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Fourth Former Rite Aid Executive Pleads Guilty

Jul 11, 2003 | AP

Another former Rite Aid Corp. executive pleaded guilty Thursday to one count of conspiracy to obstruct justice, a charge related to the government's investigation of an accounting-fraud scandal at the drugstore chain.

Philip Markovitz, 62, Rite Aid's former senior vice president of store development, admitted lying to FBI agents and a grand jury about when he received a lucrative severance letter from Martin L. Grass, Rite Aid's former chairman and chief executive.

Grass has admitted creating illegal, backdated letters authorizing generous severance benefits for several former executives. Assistant U.S. Attorney Kim Douglas Daniel said that, over the estimated length of Markovitz's retirement, the letter was worth an additional $2.9 million.

Markovitz, whose plea was accepted by U.S. District Judge Sylvia H. Rambo, faces a maximum sentence of five years in prison and a $250,000 fine. Douglas said he will urge Rambo to impose restitution at sentencing, but Markovitz's lawyer, Walter M. Phillips Jr., called it a matter "between him and Rite Aid."

"It's unfortunate that he finds himself in this situation and (he) deeply regrets his actions," Phillips said. "He didn't know that it was postdated. He allowed himself to be influenced by someone who had been his good friend for 25 years."

Markovitz started with Rite Aid in 1971 as real-estate director and later served as vice president of real estate, said company spokeswoman Karen Rugen.

Markovitz, who resigned from Rite Aid in February 2000, is now vice president for Elysian Partners in Lemoyne, a commercial real-estate development company in which Grass is a partner.

As a result of accounting practices in the late 1990s, Rite Aid was forced in July 2000 to restate earnings downward by $1.6 billion.

Grass and two other former top executives have already pleaded guilty to conspiracy in the scandal: former chief financial officer Franklyn M. Bergonzi, and former vice president for pharmacy purchasing Eric S. Sorkin. All three are awaiting sentencing.

A fifth former Rite Aid officer, Franklin C. Brown, is facing a Monday deadline to tell Rambo whether he wants to plead guilty or go to trial on 35 criminal charges.

"I don't know what he's going to do," Daniel said. "I guess we'll find out on Monday." Brown's lawyer, Joseph U. Metz, declined comment.

The man who took over as CEO when Grass retired in 1999, Timothy J. Noonan, pleaded guilty in July 2002 to one count of withholding information from the company's internal auditors. Noonan allowed investigators to secretly tape his conversations with Brown and Grass to build cases against them.

Markovitz was not among the four men indicted last summer, and U.S. Attorney Thomas A. Marino on Thursday said it is likely that additional defendants will be charged.

A fraud suit filed by the Securities and Exchange Commission against Brown, Grass and Bergonzi is on hold at the defendants' request pending resolution of the federal criminal charges.

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