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Ex-Rite Aid CEO To Pay $1.45 Million In Settlement

Grass was last holdout of those sued by investors

Apr 10, 2003 | AP

The former chairman and chief executive of Rite Aid Corp. has agreed to pay $1.45 million to settle a lawsuit in which shareholders alleged that the drugstore chain's financial books were falsified over a 30-month period, inflating the stock's value.

Martin L. Grass, who was forced out in October 1999 and is facing federal criminal fraud charges stemming from the financial statements, did not admit wrongdoing in the civil suit, his attorney said.

"Martin Grass continues to deny all the allegations in the complaint," said Andrew B. Weissman. "But a settlement is a settlement."

William H. Jeffress, Grass' attorney in the criminal case, said the civil settlement shouldn't have any effect on the criminal charges, and that no plea deal with federal prosecutors is in the works.

Grass "certainly denied and continues to deny any liability" in the criminal case against him, Jeffress said.

The money contributed by Grass brings the settlement fund to about $319.6 million. Grass was the last holdout among the parties named in a complaint by shareholders who bought the company's stock between May 2, 1997, and Nov. 10, 1999.

The settlement was filed Tuesday in U.S. District Court in Philadelphia. District Judge Stewart Dalzell scheduled a May 30 hearing on the case.

Rite Aid, based in Camp Hill, Pa., agreed in November 2000 to pay $193 million. The company's former accountant, KPMG, agreed last month to pay $125 million.

In addition, the company's former chief operations officer, Timothy J. Noonan, contributed $130,000, and shareholders' attorneys decided not to pursue claims against Franklyn Bergonzi, the former chief financial officer.

A new management team, hired in December 1999, said Rite Aid overstated its earnings by $1.6 billion in the late 1990s. The company's stock, which sold at a high of $50.94 in 1999, slipped a penny yesterday to close at $2.65 on the New York Stock Exchange.

Grass, Bergonzi and former general counsel Franklin C. Brown are to stand trial together in Harrisburg June 9 on a wide-ranging criminal indictment that accuses them of falsifying the company's financial statements to make the company appear more profitable than it was, then trying to cover it up as investigators looked into it.

All three men have pleaded innocent. Noonan is cooperating with the government.

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