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Rite Aid Secretary Tells of Payment

The employee testifies that an ex-chief counsel gave her $25,000 after she helped him create backdated documents.

October 01, 2003|From Associated Press

HARRISBURG, Pa. — A former Rite Aid Corp. executive gave his legal secretary $25,000 for a new car a week after she helped him create backdated documents qualifying him and other executives for thousands of shares of company stock, the secretary testified Tuesday.

Franklin C. Brown, former chief counsel for the pharmacy chain and former board vice chairman, is on trial for allegedly conspiring to falsely inflate income in the late 1990s, and then misleading investigators.

Mary Lou Egan, Brown's legal secretary, testified Tuesday that in March 1998, Brown dictated to her what were purported to be minutes of a March 5, 1995, meeting and accompanying letters to Brown and three other former officers outlining the stock awards.

The other recipients were Chief Executive and Chairman Martin L. Grass, Chief Financial Officer Franklyn M. Bergonzi and Chief Operating Officer Timothy J. Noonan. All three have pleaded guilty in the accounting-fraud scandal and await sentencing.

After the minutes and letters were edited, Brown offered to buy her a new car, Egan testified.

Egan later returned to him $2,000 she did not use to buy a Chrysler Sebring, she said.

On cross examination by Brown's attorney, Egan said Brown had raised the prospect of giving her a car several months earlier.

"I did not have [the] feeling that the car was in exchange for anything I did," she said.

On Monday, 24 of 35 criminal counts against Brown, 75, were dismissed, leaving charges of conspiracy, wire fraud, obstruction, witness tampering, and five counts of lying to the Securities and Exchange Commission.

In opening statements Monday, Assistant U.S. Atty. Kim Douglas Daniel told jurors that Brown "attempted to line his pockets with millions at a time when the company's very survival was in question."

Prosecutors alleged that Brown helped manufacture $100 million in earnings to fill a projected shortfall. Brown was also accused of directing a cover-up after the Justice Department and SEC launched investigations.

The scandal forced Rite Aid to retroactively lower its earnings in July 2000 by $1.6 billion.

Rite Aid shares were down 3 cents Tuesday to close at $5.16 on the New York Stock Exchange.

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