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5th Former Rite Aid Executive Sentenced

Timothy J. Noonan, who aided prosecutors, avoids a prison term in the drugstore chain's accounting fraud case.

June 09, 2004|From Associated Press

The former Rite Aid Corp. executive whose secret tapes helped prosecutors convict several colleagues in a billion-dollar-plus accounting scandal at the drugstore company was sentenced Tuesday to two years' probation.

Timothy J. Noonan is the only one of five Rite Aid defendants sentenced so far not to receive a prison term. The former president and chief operating officer retired in 2000 after three decades with the Camp Hill, Pa.-based company.

Noonan also was fined $2,500 and was sentenced to 100 hours of community service.

Noonan pleaded guilty in July 2002 to withholding information from the company's internal investigators. In return, the U.S. attorney's office in Harrisburg, Pa., recommended a sentence of probation.

U.S. District Judge Sylvia H. Rambo credited Noonan with "breaking the case for the government" by providing crucial information to federal prosecutors, including incriminating statements he captured on audiotape.

All told, the company was forced to retroactively lower earnings by $1.6 billion -- at the time, the largest accounting scandal of its kind -- after prosecutors say its former management falsified financial reports to cover up losses. Rite Aid, the nation's third-largest pharmacy chain, only recently posted its first profitable year since 1997.

On one of the tapes, played last year during the criminal trial of Franklin C. Brown, the former board vice chairman and chief counsel, Brown asked Noonan whether there was anything Noonan wanted Brown "to volunteer or weave in" when Brown met with investigators.

Brown was found guilty of 10 of 11 criminal counts and awaits sentencing.

Noonan, 62, also taped conversations with former Chairman and Chief Executive Martin L. Grass, whom he briefly succeeded at the helm of the company. Grass pleaded guilty to two counts of conspiracy and was sentenced last month to eight years in prison.

Noonan apologized in court to the judge, Rite Aid shareholders and employees, his family and citizens of central Pennsylvania.

"Hopefully, your honor, I can repay in some manner all the people I talked about," he said.

According to federal sentencing guidelines, Noonan could have received up to six months in prison for concealing a crime. He admitted misleading internal investigators hired by Rite Aid after Grass, son of company founder Alex Grass, was forced out in October 1999.

"He knows he should have been stronger, and his weakness has cost him dearly," his lawyer, David M. Howard, told Rambo. Howard pointed out that Noonan began cooperating before he was a target or subject of any investigation, and did so before the plea deal was worked out.

"There may not have been a Rite Aid prosecution without Mr. Noonan's cooperation here," Howard said.

Noonan, like other defendants in the case, received a lucrative backdated severance letter from Grass after Grass had resigned under pressure. Unlike several others, Noonan decided not to use it. He testified during Brown's trial that he negotiated his own deal with the CEO who took over from him, a deal that was worth millions less than the fraudulent document from Grass.

Along with Grass, three other former company executives also were sentenced last month after pleading guilty to conspiracy for various roles in the scandal. Chief Financial Officer Franklyn M. Bergonzi received 28 months in prison; Vice President Eric S. Sorkin five months in prison and five months' house arrest; and Vice President Philip Markovitz one month in prison and five months' house arrest.

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