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Rite Aid Ex-Chief Counsel Urged Lies, Exec Testifies

October 08, 2003|From Bloomberg News

Former Rite Aid Corp. Vice President Eric Sorkin testified Tuesday that he was "scared to death" after he lied to investigators at the urging of Franklin C. Brown, the company's ex-chief counsel, about backdated severance letters.

Sorkin told jurors at Brown's obstruction-of-justice trial that he would have gotten $1.1 million under two backdated letters that Rite Aid's former top lawyer handed him in November 1999, just before U.S. investigators began probing accounting fraud at the Camp Hill, Pa.-based company.

Sorkin, who pleaded guilty in June, said Brown repeatedly shaped a cover story on the severance letters, which were signed by former Chief Executive Martin L. Grass and dated April 1999. Sorkin said he felt trapped by the lies Brown urged him to tell to investigators, prosecutors and grand jurors.

"I knew I was in this thing and there was no way out," Sorkin told jurors in federal court in Harrisburg, Pa. "I was scared to death."

Sorkin, a 23-year company veteran, is the fourth executive to testify against Brown after pleading guilty to a role in the fraud at Rite Aid, the No. 3 U.S. drugstore chain. Grass, former Chief Financial Officer Franklyn M. Bergonzi and ex-Chief Operating Officer Timothy J. Noonan pleaded guilty to inflating revenue and understating expenses by hundreds of millions of dollars. Rite Aid erased $1.6 billion in net income in July 2000.

Brown, 75, is on trial for conspiring to obstruct justice and inflate income.

Sorkin said he believed Brown gave him the letters signed by Grass, who left the company in October 1999, "to keep me on their side" during the investigation. On cross-examination, Brown's attorney, Reid Weingarten, called Sorkin a liar who misled investigators because he was greedy and wanted to protect the severance package he was promised.

Sorkin, who was earning $250,000 a year, said Brown gave him a letter that ensured him three years' salary and bonus.

Sorkin said he followed Brown's cover story in lying to outside law firms hired by Rite Aid for an internal investigation, to the FBI, to prosecutors and to a grand jury. He said he began to disclose more details about the negotiations and the severance letters as he grew increasingly agitated about the probes.

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