief financial officer, pleaded guilty to conspiracy.
As part of a deal with prosecutors, Bergonzi agreed to testify against Grass and Brown if necessary.
The fourth defendant, Eric S. Sorkin, the company’s vice president for pharmacy purchasing, is expected be tried separately on charges of conspiracy to obstruct justice and lying to a grand jury.
A 97-page grand-jury indictment handed down last year against Grass and the other executives alleged that Rite Aid’s rise on Wall Street was “a ruse and a mirage” accomplished by ripping off vendors, concealing hidden interests, lying to the Securities and Exchange Commission and forging company documents.
In the wake of the scandal, Rite Aid was compelled to issue a $1.6 billion restatement of net earnings in July 2000.
A new management team has worked to return the company, the nation’s No. 3 pharmacy chain, to profitability by selling assets, reducing and refinancing debt and closing about 500 stores.